The IFRS implementation by companies herein as a framework of accounting principles to prepare their financial statements is latently increasing by the contribution to the strengthening of their operations.
As transactions became larger and more complex in the securities market and the banking center, Panama began to see the need and importance of maintaining a body of strict reference standards to account for and prepare financial statements.
International Financial Reporting Standards
The IFRS implementation is a tool for improving the operation and growth of companies, so Panama had to resort to them to apply issues not addressed in the generally accepted accounting principles due to the lack of a solid accounting framework.
The Technical Accounting Board controls the CPA (Contadores y Contadores Públicos Autorizados – Accountants and Certified Public Accountants) under Law No. 57, which regulates the practice of the profession. Its function is to “Supervise the professional practice is performed within the highest technical and ethical level, with the collaboration of the professional associations.”
The NOCOFIN (Comisión de Normas de Contabilidad Financiera de Panamá – Financial Accounting Standards Commission of Panama) was created by the Technical Accounting Board of Panama in 1986. It is formed by CPA members appointed by the professional accounting associations registered before the Technical Accounting Board and certified public accountant professors from state-recognized accounting universities.
The commission’s main responsibility is to implement financial accounting standards in Panama.
Regulatory Framework to issue Financial Statements
The accounting regulation in Panama is based on the Financial Reporting Standards (IFRS) and the International Financial Reporting Standards for SMEs (IFRS for SMEs). The Financial Reporting Standards structure the accounting theory by establishing the limits and operating conditions of the accounting information system, working as a regulatory framework to issue financial statements.
The IFRS issued and to be issued by the International Accounting Standards Board (IASB), an independent body enacting worldwide accounting standards, was adopted and applied in the Republic of Panama, according to Law No. 6 of February 2, 2005, Article 74, paragraph 1. Additionally, the General Directorate of Revenue prescribes the preparation of taxpayers’ income tax returns based on accounting records using the accrual system based on IFRS.
IFRS are mandatory to prepare and file financial statements, and their application is required for regulated companies:
- For the Superintendency of Banks.
- For the National Securities Commission of Panama.
- For the Insurance and Reinsurance Superintendency.
The Panamanian Technical Accounting Board adopted the IFRS for SMEs to prepare general purpose financial statements and other financial information for entities not listed in the stock market or not publicly accountable, according to the IFRS for SMEs.