DSO vs. Collection Period: The Financial Metric CEOs and CFOs Can’t Afford to Confuse!

 

Criteria	Day Sales Outstanding (DSO)	Collection Period
Definition	DSO measures the average number of days it takes a company to collect payment after a sale.	Collection Period refers to the time taken to convert accounts receivable into cash.
Formula	DSO = (Accounts Receivable / Total Credit Sales) × Number of Days	Often identical to DSO; in some contexts, used interchangeably.
Purpose	To evaluate how quickly a company collects cash from customers after a sale.	To assess the efficiency of receivables management and cash conversion.
Focus	Focuses strictly on the sales-to-cash conversion time.	Broader term—can include average time to collect all receivables.
Application Context	Primarily used in credit sales performance analysis.	Used in working capital analysis and cash flow management.
Timeframe	Typically measured over a specific period (e.g., monthly, quarterly, yearly).	Same as DSO; timeframe is aligned with financial reporting periods.
Calculation Complexity	Requires accurate credit sales data and AR balances.	Simple if treated the same as DSO; can vary if calculated differently.
Key Insights Provided	Indicates the liquidity and credit risk of the business.	Indicates cash flow efficiency and collection policy effectiveness.
Industry Variability	DSO benchmarks vary significantly by industry.	Collection periods also vary similarly across industries.
Used By	CFOs, credit analysts, auditors, and investors.	Treasurers, working capital managers, and operations teams.
Implication of High Value	High DSO may indicate inefficient collections or credit risk.	Longer collection periods may suggest tight liquidity or poor AR controls.
Alternative Names	Average Collection Period, Receivables Days, Debtor Days (in some regions).	Sometimes also referred to as Average Collection Period.
Reporting Tools	Included in AR aging reports, financial ratios, dashboards.	Appears in working capital analysis reports, liquidity KPIs.

Summary:

• DSO and Collection Period are closely related - often used interchangeably in practice.

• However, DSO is typically a more specific metric in the context of credit sales, while Collection Period may refer more broadly to overall AR efficiency.

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Complete 2025 Guide to Saudi Arabia’s Taxes: Rates, Rules & Key Updates

Tax Type	Applicable Rate	Description	Key Updates / Notes
Corporate Income Tax	20% (standard)	Levied on net adjusted profits of non-Saudi/non-GCC entities or their share in mixed-ownership companies.	Higher rates apply to specific sectors: oil and hydrocarbon production (50%–85%) and natural gas investments (separate tax base).
Zakat	2.50%	Religious levy on Saudi and GCC-owned companies, calculated on the Zakat base (capital resources held over 12 months and income not invested in fixed assets).	Amendments to Zakat Implementing Regulations were approved in April 2023, including changes related to employees' housing ownership programs and financial guarantees.
Value-Added Tax (VAT)	15%	Applies to most goods and services, including imports.	Standard rate increased from 5% to 15% effective July 1, 2020. Certain supplies, such as exports and specific medicines, may be zero-rated or exempt.
Excise Tax	50%–100%	Imposed on specific goods deemed harmful to health or the environment, such as tobacco products (100%), energy drinks (100%), and soft drinks (50%).	Introduced in June 2017. Manufacturers and importers of excisable goods are required to register with ZATCA and submit returns bimonthly.
Withholding Tax (WHT)	5%–20%	Applied to payments made by Saudi entities to non-resident entities for various services. Rates vary: dividends (5%), interest (5%), royalties (15%), management fees (20%), technical services (5%).	Recent amendments reduced WHT on technical or consultancy services to 5% from 15%. Payments for airline tickets and certain freight services are now excluded from WHT. WHT must be paid within the first 10 days of each month, with annual returns filed within 120 days after the fiscal year-end.
Real Estate Transaction Tax (RETT)	5%	Levied on the total value of real estate disposals, including land and developed properties. Applies to sales, gifts, inheritance transfers, financial leasing, and long-term usufruct contracts exceeding 50 years.	Introduced in October 2020. Certain transactions, such as compulsory disposals for public benefit and inheritance transfers, are exempt. Saudi nationals may be exempted from RETT on the purchase of their first home up to SAR 1 million, subject to conditions.
White Land Tax (WLT)	2.50%	Annual tax on undeveloped urban land intended for residential or commercial use, calculated based on the land's market value.	Implemented to encourage the development of vacant lands and address housing shortages.
Social Insurance (GOSI)	Saudis: 21.5%; Non-Saudis: 2%	Mandatory monthly contributions based on the employee's basic wage, housing allowance, and commissions, capped at SAR 45,000. For Saudi employees: 9.75% paid by the employee and 11.75% by the employer. For non-Saudi employees: 2% paid by the employer.	No recent changes reported.
Customs Duties	Varies (up to 25%)	Imposed on imports based on tariff rates effective on the payment date. Rates can be as high as 25%, depending on the product. Calculated on the cost, insurance, and freight (CIF) value of the imported goods.	No recent changes reported.

Please note that while this table provides a comprehensive overview, specific circumstances may affect tax obligations. It's advisable to consult with a tax professional or refer to official resources for detailed guidance.

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UAE to impose 15% minimum top-up tax on large multinationals from January - Happy New Year in Advance

The United Arab Emirates will impose a minimum top-up tax (DMTT) of 15% on large multinational companies operating in the country starting in January, the finance ministry said on Monday as the government seeks to boost non-oil revenue.

The DMTT is part of the OECD's global minimum corporate tax agreement which has 136 signatories, including the UAE, to ensure big companies pay a minimum 15% and to make tax avoidance harder.

In amendments to the corporate tax law, the UAE's finance ministry said the DMTT will apply to companies with consolidated global revenue of 750 million euros ($793.50 million) or more in at least two out of the four financial years preceding the ones in which the tax comes into effect.

The UAE, including Dubai, is a hub for multinationals in the Middle East and the tax amendments come a year after the UAE began rolling out a 9% business tax, with exemptions for the many free zones which power its economy.

The DMTT comes under the Organisation for Economic Co-operation and Development’s (OECD) Two-Pillar Solution, which stipulates that large multinational enterprises pay a minimum effective tax rate of 15% on profits in each country where they operate.

The UAE's finance ministry said it is also considering introducing a number of corporate tax incentives, including one for research and development (R&D) that would apply for tax periods starting in 2026.

The expenditure-based incentive would offer a potential 30%-50% refundable tax credit depending on the size of the company's operations in the UAE and revenue, the ministry added.

A refundable tax credit for high-value employment activities that would be granted to companies as a percentage of eligible income costs for employees is also being considered and could be applied as early as Jan. 1 2025, the ministry said.

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Bahrain to introduce new tax on multinational corporations

The domestic minimum top-up tax will take effect from January 1

Manama skyline. Under DMTT, multinational companies will pay a minimum 15 per cent tax on the profits generated in Bahrain.

Bahrain will introduce a new tax on multinational corporations operating in the country starting from January, as part of plans to align with global taxation reforms.

Under the domestic minimum top-up tax (DMTT), multinational companies will pay a minimum 15 per cent tax on the profits generated in the country, the Bahrain News Agency reported Sunday.

The tax will apply exclusively to large multinationals operating in the kingdom, with global revenue exceeding €750 million ($830 million) for at least two of the previous four fiscal years, starting from January 1.

Eligible businesses will need to register with the National Bureau for Revenue, which also handles VAT and excise tax.

 The new framework is "fully aligned with the Organisation for Economic Co-operation and Development (OECD) guidelines", the BNA said.

The OECD's two-pillar reform programme set up a global minimum corporate tax to ensure large multinational enterprises pay a minimum 15 per cent tax on profits in each country where they operate.

The initiative is aimed at addressing tax challenges arising from the digitalisation and globalisation of the economy and putting a floor on tax competition, according to the OECD.

So far, more than 140 jurisdictions have signed up for the reform programme, which was announced in October 2021.

The proposed global minimum tax is expected to result in annual global revenue gains of around $220 billion, or 9 per cent of global corporate income tax revenue, the OECD said last year.

With the introduction of the DMTT, "Bahrain demonstrates its international commitment to global co-operation and its dedication to fostering a fair and level playing field in international taxation", the BNA said.

Bahrain, the smallest economy in the six-member GCC economic bloc, has been focusing on diversifying away from oil and boosting its non-hydrocarbon sector.

To strengthen its economy, the country unveiled a major economic reform plan in 2021 that seeks to invest about $30 billion in strategic projects to drive post-coronavirus growth, boost employment for citizens and attract foreign direct investment.

The country's real gross domestic product is expected to grow by 3.6 per cent this year, according to the International Monetary Fund.

Countries in the Gulf have each individually introduced various taxes such as VAT and corporate tax as part of their economic reform strategies.

In July, Oman's Shura Council also revealed plans to forward a draft law on personal income tax to the State Council. Although the exact details are still being finalised, if passed, the sultanate’s personal income tax would be a GCC first and could affect high-earners, with citizens taxed on net global income above $1 million and foreign residents on Oman-sourced income above $100,000.

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IFRS 18 Presentation and Disclosure in Financial Statements: Summary

 

FRS 18 was issued in 2024 and is mandatorily applicable for the period starting on or after 1 January 2027, with earlier application permitted.

However, please watch out because we need to apply IFRS 18 retrospectively, with the restatement of the comparative period.

It means that if you apply IFRS 18 from 2027, also the numbers for 2026 must be presented in line with the new rules.

IFRS 18 replaces the oldest standard IAS 1 Presentation of Financial Statements which will no longer applicable.

This summary splits the topics covered in IFRS 18 to the following subtopics:

1. Introduction: Objective, scope, definitions, separating and aggregation;
2. General requirements for financial statements;
3. Profit or loss statement – main changes here!;
4. Statement of other comprehensive income
5. Statement of financial position
6. Statement of changes in equity
7. Notes
8. Final word.

1. Introduction to IFRS 18 Presentation and Disclosure in Financial Statements

1.1 Objective of IFRS 18

IFRS 18 establishes the requirements for the presentation and disclosure of the information in the general purpose financial statements.

The objective is to make sure that entities provide relevant information faithfully representing insurance contracts. (see IFRS 17.1)

1.2 How to apply IFRS 18

We need to apply IFRS 18 retrospectively, with the restatement of the comparative period.

It means that if you apply IFRS 18 from 2027, also the numbers for 2026 must be presented in line with the new rules.

2. General requirements for financial statements

2.1 Objective of financial statements

The objective of financial statements is to provide financial information about a reporting entity’s:

• assets;
• liabilities;
• equity;
• income; and
• expenses,

so that the users of financial statements can assess the prospects for future net cash inflows the entity and management’s stewardship of the entity’s economic resources. (IFRS 18.9)
 

2.2 A complete set of financial statements

The components of the complete set of financial statements are (IFRS 18.10):

• a statement(s) of financial performance for the reporting period;
• a statement of financial position as at the end of the reporting period;
• a statement of changes in equity for the reporting period;
• a statement of cash flows for the reporting period; and
• notes for the reporting period;
• comparative information for the preceding period;
• a statement of financial position as at the beginning of the preceding period if required (i.e. when applying the new accounting policy retrospectively or makes material restatement retrospectively).

As for presenting the statement of financial performance, there are two options to present it as:

1. a single statement of profit or loss and other comprehensive income, in two sections; or
2. two separate statements.

2.3 Identification of financial statements

All the financial statements must be clearly identified, with the following information to disclose:

• the name of the reporting entity, and any change from the preceding reporting period;
• information about group or separate financial statements;
• date of the end of the reporting period or the period covered;
• presentation currency;
• level of rounding used.

IFRS 18 then sets the main principles, such as:

• Frequency of reporting;
• Consistency, disclosure and classification;
• Comparative information;
• Aggregation, disaggregation and offsetting

3. Profit or loss statement

IFRS 18 brings significant changes and specifications to the presentation of profit or loss, especially by introducing categories of income and expenses, and new subtotals to be presented.

3.1 Categories in the statement of profit or loss

All income and expenses in the statement of profit or loss shall be classified into one of the five categories:

1. Operating category – this is a default category and here, all items not included elsewhere are classified.
2. Investing category – for example, returns on investments, rentals from investment property, etc.
3. Financing category – all income and expenses related to liabilities, either from raising finance (e.g. interest expense on bonds, loans) or from other liabilities (e.g. unwinding the discount on long-term provisions).
4. Income taxes
5. Discontinued operations

These categories are NOT the same as categories in the statement of cash flows under IAS 7, although they may remind them.

Also, when an entity has specified main business activity, then it classifies certain items differently than other entities:

• If specified main business activity is investing in assets, then those expenses and income related to investing in assets belong to operating category (not investing);
• If specified main business activity is providing finance to customers, then those expenses and income related to providing finance to customers belong to operating category (not financing).

 

3.2 Totals and subtotals in statement of profit or loss

The mandatory subtotals are also a new requirement in IFRS 18 as compared to IAS 1.

Many entities presented those subtotals anyway, IFRS 18 just specifies how they should be determined.

There are three new mandatory subtotals:

• operating profit or loss – including all income and expenses in operating category;
• profit or loss before financing and income taxes – including operating profit or loss and all income and expenses in investing category;
• profit or loss, including all items in profit or loss.

3.3 Line items to be presented in profit or loss

As a minimum, an entity shall present the following amounts:

• Amounts required by IFRS 18:
  • Revenue, with presenting interest revenue and insurance revenue separately;
  • Operating expenses (by nature or by function);
  • Share of the profit or loss of associates and joint ventures by equity method;
  • Income tax expense or income;
  • Total for discontinued operations under IFRS 5.
• Amounts required by IFRS 9 Financial Instruments;
• Amounts required by IFRS 17 Insurance Contracts.

On top of these line items, an entity should present profit or loss for the period in allocation:

• attributable to non-controlling interests and
• attributable to owners of the parent.

4. Statement presenting comprehensive income

In the statement presenting comprehensive income, the following totals should be shown:

• profit or loss (carried from the statement of profit or loss);
• other comprehensive income, split into two categories:
  • items that will be reclassified to profit or loss after certain conditions are met; and
  • items that will not be reclassified.
• comprehensive income, being the total of:
• profit or loss and
• other comprehensive income.

Similarly as with profit or loss, an entity should present comprehensive income for the period in allocation:

• attributable to non-controlling interests and
• attributable to owners of the parent.

5. Statement of financial position

IFRS 18 does not change much about the presentation of the statement of financial position (balance sheet) in comparison with IAS 1.

IFRS 18 requires presentation of classified statement of financial position where current assets or liabilities are separated from non-current assets or liabilities.

With regard to a minimum content, the following line items shall be presented:

ASSETS	EQUITY AND LIABILITIES
Property, plant and equipment	Issued capital and reserves attributable to owners of the parent
Investment property
Intangible assets	Non-controlling interests
Financial assets	Financial Liabilities
Investments accounted for using equity method	Provisions
Biological assets
Inventories
Trade and other receivables	Trade and other payables
Cash and cash equivalents
Totals of assets in accordance with IFRS 5 Non-current assets Held for Sale and Discontinued Operations	Totals of liabilities in accordance with IFRS 5 Non-current assets Held for Sale and Discontinued Operations
Current tax assets	Current tax liabilities
Deferred tax assets	Deferred tax liabilities

Further sub classifications of the line items shall be disclosed either directly in the statement of financial position or in the notes, such as disaggregation of property, plant and equipment into classes, and similar.

Also, certain information related to the share capital, reserves and a few others shall be included in the statement of financial position, the statement of changes in equity or in the notes.

IFRS 18 does NOT prescribe the precise format of the statement of financial position. Instead, several formats are acceptable if they fulfill all requirements outlined above.

6. Statement of changes in equity

The requirements for statement of changes in equity in IFRS 18 are carried over from IAS 1, so they remain unchanged.

As a minimum, the statement of changes in equity must contain the following items:

• total comprehensive income for the period, showing separately amounts attributable to owners of the parent and to non-controlling interests
• the effect of retrospective application or restatement for each component of equity (if applicable)
• the reconciliation between the carrying amount at the beginning and the end of the period for each
  component of equity. Here, the following changes shall be disclosed separately:

• those resulting from profit or loss
• resulting from other comprehensive income
• resulting from transactions with owners (contributions, distributions and changes in ownership)

For the practical example showing the preparation of the statement of changes in equity step by step, please see this article.

Also, IFRS 18 prescribes to present amount of dividends recognized as distributions and the related amount per share on the face of the statement of changes in equity or in the notes.

7. Notes to the Financial Statements

The notes are meant to be the document accompanying numerical financial statements listed above. They should provide additional information not contained in the numbers, the basis of preparation of the financial statements and some additional information that might be relevant.

IFRS 18 sets that the notes shall contain at least:

• information about the basis for preparation of the financial statements;
• accounting policies used;
• information required by IFRS that is not presented in the primary financial statements – those are all subtotals and additional disclosures as required by other standards;
• other information that is not presented in the primary financial statements – for example, information about significant events or trends or contracts that might affect the business;

.

The notes shall be prepared in the systematic manner and be cross-referenced to the financial statements.

The new requirement in IFRS 18 is the presentation of management-defined performance measures.

Courtesy: Silvia

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