KARACHI— –The State Bank of Pakistan (SBP) extended the deadlines for putting the International Financial Reporting Standard, IFRS-9, into place, but also gave the final instructions for doing so on Wednesday.
A spokesperson for the SBP said that final instructions on IFRS 9, which is a global standard set by the International Accounting Standards Board (IASB), have been given to make sure that the standard is used in the banking industry in a smooth and consistent way.
Under the new timelines, IFRS 9 will go into effect on January 1, 2023, for banks with assets of PKR 500 billion or more according to their annual financial statements as of December 31, 2021, and for all development finance institutions (DFIs). However, IFRS 9 will go into effect on January 1, 2024, for all other banks and microfinance banks (MFBs).
The Standard tells accountants how to classify, measure, and write down the value of financial instruments and assets. With the implementation of IFRS 9, the current provisioning requirement, which is based on the “incurred loss” method, will be replaced by “expected credit loss provisions,” which will be based on expected losses on both performing and non-performing portfolios.
Since the beginning of 2018, the SBP has been talking with the banking industry about how to use IFRS 9 in Pakistan. Before, SBP had set a deadline of January 1, 2022 for banks to start using IFRS-9. This deadline has now been changed at the request of banks that are having trouble with the new standard, according to the statement.
This method looks to the future and measures the loan loss provisions based on models of credit risk.
