KARACHI: State Bank of Pakistan (SBP) on Tuesday announced timeline for implementing International Financial Reporting Standards 9 (IFRS 9). The central bank said that it has been decided to implement the IFRS 9 from January 01, 2022.
The SBP said that through Circular No. 04 dated October 23, 2019 wherein the effective date of IFRS 9 implementation and its transition requirements were advised.
However, keeping in view of COVID-19 impact and banking industry representations, it has been decided to implement the IFRS 9 from January 01, 2022 instead of its earlier implementation date of January 01, 2021.
Meanwhile, the banks/DFIs/MFBs (hereinafter referred as Financial Institutions) are required to perform the following tasks:
|1|| Submission of IFRS 9 compatible pro forma Financial Statements for|
year-ending 2020 and 2021 (as per the requirements given in para 2(a) and Annex-I of BPRD Circular No. 04 dated October 23, 2019)
|Jul 15, 2021 Mar 31, 2022|
|2||Parallel Run Implementation of IFRS 9 Submission of Parallel Run Results for period ending Mar 31, 2021 Submission of Parallel Run Results for period ending Jun 30, 2021 Submission of Parallel Run Results for period ending Sep 30, 2021||Jul 30, 2021 Aug 31, 2021 Oct 31, 2021|
The central bank said that it is aware of the fact that IFRS 9 implementation involves considerable judgment on part of the Financial Institutions (FIs) particularly on the Expected Credit Loss (ECL) Methodology.
In this regard, the SBP, in line with best international practices, has developed “IFRS 9 application instructions” for ensuring smooth, robust and consistent implementation of IFRS 9 in the banking industry.
The aim of these instructions is to achieve standardized practices with respect to the expected credit loss accounting and to draw out the SBP’s expectations from the FIs, where they are expected to exercise considerable judgment and/or elect to use simplifications and other practical expedients permitted under the Standard. Notwithstanding, the FIs are advised to develop their own Credit Conversion Factor and Loss Given Default models till Dec 31, 2021.
The instructions enclosed herewith will be used by the FIs for their parallel reporting purposes only and these shall not be considered as final instructions, which will be issued by SBP subsequently based on the parallel run results.
Further, for ECL to be recognized in 2022, SBP will provide timeline by Dec 2021 for absorption of ECL, for CAR purposes, after evaluation / assessment of individual FIs.
During the parallel reporting period, FIs non-compliance will not attract punitive action; however, any non-compliance of specific provisions of these instructions will be disclosed by the FI in its pro forma financial statements and parallel run results along with reasons thereof.