Determines the accounts and acceptable or authorised accounting standard used as the starting point, including conditions for local accounts and alternatives.
What should you do now?Prepare a schedule of all Bahrain entities showing standards, periods and the legal requirement for the accounts or their audit. Record why consolidation accounts are used, why they are impracticable if an alternative is needed, and reconcile permanent differences and later adjustments.
What does the official Article provide?
The official source is Arabic. This English commentary is explanatory and is not presented as an official translation.
Determines the accounts and acceptable or authorised accounting standard used as the starting point, including conditions for local accounts and alternatives.
This is a verified summary rather than a verbatim reproduction. Consult the official Arabic text, the Law and later decisions before making a final determination.
What does the Article mean in plain language?
Start by testing whether accounts prepared under the Local Financial Accounting Standard can be used. All Bahrain Constituent Entities in the group must have accounts under that standard; their periods must match the Fiscal Year of the consolidated statements of the group or Joint Venture Group; and all those entities must be required to prepare or use the accounts for tax liabilities or another Bahrain law, or the accounts must be externally audited. Here, a Joint Venture Group includes the Joint Venture and its subsidiaries.
If any Bahrain entity's accounts fail any Paragraph A requirement, determine income or loss under Paragraph D or E, as applicable. Paragraph D starts with the entity's net income or loss used to prepare the Ultimate Parent Entity's consolidated statements, before consolidation adjustments eliminating intra-group transactions. Accordingly, do not remove intra-group revenue from the starting figure merely because it is eliminated in consolidated statements.
Paragraph E is available where determining the amount under Paragraph D is not reasonably practicable; it is not a free choice of the standard producing the lowest income. Under another Acceptable or Authorised Financial Accounting Standard, the accounts must be prepared under that standard, their information must be reliable, and permanent differences greater than EUR 1 million must be conformed to the Ultimate Parent Entity's consolidation standard. This adjustment threshold is not a general exemption from other Articles' adjustments. Once the starting point is established, assess allocation rules and subsequent adjustments separately.
Financial reporting, tax, transfer-pricing and consolidation teams.
Prepare a schedule of all Bahrain entities showing standards, periods and the legal requirement for the accounts or their audit. Record why consolidation accounts are used, why they are impracticable if an alternative is needed, and reconcile permanent differences and later adjustments.
How can the rule appear in practice?
A group has two Bahrain entities. One entity's accounts end on 30 June, while the consolidated Fiscal Year ends on 31 December. An audit does not cure the period mismatch: apply the Paragraph D and E sequence. If the alternative is available and a permanent difference of EUR 1.2 million arises from the different standard, conform its treatment to the parent's standard before continuing the computation.
This illustration is not an NBR case or a binding outcome for a particular fact pattern.Treating an audit alone as sufficient despite mismatched periods, using consolidated group profit after intra-group eliminations, or choosing an alternative standard without establishing impracticability.
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Before relying on the result
Is this Article enough on its own?
Usually not. Read it with the connected Law Article, definitions, any effective election and current NBR guidance, especially for an amount or deadline.
Does NBR guidance replace the Regulations?
No. Guidance explains application and supports procedures and examples, but current legislation and decisions prevail in case of inconsistency.