ISLAMABAD – State Bank of Pakistan has issued a deadline of 1st January2021 to commercial and microfinance banks to implement the InternationalFinancial Reporting Standard on Financial Instruments (IFRS 9) in theirsystems.
The decision was taken against the request of several banking companiesthat are facing problems in implementing the new reporting standards intheir systems and so, have not yet been able to implement it fully.
The International Accounting Standards Board (IASB) issued theInternational Financial Reporting Standard on Financial Instruments i.e.IFRS 9 effective from January 1, 2018. IFRS 9 has introduced an expectedcredit loss approach, which brings major changes in the way financialinstitutions (FIs) will assess impairments of financial instruments.
Keeping in mind the importance of the Standard, the SBP advised the bankingindustry to carry out a quantitative impact assessment of IFRS 9 on theirfinancials, along with the assessment of their readiness for itsimplementation. Given the impact assessment and stakeholders’representation, it has been decided that the effective date of IFRS 9implementation 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 ofChanges in Equity, based on the requirements of IFRS 9. Along with thedetailed notes on Advances, Investments, Provisions, Write-offs and anyother notes which may have a material impact.
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Banks will perform a parallel run of IFRS 9 implementation starting fromJan 1, 2020, to test the IFRS 9 outcomes. The FIs shall submit quarterlyreports on the status of the implementation of IFRS 9 in the SBP, afterreview by the Board Committee responsible for oversight of theimplementation. These reports should be submitted to the SBP within 14working days of the Board of Directors (BOD) meeting at which the financialstatements are approved.
Banks will review internal systems and procedures and put in place requiredgovernance structures, processes, and systems for implementation of theStandard before the effective date of IFRS 9’s implementation.
