Pakistan
Extent of IFRS applicationStatusAdditional Information
IFRS Standards are required for domestic public companies Domestic companies whose securities trade in a public market, financial institutions, public utilities, and large-sized companies are required to use IFRS Standards as adopted in Pakistan. Some important Standards have not been adopted for companies asserting compliance with IFRS Standards as adopted in Pakistan. And Pakistan has not applied IFRS 1 First-time Adoption of IFRS.
IFRS Standards are permitted but not required for domestic public companies
IFRS Standards are required or permitted for listings by foreign companies Foreign companies whose securities trade in a public market in Pakistan are required to use IFRS Standards as adopted in Pakistan.
The IFRS for SMEs Standard is required or permitted Permitted. In adopting the IFRS for SMEs Standard, Pakistan added an option to capitalise borrowing costs relating to the construction or acquisition of an asset similar to the requirement of IAS 23 Borrowing Costs.
The IFRS for SMEs Standard is under consideration

Pakistan

RELEVANT JURISDICTIONAL AUTHORITY

Organisation

The Institute of Chartered Accountants of Pakistan (ICAP).

Securities and Exchange Commission of Pakistan (SECP).

The State Bank of Pakistan (SBP).

Role of the organisation

The ICAP regulates the chartered accountancy profession in Pakistan. It is the body responsible for adopting and issuing auditing standards and for recommending accounting standards for notification, i.e. formal adoption by regulation by the SECP. The ICAP is the standard-setting body for Islamic Financial Accounting Standards.

The SECP has authority to notify accounting standards for all companies, not just listed companies.

The SBP being the banking regulator has a role in prescribing the accounting and reporting requirements for banks and certain categories of financial institutions.

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COMMITMENT TO GLOBAL FINANCIAL REPORTING STANDARDS

Has the jurisdiction made a public commitment in support of moving towards a single set of high quality global accounting standards?
Yes.
Has the jurisdiction made a public commitment towards IFRS Standards as that single set of high quality global accounting standards?
Yes.
What is the jurisdiction's status of adoption?

Pakistan has adopted all effective IFRS Standards except IFRS 1 First-time Adoption of International Financial Reporting Standards and IFRS 14 Regulatory Deferral Accounts. Pakistan has adopted IFRS 9 Financial Instruments with an effective date of 1 July 2018 but has deferred for companies until 30 June 2019 (i.e. applicable for companies for period ending on or after 30 June 2019). Early application is permitted. Further, for companies holding financial assets where amounts are due from the Government of Pakistan IFRS 9 ‘Expected Credit Loss model’ has been deferred until 30 June 2021.These companies shall follow the relevant requirements of IAS 39 during the exemption period.

Further, following the grandfathering approach all companies that have executed power purchase agreements before 1 January 2019, shall have exemption as follows:

  1. IFRS 16 Leases to the extent of the power purchase agreements executed before the effective date of IFRS 16 i.e. 1 January 2019;
  2. International Accounting Standard 21 The Effects of Changes in Foreign Exchange Rates to the extent of capitalization of exchange differences; and
  3. In case of capitalisation of exchange differences under (b) above, recognition of embedded derivatives under IFRS 9 shall not be permitted.

Additionally, IFRS 9, IFRS 7 Financial Instruments: Disclosures and IAS 40 Investment Property are not yet implemented for banking companies due to the current regulations prescribed by the SBP addressing the accounting of financial instruments.

Additional comments provided on the adoption status?
More information about the IFRS Standards that Pakistan has not adopted can be found in the IFRS Endorsement section of this Profile.
If the jurisdiction has NOT made a public statement supporting the move towards a single set of accounting standards and/or towards IFRS Standards as that set of standards, explain the jurisdiction's general position towards the adoption of IFRS Standards in the jurisdiction.
Not applicable.

EXTENT OF IFRS APPLICATION

For DOMESTIC companies whose debt or equity securities trade in a public market in the jurisdiction:

Are all or some domestic companies whose securities trade in a public market either required or permitted to use IFRS Standards in their consolidated financial statements?

Domestic companies whose securities trade in a public market are required to prepare their statutory financial statements in accordance with the IFRS Standards as adopted in Pakistan. Further, all domestic companies, including companies whose securities trade in a public market, can opt to prepare their statutory financial statements in accordance with the IFRS Standards as issued by the Board.

As noted above, Pakistan has adopted all effective IFRS Standards, except IFRS 1 and IFRS 14. Application of IFRS 9 is deferred but early application is permitted. Additionally, IFRS 9, IFRS 7 and IAS 40 are not yet implemented for banking companies due to the current regulations prescribed by the SBP dealing with the accounting for financial instruments.

Therefore, companies preparing statutory financial statements in accordance with the IFRS Standards as adopted in Pakistan may not assert compliance with ‘IFRS Standards’ but they may assert compliance with ‘IFRS Standards as adopted in Pakistan’. More information is available in the ‘IFRS Endorsement’ section of this Profile.

If YES, are IFRS Standards REQUIRED or PERMITTED?
Required.
Does that apply to ALL domestic companies whose securities trade in a public market, or only SOME? If some, which ones?
All.
Are IFRS Standards also required or permitted for more than the consolidated financial statements of companies whose securities trade in a public market?
Yes.
For instance, are IFRS Standards required or permitted in separate company financial statements of companies whose securities trade in a public market?
Yes.
For instance, are IFRS Standards required or permitted for companies whose securities do not trade in a public market?

Under the Companies Act 2017, the SECP has prescribed the following financial reporting frameworks for companies registered in Pakistan.

Classification criteria Applicable framework
Public-interest company
  • a listed company;
  • a non-listed company which is:
    1. a public-sector company as defined in the Act; or
    2. a public utility or similar company carrying on the business of essential public service; or
    3. a company that holds assets in a fiduciary capacity for a broad group of outsiders, such as a bank, insurance company, securities broker/dealer, pension fund, mutual fund or investment banking entity;
    4. a company with such number of members holding ordinary shares as may be notified; or
    5. a company with assets exceeding such value as may be notified.

Large-sized company

  • a non-listed company (with paid-up capital of, or exceeding, 200 million rupees (approximately US$1.4 million); annual turnover of, or exceeding, 1 billion rupees (approximately US$7 million); or 750 employees or more.
  • a foreign company with turnover of, or exceeding, 1 billion rupees.
IFRS Standards as adopted in Pakistan.
  • a non-listed large-size company licensed or formed under sections 42 or 45 of the Act having an annual gross revenue (grants/income/subsidies/donations) including other income/revenue of, or exceeding, 200 million rupees.

IFRS Standards as adopted in Pakistan; and

Accounting Standard for Not-for-Profit Organisations (NPOs) as issued by the ICAP and notified by the SECP.

Medium-sized company

  • a non-listed public company (paid-up capital of less than 200 million rupees; and annual turnover of less than 1 billion rupees; and fewer than 750 employees).
  • A private company (paid-up capital exceeding 10 million rupees (approximately US$71,000) but less than 200 million rupees; or annual turnover exceeding 100 million rupees (approximately US$707,000) but less than 1 billion rupees; or more than 250 employees but fewer than 750).
  • a foreign company with turnover of less than 1 billion rupees.
The IFRS for SMEs Standard is required.
  • medium-sized non-listed company licensed or formed under sections 42 or 45 of the Act having annual gross revenue (grants/income/subsidies/donations) including other income/revenue less than 200 million rupees (approximately US$1.4 million)
The IFRS for SMEs Standard is required and Accounting Standards for NPOs.
Small-sized entities (paid-up capital not exceeding 10 million rupees; turnover not exceeding 100 million rupees (approximately US$720,000); and not more than 250 employees).

Accounting and Financial Reporting Standards for Small-sized Entities (AFRS for SSEs) as issued by the ICAP is required.

These companies may choose instead to use either the IFRS for SMEs Standard or full IFRS Standards as adopted in Pakistan.

Further, companies can opt to prepare statutory financial statements under a higher financial reporting framework. For example, a medium-sized company can prepare statutory financial statements under the IFRS Standards as adopted in Pakistan.

Moreover, all companies can opt to prepare statutory financial statements in accordance with IFRS Standards as issued by the International Accounting Standards Board.

If the jurisdiction currently does NOT require or permit the use of IFRS Standards for domestic companies whose securities trade in a public market, are there any plans to permit or require IFRS Standards for such companies in the future?
Not applicable.

For FOREIGN companies whose debt or equity securities trade in a public market in the jurisdiction:

Are all or some foreign companies whose securities trade in a public market either REQUIRED or PERMITTED to use IFRS Standards in their consolidated financial statements?

Foreign companies whose securities trade in a public market are required to prepare their statutory financial statements in accordance with the IFRS Standards as adopted in Pakistan. Such companies can opt to prepare their statutory financial statements in accordance with the IFRS Standards as issued by the Board.

As noted above, Pakistan has adopted all effective IFRS Standards, except IFRS 1 and IFRS 14. Application of IFRS 9 is deferred until 30 June 2019, early application is permitted. Additionally, IFRS 9, IFRS 7 and IAS 40 are not yet implemented for banking companies due to the current regulations prescribed by the SBP dealing with the accounting of financial instruments.

If YES, are IFRS Standards REQUIRED or PERMITTED in such cases?
Required.
Does that apply to ALL foreign companies whose securities trade in a public market, or only SOME? If some, which ones?
All.

IFRS ENDORSEMENT

Which IFRS Standards are required or permitted for domestic companies?

Pakistan has adopted all effective IFRS Standards, except for IFRS 1 and IFRS 14. Pakistan has adopted IFRS 9 with an effective date of 1 July 2018 but has deferred it until 30 June 2019. Early application is permitted. Additionally, IFRS 9, IFRS 7 and IAS 40 are not yet implemented for banking companies due to the current regulations prescribed by the SBP dealing with the accounting of financial instruments.

Domestic companies can prepare statutory financial statements in accordance with either IFRS Standards issued by the Board or IFRS Standards as adopted in Pakistan.

More information can be found below.

The auditor's report and/or the basis of presentation footnote states that financial statements have been prepared in conformity with:
Based on the above explanation, IFRS Standards issued by the International Accounting Standards Board or IFRS Standards as adopted in Pakistan.
Does the auditor's report and/or the basis of preparation footnote allow for ‘dual reporting’ (conformity with both IFRS Standards and the jurisdiction’s GAAP)?
Yes.
Are IFRS Standards incorporated into law or regulations?
Yes.
If yes, how does that process work?
IFRS Standards are adopted by the SECP by notification in the Official Gazette. When notified, the Standards have the authority of law.
If no, how do IFRS Standards become a requirement in the jurisdiction?
Not applicable.
Does the jurisdiction have a formal process for the 'endorsement' or 'adoption' of new or amended IFRS Standards (including Interpretations) in place?
Yes.
If yes, what is the process?

Adoption of an IFRS or IAS Standard involves the following steps:

  • Initially, the IFRS Standard is considered by the Accounting Standards Board (ASB) of the ICAP, which identifies any issues that may arise on adoption.
  • The ASB carries out its due process in terms of stakeholder awareness and consultation in relation to the new Standard.
  • The ASB also identifies and requests the SECP and/or the State Bank of Pakistan (SBP) to make any necessary amendments to local legislation to ensure the effective implementation of the proposed IFRS Standard.
  • The ASB recommends adoption of the IFRS Standard to the ICAP Council after the ASB has completed its due process, including the satisfactory resolution of any concerns or issues.
  • By a decision of the Council, the ICAP recommends the adoption of the IFRS Standard to the SECP for notification. The decision to adopt rests with the SECP.
  • When the SECP notifies the IFRS Standard it becomes, under the law, part of the IFRS Standards as adopted in Pakistan.

For details of the Due Process refer to the ASB Handbook:

http://www.icap.net.pk/wp-content/uploads/2014/01/ASB-Due-Process-Rules-Final-post-comments-1.pdf

If no, how do new or amended IFRS Standards become a requirement in the jurisdiction?
Not applicable.
Has the jurisdiction eliminated any accounting policy options permitted by IFRS Standards and/or made any modifications to any IFRS Standards?
Yes.
If yes, what are the changes?
  • The implementation of IAS 39 was deferred for banks and financial institutions by SBP till further notice. The SBP has prescribed its own criteria for recognition and measurement of financial instruments for such financial entities. Further, IFRS 7 Financial Instruments: Disclosures has been deferred for banks and other financial institutions regulated by the SBP. The disclosure requirements are also set out by SBP in the format for financial statements prescribed for them.
  • The SECP, through SRO 1007(I)/2017, dated 4 October 2017, adopted IFRS 9 Financial Instruments with an effective date of 1 July 2018. However, subsequently, the SECP deferred the effective date of IFRS 9 for the reporting period or year ending on or after 30 June 2019 for all companies required to prepare their financial statements in accordance with the requirements of IFRS Standards. The SECP has allowed early application of IFRS 9. Additionally, IFRS 9, IFRS 7 and IAS 40 are not yet implemented for banking companies due to the current regulations prescribed by the SBP addressing the accounting of financial instrument.
  • IAS 40 Investment Property has been deferred for banks and other financial institutions regulated by the SBP. Investment properties are accounted for applying IAS 16. The disclosure requirements are also set out by SBP in the format for financial statements prescribed for them.
  • Power-sector companies have been exempted by the SECP from the requirements of IAS 21 The Effects of Changes in Foreign Exchange Rates to the extent of capitalisation of a foreign exchange loss.
  • All companies have been exempted by the SECP from the application of IFRIC 12 Service Concession Arrangements.
  • Banks and other entities (e.g. investment management companies) have been exempted from consolidation requirements of IFRS 10 for their holdings in mutual funds.
Other comments regarding the use of IFRS Standards in the jurisdiction?

Pakistan recently adopted the following IFRS Standards:

  • The implementation of IAS 39 was deferred for banks and financial institutions by SBP till further notice. Pakistan adopted IFRS 9 with an effective date of 1 July 2018 through SECP SRO 1007 (l)/2017, dated 4 October 2017 but has deferred it until 30 June 2019. Early application is permitted. Additionally, IFRS 9, IFRS 7 and IAS 40 are not yet implemented for banking companies due to the current regulations prescribed by the SBP dealing with the accounting of financial instruments.
  • IFRS 15 Revenue from Contracts with Customers (SECP SRO 1007 (l)/2017, dated 4 October 2017).
  • IFRS 16 Leases (SECP SRO 434 (l)/2018, dated 9 April 2018).

Further, IFRS 14 and IFRS 17 are expected to be adopted by Pakistan in 2019.

TRANSLATION OF IFRS STANDARDS

Are IFRS Standards translated into the local language?
No.
If they are translated, what is the translation process? In particular, does this process ensure an ongoing translation of the latest updates to IFRS Standards?
Not applicable.

APPLICATION OF THE IFRS FOR SMEs STANDARD

Has the jurisdiction adopted the IFRS for SMEs Standard for at least some SMEs?
Yes. See below.
If no, is the adoption of the IFRS for SMEs Standard under consideration?
Not applicable.
Did the jurisdiction make any modifications to the IFRS for SMEs Standard?
No.
If the jurisdiction has made any modifications, what are those modifications?
Not applicable.
Which SMEs use the IFRS for SMEs Standard in the jurisdiction, and are they required or permitted to do so?

Under section 224 of, and the Third Schedule to, the Companies Act 2017, the SECP prescribed the IFRS for SMEs Standard for the following classes of Pakistani companies.

Further, companies can opt to prepare statutory financial statements under a higher financial reporting framework. For example, a medium-sized company can prepare statutory financial statements under the IFRS Standards as adopted in Pakistan.

Classification criteria Applicable framework

Medium-sized company

  • a non-listed public company (paid-up capital of less than 200 million rupees; and annual turnover of less than 1 billion rupees; and fewer than 750 employees).
  • a private company (paid-up capital exceeding 10 million rupees (approximately US$71,000) but less than 200 million rupees; or annual turnover exceeding 100 million rupees (approximately US$707,000) but less than 1 billion rupees; or more than 250 employees but fewer than 750).
  • a foreign company with turnover of less than 1 billion rupees.
The IFRS for SMEs Standard is required.
  • medium-sized non-listed company licensed or formed under sections 42 or 45 of the Act having annual gross revenue (grants/income/subsidies/donations) including other income/revenue less than 200 million rupees (approximately US$1.4 million)
The IFRS for SMEs Standard is required and Accounting Standards for NPOs.
Small-sized entities (paid-up capital not exceeding 10 million rupees; turnover not exceeding 100 million rupees (approximately US$720,000); and not more than 250 employees).

Accounting and Financial Reporting Standards for Small-sized Entities (AFRS for SSEs) as issued by the ICAP is required.

These companies may choose instead to use either the IFRS for SMEs Standard or full IFRS Standards as adopted in Pakistan.

Further, companies can opt to prepare statutory financial statements under a higher financial reporting framework. For example, a medium-sized company can prepare statutory financial statements under the IFRS Standards as adopted in Pakistan.

For those SMEs that are not required to use the IFRS for SMEs Standard, what other accounting framework do they use?
See above.
Other comments regarding use of the IFRS for SMEs Standard?
None.

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