State Bank of Pakistan gives final deadline to the commercial banks
ISLAMABAD - State Bank of Pakistan has issued a deadline of 1st January 2021 to commercial and microfinance banks to implement the International Financial Reporting Standard on Financial Instruments (IFRS 9) in their systems.
The decision was taken against the request of several banking companies that are facing problems in implementing the new reporting standards in their systems and so, have not yet been able to implement it fully.
The International Accounting Standards Board (IASB) issued the International Financial Reporting Standard on Financial Instruments i.e. IFRS 9 effective from January 1, 2018. IFRS 9 has introduced an expected credit loss approach, which brings major changes in the way financial institutions (FIs) will assess impairments of financial instruments.
Keeping in mind the importance of the Standard, the SBP advised the banking industry to carry out a quantitative impact assessment of IFRS 9 on their financials, along with the assessment of their readiness for its implementation. Given the impact assessment and stakeholders’ representation, it has been decided that the effective date of IFRS 9 implementation is January 1, 2021, for banks/DFIs/MFBs.
Banks are asked to prepare a separate Statement of Financial Position, Profit and Loss Account, Statement of Comprehensive Income and Statement of Changes in Equity, based on the requirements of IFRS 9. Along with the detailed notes on Advances, Investments, Provisions, Write-offs and any other notes which may have a material impact.
Banks will perform a parallel run of IFRS 9 implementation starting from Jan 1, 2020, to test the IFRS 9 outcomes. The FIs shall submit quarterly reports on the status of the implementation of IFRS 9 in the SBP, after review by the Board Committee responsible for oversight of the implementation. These reports should be submitted to the SBP within 14 working days of the Board of Directors (BOD) meeting at which the financial statements are approved.
Banks will review internal systems and procedures and put in place required governance structures, processes, and systems for implementation of the Standard before the effective date of IFRS 9’s implementation.