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ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has directed companies to follow accounting standards on “Accounting for Common Control Transactions” approved by the Council of Institute of Chartered Accountants of Pakistan (ICAP).

According to a notification issued by the SECP here on Friday, the SECP has directed that the accounting standard on “Accounting for Common Control Transactions” annexed to this notification, approved by the Council of Institute of Chartered Accountants of Pakistan, shall be followed, by companies, while carrying out common control transactions and preparing financial statements on or after June 30, 2022.

Provided that the Commission may in the public interest, on its own motion or upon an application made to it, grant an exemption to any company from compliance with all or any of the requirements of the aforesaid standard, the SECP added.

The objective of general purpose financial reporting is to provide information about the financial position, performance, and cash flows of a reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity.

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The entities carry out business combinations under a common control (BCUCC) for various reasons, including in the context of group restructurings and re-organisations.

The objective of this Accounting Standard is to establish the principles to account for the effects of the BCUCC and group restructurings in the general purpose financial statements of a receiving entity.

The Accounting Standard, accordingly, aims to improve the relevance, reliability and comparability of the information that the receiving entity provides in its financial statements about a BCUCC or a group restructuring transaction.

The Accounting Standard establishes principles and requirements for how the receiving entity: (a) recognises and measures in its financial statements a BCUCC or a group restructuring transaction; and (b) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of a BCUCC or a group restructuring transaction, the SECP added.

Copyright Business Recorder, 2022

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