International Federation of Accountants

Lebanon

Member Organizations

Member Organization Associate

  Lebanese Association of Certified Public Accountants

Legal and Regulatory Environment

  • Overview of Statutory Framework for Accounting and Auditing

    Several laws and regulations govern the requirements for the preparation, reporting, and audit of financial information in Lebanon.

    Accounting Requirements

    Accounting reporting standards are adopted by the Ministry of Finance. Most companies are required to prepare annual financial statements using the International Financial Reporting Standards (IFRS), then referred to as International Accounting Standards (IAS), according to Ministerial Decisions 6258 of 1996 and 673/1 of 2001. Furthermore, all businesses are required to report in Arabic, English, or French.

    Under Order No. 1/6258, the following types of entities are required to use IFRS to prepare their financial statements: (1) all holding, offshore, limited liability and joint stock companies, regardless of type, size, and number of employees; (2) all branches of foreign companies; and (3) all sole proprietorships and partnership whose total number of employees exceeds 25 or that have annual turnover above LB750 million (USD 500,000). Companies listed on the Beirut Stock Exchange must use full IFRS. Unlisted companies have the option of using full IFRS. The list of all applicable IFRS is published in the Official Gazette on an annual basis. Where differing interpretations exist, the official English version of IFRS should be referred to.

    The Code of Money and Credit, the Banking Law of 1963, and Resolution 10/1 of 1984 and related decrees requires banks and other financial institutions (except insurance companies) to comply with accounting requirements set forth by the Banking Control Commission (BCC), in addition to decrees issued by the Ministry of Finance. According to the 2003 World Bank Report on the Observance of Standards and Codes, the requirements of the BCC were largely consistent with IAS but with some significant deviations. It is unclear how these requirements currently compare with IFRS.

    Audit Requirements

    Ministerial Decree No. 8089 of 1996, referred to above for IFRS requirements, also established the annual audit requirement for the following types of companies: (1) all holding, offshore, limited liability and joint stock companies, regardless of type, size, and number of employees; (2) all branches of foreign companies; and (3) all sole proprietorships and partnership whose total number of employees exceeds 25 or that have annual turnover above LB750 million (USD 500,000).

    According to Ministerial Circular No. 742 of 2002, auditors must apply ISA for all audits of financial statements. ISA appear to be adopted as issued by the IAASB, without modifications. The Circular introduced ISA 700 as the official format to be followed for audit reports. The rules of the Beirut Stock Exchange and the BCC stipulate that financial statements of all listed companies and banks should be audited using ISA.

  • Regulation of Accountancy Profession

    The accountancy profession in Lebanon is self-regulated. The Accountancy Profession Act No. 364 of 1994 reformed the Lebanese Association of Certified Public Accountants (LACPA) and established its current regulatory and standard-setting authority as the sole professional accountancy organization in Lebanon. Only Certified Public Accountants (CPAs) registered with and having practicing certificates awarded by LACPA are permitted to perform audits and issue an auditor’s report for the companies that are registered in Lebanon.

    The act defines initial professional development requirements of aspiring CPAs, requires all CPAs to be registered and licensed members of LACPA, and grants the association the authority to establish continuing professional development (CPD) requirements for its members. The curricula for university accounting programs for public universities are established by the Ministry of Higher Education. As for the private universities, curricula are approved by the Ministry of Higher Education.

    According to act, LACPA proposes auditing standards to the Ministry of Finance (MoF). The act also grants authority to LACPA to set a Code of Ethics for CPAs and to investigate and impose sanctions on members for non-compliance with its statutes or professional ethics; however, both must be approved by the MoF.

    In addition, the internal bylaws of LACPA further outline other membership requirements related to CPD, applicable penalties for members’ misconduct, and the process for becoming a member of the association. In 2013, LACPA amended its internal bylaws to establish the necessary mechanisms for a mandatory quality assurance review system.

    The Capital Markets Authority (CMA) was established under Law No. 161 of 2011 with broad responsibility for market regulation, investor protection, and with the remit to encourage market development. The law defines the role of the CMA in relation to the monitoring of corporate financial reporting through its Control Unit. More specifically, Articles 14 and 15 of this law describe the regulatory role of the CMA Control Unit and its relation to the companies under its purview and the coordination methods with the companies’ external auditors.

  • Audit Oversight Arrangements

    The accountancy profession in Lebanon is self-regulated and there are no public oversight arrangements in place. Auditors are regulated by the Lebanese Association of Certified Public Accountants (LACPA), established under the Act No. 364 of 1994. Only Certified Public Accountants (CPAs) registered with and having practicing certificates awarded by LACPA are permitted to perform audits and issue an auditor’s report for the companies that are registered in Lebanon.

    The Act specifies initial professional development requirements for CPAs and grants LACPA the authority to carry out the following functions in respect to auditors: set a Code of Ethics for CPAs and investigate and impose sanctions on members for non-compliance with its statutes or professional ethics. In addition, the bylaws of LACPA further outline other membership requirements related to continuing professional development, applicable penalties for members’ misconduct, and the process for becoming a member of the association.

    In 2013, LACPA amended its bylaws to establish the necessary mechanisms for a mandatory quality assurance (QA) review system. LACPA’s QA review system is conducted by two committees: the Quality Control Supervisory Commission and the Quality Control Technical Committee.

    The Capital Markets Authority (CMA) was established under Law No. 161 of 2011 as an independent and autonomous regulatory body chaired by the Governor of the Central Bank of Lebanon. Its primary objectives are to promote the development of the capital markets and to protect investors. The law defines the role of the CMA in relation to the monitoring of corporate financial reporting through its Control Unit. More specifically, Articles 14 and 15 of this law describe the regulatory role of the CMA Control Unit and its relation to the companies under its purview and the coordination methods with the companies’ external auditors.

  • Professional Accountancy Organizations

    The Lebanese Association of Certified Public Accountants (LACPA) is the only professional accountancy organization representing, regulating, and setting standards and requirements for all professional accountants in Lebanon. It was established under the Accountancy Profession Act No. 364 of 1994. The act stipulates that all Certified Public Accountants (CPAs) must be registered with LACPA and specifies the membership and initial professional development requirements. The act also grants authority to LACPA to set a Code of Ethics for CPAs and to investigate and impose sanctions on members for non-compliance with its statutes or professional ethics; however, the Code of Ethics must be approved by the Ministry of Finance.

    In addition, the bylaws of LACPA further outline other membership requirements related to continuing professional development, applicable penalties for members’ misconduct, and the process for becoming a member of the association. In 2013, LACPA amended its bylaws to establish the necessary mechanisms for a mandatory quality assurance review system.

    In addition to being a member of IFAC, LACPA maintains membership in the Federation Internationale des Experts-Comptables Francophone and the Arab Federation for Accountants and Auditors.

  • Projects or Other Information

Adoption of International Standards

  • Quality Assurance

    In 2013, the Lebanese Association of Certified Public Accountants (LACPA) amended its bylaws to establish the necessary mechanisms for a mandatory peer-review quality assurance review system for all CPAs, which by law must be members of LACPA. Implementation of the system is planned for Q4 2016 with a focus on a representative sample of listed and public companies. LACPA reports that its quality control manual has been reviewed to ensure its compliance with the revised requirements of SMO 1 (2012).

    It appears ISQC 1 has been adopted and incorporated into LACPA’s quality control manual; however, the status and legal applicability of the standard should be clarified, as for the ISQC1 translation, LACPA adopted its own professional translation.

    Current Status: Partially Adopted

  • International Education Standards

    The Accountancy Profession Act No. 364 of 1994 defines initial professional development (IPD) requirements for aspiring Certified Public Accountants (CPAs). The act requires all CPAs to be registered and licensed members of the Lebanese Association of Certified Public Accountants (LACPA) and grants the association the authority to establish final competency examinations and continuing professional development (CPD) requirements for its members.

    The IPD requirements for CPAs include a university degree in accounting from a university that is recognized by the Ministry of Education, three to five years’ experience supervised by a LACPA member, and successful completion of LACPA’s professional examination which includes a theoretical and practical component to assess competencies.

    The curricula for public universities are established by the Ministry of Higher Education. As for the private universities, curricula are approved by the Ministry of Higher Education.

    LACPA requires CPAs to attend a minimum of 40 hours of CPD annually. The association monitors the fulfillment of CPD requirements by requiring members to submit evidence.

    LACPA indicates that it established and monitors additional requirements in line with IES 8 for engagement partners. CPAs may jointly establish professional non-trading partnership or companies in collaboration with financial, management and economic experts.

    In 2022, LACPA conducted a preliminary self-assessment of education requirements at the jurisdiction level and identified some gaps in alignment. LACPA indicates that once the situation in-country permits, it plans to conduct a follow-up gap analysis, particularly in reviewing university curricula, to clarify the extent of alignment with the revised IES of 2019—subject to delay due to ongoing crisis in Lebanon since 2019.

    Current Status: Partially Adopted

  • International Standards on Auditing

    The Ministry of Finance (MoF) is responsible for adopting audit standards for all companies. According to Accountancy Profession Act No. 364 of 1994, the Lebanese Association of Certified Public Accountants (LACPA) proposes auditing standards to the MoF. The Beirut Stock Exchange (BSE) and Banking Control Commission (BCC) also set requirements for entities under their supervision.

    Ministerial Decree No. 8089 of 1996 established the annual audit requirement for the following types of companies: (1) all holding, offshore, limited liability and joint stock companies, regardless of type, size, and number of employees; (2) all branches of foreign companies; and (3) all sole proprietorships and partnership whose total number of employees exceeds 25 or that have annual turnover above LB750 million (US$500,000).

    According to Ministerial Circular No. 742 of 2002, auditors must apply ISA for all audits of financial statements. The Circular introduced ISA 700 as the official format to be followed for audit reports. The rules of the BSE and BCC also stipulate that financial statements of all listed companies and banks should be audited using ISA.

    LACPA reports that the ISA are required by the government as issued by the IAASB, without modifications. The association reports to have ongoing processes in place to disseminate new and revised standards. As multilingual country, English is used in the business environment, and therefore, the English version of ISA is used.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    The Accountancy Profession Act No. 364 of 1994 grants authority to the Lebanese Association of Certified Public Accountants (LACPA) to set ethical requirements for Certified Professional Accountants. While the association can issue a Code of Ethics for its members, it must be approved by the Ministry of Finance (MoF). LACPA reports it is currently drafting revisions to the Act No. 364 to allow revisions to its Code without the approval of the MoF.

    LACPA last issued its Code in 2006, which it reports was at the time in line with the IESBA Code of Ethics. While the association reports that it has a process in place to monitor all new and revised pronouncements from the IESBA and communicate these to its members, it is not clear whether any subsequent versions of the Code were adopted.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    The Ministry of Finance (MoF) is responsible for adopting public sector accounting standards and in 2015, the Lebanese Association of Certified Public Accountants (LACPA) reports that the MoF issued a recommendation to LACPA to form a multi-stakeholder committee to establish a work plan for the adoption and implementation of the IPSAS. However, it is not clear whether the MoF has since adopted IPSAS or if there is a timeline in place. No decision has been taken to proceed with the adoption from the MoF.

    Current Status: Not Adopted

  • Investigation and Discipline

    The Lebanese Association of Certified Public Accountants (LACPA), through the Accountancy Profession Act No. 364 of 1994 and its internal bylaws, establishes the rules and procedures for an investigative and disciplinary (I&D) system of the association. All CPAs must be licensed and registered members of LACPA; therefore, its system applies to all professional accountants.

    LACPA reports that since 2014 it has been in the process of reforming its I&D system to ensure it fulfills the requirements of SMO 6 (revised 2012). The process includes redrafting the Act No. 364 and its bylaws as well as establishing the necessary internal structure, mechanisms, and processes. The status of the reforms and current level of fulfillment of the system with SMO 6 requirements is unclear.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    According to Ministerial Decisions 6258 of 1996 and 673/1 of 2001. Financial reporting standards are adopted by the Ministry of Finance (MoF). Most companies are required to prepare annual financial statements using the International Financial Reporting Standards (IFRS), The list of all applicable IFRS is published in the Official Gazette. Where differing interpretations exist, the official English version of IFRS should be referred to.

    The decisions specify the types of entities required to use IFRS to prepare their financial statements. Additionally, companies listed on the Beirut Stock Exchange must use full IFRS. Unlisted companies have the option of using full IFRS or IFRS for SMEs. (1) all holding, offshore, limited liability and joint stock companies, regardless of type, size, and number of employees; (2) all branches of foreign companies; and (3) all sole proprietorships and partnership whose total number of employees exceeds 25 or that have annual turnover above LB750 million (US $500,000). Unlisted companies have the option of using full IFRS. The list of all applicable IFRS is published in the Official Gazette.

    The Code of Money and Credit, the Banking Law of 1963, and Resolution 10/1 of 1984 and related decrees requires banks and other financial institutions (except insurance companies) to comply with accounting requirements set forth by the Banking Control Commission (BCC), in addition to complying with decrees issued by the MoF. According to the 2003 World Bank Report on the Observance of Standards and Codes, the requirements of the BCC were largely consistent with IAS but with some significant deviations. It is unclear how these requirements currently compare with IFRS.

    It is unclear if a translation of IFRS is used or required, and it is unclear if an ongoing adoption process is in place to incorporate new and amended standards into national requirements, or if the standards are adopted by reference and as issued by the IASB.

    Current Status: Partially Adopted

Disclaimer

IFAC bears no responsibility for the information provided in the SMO Action Plans prepared by IFAC member organizations. Please see our full Disclaimer for additional information.

 

Methodology

Methodology
Last updated: 03/2022
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