SBP extends IFRS 9 implementation timeline

July 29, 2024 (MLN): The State Bank of Pakistan (SBP) has decided to make amendments and extend the timelines of the International Financial Reporting Standard (IFRS) 9 application instructions.

"Considering the issues being faced by banks/DFIs/MFBs regarding the implementation of IFRS 9 standard, SBP has decided to make amendments and extend the timelines of the SBP IFRS 9 application instructions," reads a circular issued by the central bank.

Scope of Application-Consolidation of Overseas Associates

Finance Institutions (FI) 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.

Measurement of Unquoted Equity Securities

FIs are allowed to continue measuring unquoted equity securities at the lower of cost or break-up value up to December 31, 2024.

However, Fls shall be required to measure unquoted equity securities at fair value, as required in the IFRS 9 application instructions, with effect from January 01, 2025.

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.

Effective Interest Rate (EIR) Method

Fls 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 01, 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.

Modification Accounting

SBP has advised Fls to use modification accounting for financial assets and liabilities as per IFRS 9 standard with effect from October 01, 2024.

The central bank has also advised 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.

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