Iranian Accounting Standards: The Ten That Actually Shape Your Statements

Accounting standards look academic to most owners right up to the moment an auditor, a bank or a tax inspector asks a question whose answer sits in one of them. This covers the ten standards that in practice shape a small or mid-sized Iranian company's financial statements, and where they diverge from tax law.

Who sets what

In Iran, accounting standards are issued by the Audit Organization. The body of standards has been revised over time and some older texts have been superseded. Separately, listed companies and entities supervised by the securities regulator carry additional disclosure requirements and, in defined cases, report under international standards.

The point I repeat to managers is that an accounting standard is not tax law. The standard tells you how an event should be presented; the tax code tells you how taxable income is computed. They mostly agree, and where they do not — provisions, depreciation, certain expenses — the difference is managed in a reconciliation, not by distorting the books.

The ten that matter

If you manufacture, standards 8 and 11 carry your books. If you contract, standard 9 governs how you recognise revenue on long-term work. If you import or export, take standard 16 seriously.

Presentation and cash flow

Standard 1 fixes the components of a set of financial statements, their classification and the notes. The two breaches I see most often are omitting prior-year comparatives and offsetting balances — netting a counterparty's receivable and payable — which is not permitted outside defined cases.

Standard 2 requires the statement that gives management the most information and receives the least attention. Splitting operating flows from investing flows is exactly what shows whether book profit has converted into cash.

Revenue: the narrow line

Revenue is recognised when the significant risks and rewards have transferred, the amount is measurable reliably, and inflow of economic benefit is probable. In practice:

• A customer advance is not revenue; it is a liability.
• An invoice issued in the last month of the year for goods delivered after year end belongs to next year.
• Services delivered over a contract term are recognised across that term, not on the collection date.

That boundary is explored in accrual revenue recognition.

Inventory: where real errors live

Inventory is measured at the lower of cost and net realisable value. Three recurring failures:

1. Carrying obsolete or damaged goods at historical cost with no write-down.
2. Loading unrelated costs, typically administrative overhead, into inventory cost.
3. Relying on system balances without a physical count and without documenting the result.

Fixed assets and currency

Under standard 11, the cost of an asset includes everything needed to bring it into use — freight, installation, commissioning — rather than being expensed. Useful life and method must reflect actual use, whereas for tax purposes the prescribed depreciation schedule governs. That duality is unpacked in fixed asset depreciation.

Standard 16 records a foreign-currency transaction at the rate on the transaction date and translates monetary items at period end. The tax treatment of the resulting gain or loss follows its own rules.

Year-end compliance checklist

1. Basis of preparation and significant policies disclosed in the first note.
2. Prior-year comparatives presented, restated where required.
3. Inventory measured at the lower of cost and net realisable value.
4. Provisions for termination benefits, leave and probable claims recognised.
5. Foreign-currency balances translated and the effect shown separately.
6. Post balance sheet events reviewed and disclosed where material.
7. Prior-period errors corrected separately from current-year activity.
8. Reconciliation of accounting profit to taxable profit prepared.

A fuller year-end sequence is in closing the books at year end.

Where standards and tax diverge

Managing that gap is not difficult, provided the reconciliation working paper is documented and signed. That single sheet saves the most time in an audit.

Key takeaways

• Standards govern presentation; tax law governs the bill. Do not conflate them.
• Ten standards cover almost everything a mid-sized Iranian company encounters.
• The costliest real errors sit in inventory valuation and early revenue recognition.
• Consistency of policy and full comparatives are the clearest signs of professional statements.
• Prepare and file the accounting-to-taxable profit reconciliation every year.