All business entities in Libya are required by Libyan law to maintain, in Arabic, a ledger and journal. These must bear revenue stamps on each page before use and must be registered at the commercial court. If there are any entries on this book they will not be registered. It follows that existing books of accounts cannot be registered and transactions prior to registration of the books are disallowed.
Under the letter of the law, the books are required to be written up daily, however in reality most companies tend to write up their books on a monthly basis from daily transactions’ summaries. In practice it is found that this is acceptable to the Inspector.
The books of account must have entries in Arabic only, on pages that have been stamped by the Revenue Department. The books can be written in other languages, if so desired, on the left-hand pages.
The book has to be kept meticulously, once a page is started no lines should be left out, every entry must be cross-referenced, and a double entry system must be maintained.
If the book is being written in another language as well as Arabic, it would be advisable that entries first be made in the foreign language and then translated and transcribed on the right hand pages in Arabic. Inconsistencies between the right hand and left hand pages of the book often result in disputes with the Tax Department. The tax inspector always requests sight of the statutory books of account.
Libyan company law requires that a company keep proper books of accounts that explain its transactions. Financial statements are required to follow the provisions of the Libyan commercial code. In practice this means that financial statements are prepared to international norms with some specific variants.
Thus financial statements would include:
- Directors’ report
- Profit and loss account (Income Statement)
- Balance Sheet
- Cash flow statement
- Control committee report
Notes to the above:
- Auditors and Audit Requirements
- Financial statements of foreign companies are required to be audited by qualified auditors annually.
A number of International auditing and accounting firms operate in Libya under their appointed Libyan representatives together with a number of local firms.