The State Bank of Pakistan (SBP) has extended the effective implementation date of the International Financial Reporting Standards (IFRS) 9 for banks and development finance institutions (DFIs).
The extension has been given to financial institutions with an asset size of PKR 500 billion or more to January 1, 2024, according to a circular issued by the Bank’s Policy and Regulations Department (BPRD).
The decision comes after feedback was received from relevant stakeholders. The implementation date for all other banks and microfinance banks (MFBs) will remain the same, also set for January 1, 2024.
During the transition period, banks, DFIs, and MFBs are expected to continue with their parallel run reporting as per the timelines specified in BPRD Circular No. 03 dated July 05, 2022. The early adoption of the IFRS 9 standard is also encouraged.
The SBP has also extended the preparation deadline for annual and interim financial statements on the revised formats by banks and DFIs to the first quarter of 2024. The revision of the financial statements format was previously announced in BPRD Circular No. 02 dated February 09, 2023.
The circular is aimed at facilitating the transition to IFRS 9 for banks and DFIs while providing a timeline that ensures the standard is implemented effectively. The SBP encourages stakeholders to comply with the requirements and prepare for the upcoming changes in a timely manner.
IFRS 9 is a financial reporting standard issued by the International Accounting Standards Board (IASB) that sets out the requirements for accounting for financial instruments. The standard provides guidance on the classification and measurement of financial assets and liabilities, as well as the recognition and measurement of impairment losses on financial assets.
IFRS 9 replaced the previous standard, IAS 39, and is effective for annual periods beginning on or after January 1, 2018, with earlier adoption permitted. The standard is applicable to all entities that have financial instruments, including banks, insurers, and other financial institutions.
One of the key changes introduced by IFRS 9 is the new expected credit loss (ECL) model for the recognition and measurement of impairment losses. Under this model, entities are required to recognize expected credit losses for all financial assets, including those that are not yet past due or impaired. This approach differs from the previous incurred loss model, which only recognized losses when there was evidence of impairment.
The adoption of IFRS 9 has had a significant impact on financial reporting for many entities, particularly for those with significant financial instruments. It has also led to increased disclosure requirements, as entities are required to provide more information about their financial instruments and the assumptions used in calculating ECL.