KARACHI: The State Bank of Pakistan (SBP) has decided to make some amendments and extend the timelines of IFRS 9 (International Financial Reporting Standard 9) application instructions as financial institutions are facing some difficulties in its implementations.
As per SBP’s directives, issued in April 2023, banks, DFIs and MFBs (Financial Institutions-FIs) were required to implement IFRS 9 from January 1, 2024.
However, now considering the issues being faced by Financial Institutions regarding the implementation of IFRS 9 standard, it has been decided to make amendments and extend the timelines of SBP IFRS 9 application instructions.
IFRS 9: Applicability period of exemption extended till Jan 1, 2026: SECP
As per amendments, FIs may continue preparing financial statements based on the host country’s regulatory accounting practices in the case of associates, till such time the IFRS 9 is implemented in that jurisdiction.
FIs are also allowed to continue measuring unquoted equity securities at the lower of cost or break-up value up to December 31, 2024. However, FIs shall be required to measure unquoted equity securities at fair value, as required in the IFRS 9 application instructions, with effect from January 1, 2025.
For Exposure at Default (EAD) Models, FIs are allowed an extension up to December 31, 2024 for developing the requisite models for calculating EAD for revolving products beyond the contractual date.
On Effective Interest Rate (EIR) Method, FIs are allowed to use the existing practice for recognizing interest income/expense on financial assets/liabilities up to September 30, 2024. However, FIs shall ensure the recognition of interest income/expense on financial assets/liabilities on the EIR method as per the IFRS 9 standard with effect from October 1, 2024.
Similarly, FIs shall measure the subsidized staff loans, extended to their employees as per HR policies, at fair value as per the IFRS 9 standard with effect from October 1, 2024.
For Modification Accounting, SBP has advised the FIs to use modification accounting for financial assets and liabilities as per IFRS 9 standard with effect from October 1, 2024.
The SBP has also advised the FIs to prepare time-bound plans for implementing the above requirements, duly approved by their Board of Directors, to ensure compliance with the above requirements and the extended timeline.
All other instructions regarding the IFRS 9 application instructions shall, however, remain unchanged, the central bank maintained.
Copyright Business Recorder, 2024
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