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Coronavirus
LOW Source: covid.gov.pk
Pakistan Deaths
28,761
824hr
Pakistan Cases
1,286,453
43124hr
0.98% positivity
Sindh
476,494
Punjab
443,379
Balochistan
33,491
Islamabad
107,848
KPK
180,254

KARACHI: The State Bank of Pakistan (SBP) has delayed implementation on the International Financial Reporting Standard 9 (IFRS 9) due to Covid-19 impact and now the Financial Institutions (FIs) are required to implement IFRS 9 from January 1, 2022. Previously, in October 2019, the SBP announced the effective date of IFRS 9 implementation by January 1, 2021 and advised its transition requirements. However, now the SBP has decided to revise these instructions sand keeping in view Covid-19 impact and banking industry representations, the implement date for the IFRS 9 will be from January 1, 2022 instead of its earlier implementation date of January 1, 2021.

Meanwhile, the banks, DFI and MFBs (Financial Institutions) will be required to perform some tasks. This includes, Submission of IFRS 9 compatible pro forma Financial Statements for year-ending 2020 and 2021 by July 15, 2021 and Mar 31, 2022 respectively.

For Parallel Run Implementation of IFRS 9, Submission of Parallel Run Results for period ending Mar 31, 2021 will be by Jul 30, 2021. Submission of Parallel Run Results for period ending Jun 30, 2021 will Aug 31, 2021 and deadline for submission of Parallel Run Results for period ending Sep 30, 2021 is Oct 31, 2021.

According to a circular, State Bank 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.

In this regard, the SBP, in line with best international practices, has developed “IFRS 9 application instructions” for ensuring smooth, robust and consistent implementation of IFRS 9 in the banking industry.

The aim of these instructions is to achieve standardized practices with respect to the expected credit loss accounting and to draw out the SBP’s expectations from the FIs, where they are expected to exercise considerable judgment and/or elect to use simplifications and other practical expedients permitted under the Standard.

Notwithstanding, the SBP has advised the FIs to develop their own Credit Conversion Factor and Loss Given Default models till Dec 31, 2021.

The instructions will be used by the FIs for their parallel reporting purposes only and these will not be considered as final instructions, which will be issued by SBP subsequently based on the parallel run results.

Further, for ECL to be recognized in 2022, the SBP will provide timeline by Dec 2021 for absorption of ECL, for CAR purposes, after evaluation/assessment of individual FIs.

According to the SBP fresh directives, during the parallel reporting period, FIs non-compliance will not attract punitive action; however, any non-compliance of specific provisions of these instructions will be disclosed by the FI in its proforma financial statements and parallel run results along with reasons thereof.

Copyright Business Recorder, 2021

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