Extent of IFRS application | Status | Additional Information |
---|---|---|
IFRS Accounting 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 Accounting Standards are permitted but not required for domestic public companies | ||
IFRS Accounting 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 Accounting 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 Accounting Standard is under consideration |
Profile last updated: 16 June 2016
The Institute of Chartered Accountants of Pakistan (ICAP).
Securities and Exchange Commission of Pakistan (SECP).
The State Bank of Pakistan (SBP).
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.
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:
(a) | IFRS 16 Leases to the extent of the power purchase agreements executed before the effective date of IFRS 16 i.e. 1 January 2019; |
(b) | International Accounting Standard 21 The Effects of Changes in Foreign Exchange Rates to the extent of capitalization of exchange differences; and |
(c) | 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.
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.
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
Large-sized company
| IFRS Standards as adopted in Pakistan. | ||||||||||||||
| 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
| The IFRS for SMEs Standard is required. | ||||||||||||||
| 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.
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.
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.
Adoption of an IFRS or IAS Standard involves the following steps:
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
Pakistan recently adopted the following IFRS Standards:
Further, IFRS 14 and IFRS 17 are expected to be adopted by Pakistan in 2019.
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
| The IFRS for SMEs Standard is required. |
| 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.