State Bank announces implementation of IFRS-9 from January 2022

Shahnawaz AkhterWeb Editor

06th Jul, 2021. 03:51 pm
State Bank announces implementation

KARACHI: The central bank on Tuesday announced the implementation of the International Financial Reporting Standard 9 (IFRS-9) from January 1, 2022, which was delayed due to the coronavirus pandemic.

Through a circular issued on October 23, 2019, the State Bank of Pakistan (SBP) had announced plans to implement IFRS-9 from January 2020. However, keeping in view the impact of the Covid-19 and the banking industry representations, it has been decided to implement the International Financial Reporting Standard 9 from January 1, 2022, the SBP said.

Meanwhile, the banks/development financial institutions (FDIs)/microfinance banks (MFBs) are required to submit International Financial Reporting Standard 9 compatible proforma financial statements for the year ending 2020 and 2021 by July 15, 2021 and March 31, 2022. The banks are required to parallel run implementation of IFRS 9, it added.

Likewise, the parallel run results for the period ending March 31, 2021 should be submitted by July 30, 2021, the parallel run results for the period ending January 30, 2021 should be submitted by August 31, 2021, while the parallel run results for the period ending September 30, 2021 should be submitted by October 31, 2021, the SBP said.

The central bank also said that IFRS 9 implementation involves considerable judgement on the part of the financial institutions, particularly on the expected credit loss (ECL) methodology. In this regard, the SBP, in line with the best international practices, has developed “IFRS 9 application instructions” for ensuring smooth, robust and consistent implementation in the banking industry.

The aim of these instructions is to achieve standardised practices regarding the expected credit loss accounting and to draw out the central bank’s expectations from the financial institutions, where they are expected to exercise considerable judgement and/or elect to use simplifications and other practical expedients permitted under the standard.

Notwithstanding, the financial institutions are advised to develop their own credit conversion factor and loss given default models till December 31, 2021.

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