Please refer to BPRD Circular Letter No. 07 dated April 13, 2023 regarding the implementation of IFRS 9 by the banking industry from January 1, 2024.
2. Considering the issues being faced by banks/DFIs/MFBs (Financial Institutions- FIs) regarding the implementation of IFRS 9 standard, it has been decided to make amendments and extend the timelines of SBP IFRS 9 application instructions as follows:
i. Scope of
Application-Consolidation of Overseas
Associates: FIs may continue
preparing financial statements based on
the host country’s regulatory accounting
practices in the case of associates, till
such time the IFRS 9 is implemented in
that jurisdiction. (Para 1.2 of SBP IFRS
9 Application Instructions)
ii. Measurement
of Unquoted Equity Securities:
FIs are allowed to continue measuring
unquoted equity securities at the lower
of cost or break-up value up to December
31, 2024. However, FIs shall be required
to measure unquoted equity securities
at fair value, as required in the IFRS
9 application instructions, with effect
from January 1, 2025. (Para 2.2.2 of SBP
IFRS 9 Application Instructions)
iii. Exposure
at Default (EAD) Models: FIs
are allowed an extension up to December
31, 2024 for developing the requisite
models for calculating EAD for revolving
products beyond the contractual date.
(Para 3.17 of SBP IFRS 9 Application Instructions)
iv. Effective
Interest Rate (EIR) Method: FIs
are allowed to use the existing practice
for recognizing interest income/expense
on financial assets/liabilities up to
September 30, 2024. However, FIs shall
ensure the recognition of interest income/expense
on financial assets/liabilities on the
EIR method as per the IFRS 9 standard
with effect from October 1, 2024.
Similarly, FIs shall
measure the subsidized staff loans, extended
to their employees as per HR policies,
at fair value as per the IFRS 9 standard
with effect from October 1, 2024. (Relevant
paragraphs of the IFRS 9 Standard)
v. Modification
Accounting: FIs are advised to
use modification accounting for financial
assets and liabilities as per IFRS 9 standard
with effect from October 1, 2024. (Relevant
paragraphs of IFRS 9 Standard)
3. The FIs are also advised to prepare time-bound plans for implementing the above requirements, duly approved by their Board of Directors, to ensure compliance with the above requirements and the extended timeline.
4. Further, clarifications on some other aspects concerning the IFRS 9 application instructions are attached at Annexure-A.
5. All other instructions regarding the IFRS 9 Application Instructions shall, however, remain unchanged.