SECP extends IFRS 9 implementation deadline

Extension granted till June 30, 2024 due to economic hardships, capacity issues

ISLAMABAD:

The Securities and Exchange Commission of Pakistan (SECP) has extended the effective date for implementation of the International Financial Reporting Standard rule (IFRS-9) for Non-Banking Finance Companies (NBFCs) including Non-Bank Microfinance Companies (NBMFCs) and Modarabas till June 30, 2024.

This extension has been granted in the wake of economic hardships and capacity issues being faced by the respective sectors in the post-Covid times. It also aims to provide a level playing field to the NBFCs and Modarabas in line with the extension granted by the State Bank for banks and Development Finance Institutions till January 1, 2024.

Earlier, the International Accounting Standard Board (IASB) replaced the International Accounting Standard 39 with IFRS 9 effective from January 1, 2018. The new standard can have a substantial market impact and requires, in particular, the application of a new impairment requirement i.e., Expected Credit Loss (ECL), which effectively asks all NBFCs to set provisions for expected future credit losses.

Under the IFRS 9 measured ECL approach, NBFCs need to consider current conditions and, reasonable and supportable, forward-looking information that is available without undue cost or effort, when estimating the ECL. Currently, only 17 of 42 members of Non-Banking Financial Institutions (NBFI), Modaraba Association of Pakistan and only two NBMFCs have adopted the standard.

The SECP, however, is actively engaged in encouraging an early adoption of the IFRS-9 standard and has clearly stated that no further extensions shall be granted.

Published in The Express Tribune, October 12^th, 2022.

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