SBP extends IFRS 9 deadline till Jan 2022

KARACHI: The State Bank of Pakistan (SBP) on Tuesday granted banks a one-year extension for the implementation of the International Financial Reporting Standard (IFRS) 19 due to the coronavirus pandemic.

“Keeping in view of Covid-19 impact and banking industry representations, it has been decided to implement the IFRS 9 from January 1, 2022 instead of its earlier implementation date of January 1, 2021,” the SBP said in a circular.

Meanwhile, banks and development finance institutions are required to submit the IFRA 9 compatible pro forma financial statements for year-ending 2020 and 2021 till July 15.

The SBP is aware of the fact that IFRS 9 implementation involves considerable judgment on part of the financial institutions (FIs) particularly on the expected credit loss (ECL) methodology, it said.

In line with best international practices, the central bank has developed “IFRS 9 application instructions” for ensuring smooth, robust and consistent implementation of the standard in the banking industry, it added.

The instructions, as per the SBP’s circular, would be used by the FIs for their parallel reporting purposes only and these would not be considered as final instructions that would be issued by the SBP subsequently based on the parallel run results.

The SBP advised FIs to develop their own credit conversion factor and loss given default models till December 31, 2021.

The FIs are required to prepare their financial statements in accordance with approved accounting standards as applicable in Pakistan.

The application of new accounting requirements under IFRS 9 will oblige FIs to establish provisions for expected credit losses, which will require the current banking systems to develop and establish new systems to evaluate all types of the FIs’ financial assets, according to the requirements of IFRS 9.