SBP amends IFRS 9 instructions

KARACHI: The State Bank of Pakistan on Wednesday revised the application instructions for the implementation of International Financial Reporting Standard (IFRS) 9, a statement said.

The revised standards stipulate that modification accounting should be implemented retrospectively; however, it may apply to loans modified on or after January 1, 2020. “FIs [financial institutions] are permitted to maintain general reserves/ provisions over and above the ECL, worked out for Stage 1 and Stage 2, up to December 31, 2026,” the SBP said.

“Islamic banking institutions (IBIs) are allowed to follow Islamic Financial Accounting Standards (IFAS) 1 & 2 where applicable and continue the existing accounting methodology on other Islamic products until issuance of further instruction in this regard.

However, IBIs are advised to disclose the impact, in notes to financial statements, had IFRS 9 been adopted in its entirety,” it added. Regarding charity on Islamic products, the SBP said the treatment of charity should be in line with the existing practices as defined in SBP instructions and should not be recognised as income.