Karachi July 29 2024: Considering the issues being faced by banks/DFIs/MFBs (Financial Institutions- FIs) regarding the implementation of IFRS 9 standard, it has been decided to make amendments and extend the timelines of SBP IFRS 9 application relating to certain areas.
Scope of Application-Consolidation of Overseas Associates: 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.
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, 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.
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: 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. (Relevant paragraphs of the IFRS 9 Standard)
Modification Accounting: FIs are advised to use modification accounting for financial assets and liabilities as per IFRS 9 standard with effect from October 1, 2024. (Relevant paragraphs of IFRS 9 Standard)
The FIs are also advised 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.
