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Disasters are any way harmful to every segment of life whenever they take place. Whether man-made or natural, they do affect our professional and personal lives severely. When a natural disaster strikes, it leads to a heavy loss of property and damaged sales. However, if you have a concrete understanding of accounting rules in the UAE, then it can help immensely during difficult times like natural disasters to fully account for your damages, gain some financial aid through various insurance schemes, minimize the economic harm done to the company, review tax deductions and various other sources.
Accounting steps to be taken for inventory damages
The first step will be to count the items/products present in the inventory at present. Manual counting can be done as long as it is practical to do so. If some items have been damaged and are a total loss, it is still better to account for those losses by documenting them. It can be documented as the losses caused due to the harmful effects of a disaster in comparison to the losses which may have been caused due to some other means, not including the disaster. This process would make things very substantial and concrete while requesting reimbursement or claims through the insurance policies of the company.
After documenting the losses in inventory, the details will be needed to be reflected in the balance sheets as well. Another major step involved will be to update the balance sheet and include the value of the remaining inventory currently post the disaster. The inventory losses can be recorded as expenses as they can at the time of preparing for filing taxes, be used for tax returns to minimize the monetary losses.
However, there is one trade-off here. It is not possible to ask for the reimbursement of expenses incurred due to and not count the insurance claim in the income at the same time. Hence, this will require adjusting for any reimbursements through insurance.
Accounting steps to be taken for property damages
Damage caused to the assets of the company has to be taken care of in a similar manner to that of handling the damages caused to the inventory. In case the damage is serious and substantial to the assets of the company like buildings or machinery, it may cause a significant decline in the market value of the asset. It may also prevent the usage of the asset if the core functionality is damaged severely, and it may require one to take an impairment loss and deduct the value of the assets on the balance sheet of the companies.
When the time comes to file for the taxes, one can claim a deduction in the tax value for the case of a decline in the value of an asset due to any disaster which was not reimbursed back to the firm through insurance policies.
Steps to calculate the payroll
It is difficult to manage the finances after a disaster owing to a lot of inventory and property damages. When the company fails to bring new employees or brings in extra employees after a disaster, the laws should be studied properly to understand if Dubai’s laws and other employment laws and agreements legally obligate you to pay the staff members their compensation or not.
The laws for payment of salaries for the staff may vary from place to place. In some cases, you may be obliged to pay exempted, salaried staff during a temporary lay-off period when the company has closed its operations, or in some cases, You can ask your staff to use their paid annual leaves in that case but pay them if they have available sufficient annual leaves.
However, under some laws, the non-exempt employees are not required to be paid for the time in which the firm has closed temporarily. They are only to be paid for the time they had worked actually in fulfilling their duties as the employees of the firm when it was functioning properly. Still, in some cases, the local laws or some contacts of employment can let the firm be obliged for payment of staff in Dubai. It would include only those employees who were scheduled to work in the closure period, and the details were specified explicitly in their employment contracts.
Also, if you want the staff and the employees to stay on-site throughout a disaster, then, in that case, you will have to compensate them for the time they are not permitted to leave and provide their valuable services to sustain the firm’s operations.
What about late payments?
When a disaster affects clearing paychecks of the employees, which may delay the whole process, then one of the first goals will be to address them on a priority basis. Deliberately refusing to pay your employees in a timely way is considered a violation in most of the federal and state laws related to employment.
In unprecedented situations like a power outage in the office building, which can really impede the process of clearing the paychecks, the fines which a company has to ideally pay according to the laws for the delay in payments can be excused. But they should not be delayed in case of handling the flow of cash post or during a disaster and may incur fines.
Tax deadlines are most likely to get extended
The income tax authorities would subsequently postpone tax deadlines for people and companies in the impacted regions following a major disaster. However, the duration and timing of extensions will definitely differ as per the severity of the disaster and the structure of income taxes of Dubai.
In case these concepts seem complex to understand to anyone, the very basic and important steps to be taken by an individual to minimize the impact of the disaster come from the application of the basic accounting concepts. Most importantly, the assets and their losses should be documented well and updated in the balance sheet in order to claim insurance from the government for reimbursement or tax deductions. Having a good understanding of these basic concepts can help you greatly to minimize the losses and start working properly as before as soon as possible.