The Presidents / Chief Executives
All Banks / DFIs / MFBs



Dear Sir/Madam,

IMPLEMENTATION OF INTERNATIONAL FINANCIAL REPORTING STANDARD 9 (IFRS 9)

          Please refer to BPRD Circular Letter No. 16 dated July 29, 2024 on the captioned subject.

2. In order to facilitate the implementation of IFRS 9, it has been decided to amend the implementation of IFRS 9 Application Instructions as follows:


1. Modification Accounting: Modification accounting is to be applied retrospectively, however, the same may be effective on loans modified on or after January 01, 2020.


2. General Provisions: FIs 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.


3. Revenue Recognition from Islamic Operations: 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.


4. Charity on Islamic Products: IBD Circular No. 02 of 2008 clearly states that the “Charity Fund shall not constitute income of the IBI”. Hence, the treatment of charity should be in line with the existing practices as defined in SBP instructions and should not be recognized as income.


3. All other instructions regarding the IFRS 9 Application Instructions shall, however, remain unchanged.