SECP vide S.R.O. 742 (I)/2025 (dated April 16, 2025) notified that International Financial Reporting Standard (IFRS)-7, ‘Financial Instruments: Disclosures’ shall be followed by:

a) Non-Banking Finance Companies engaged in investment finance services, discounting services, and housing finance services for the preparation of financial statements from the annual reporting periods beginning on or after July 1, 2025 (earlier application is permitted); and

b) Banks, for the preparation of financial statements, from the annual reporting periods beginning on or after January 1, 2026 (earlier application is permitted).

SECP vide S.R.O. 1784 (I)/2024 (dated November 04, 2024) notified a partial exemption, that in respect of companies holding financial assets due or ultimately due from the Government of Pakistan in respect of circular debt, the requirements contained in “IFRS 9 (Financial Instruments) with respect to application of Expected Credit Losses method” shall be not be applicable till December 31, 2025, provided that such companies shall follow relevant requirements of IAS 39 – Financial Instruments: Recognition and Measurement, in respect of above referred financial assets during the exemption period.

IFRS 9 Application Instructions were earlier issued by SBP vide Circular BPRD Circular No. 03 of 2022 dated 05 July 2022.
SBP vide BPRD Circular Letter No. 16 of 2024 (dated July 29, 2024) considering the issues being faced by banks/DFIs/MFBs (Financial Institutions- FIs) regarding the implementation of IFRS 9 standard, 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.
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.
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.
iv. Effective Interest Rate (EIR) Method: 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.
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.

SBP vide BPRD Circular Letter No. 01 of 2025 (dated January 22, 2025) amended the implementation of IFRS 9 Application Instructions as follows:
i. Modification Accounting: Modification accounting is to be applied retrospectively, however, the same may be effective on loans modified on or after January 01, 2020.
ii. 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.
iii. 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.
iv. 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.
All other instructions regarding the IFRS 9 Application Instructions shall, however, remain unchanged.

SECP through S.R.O.506(I)/2024 dated March 29, 2024 has directed that the applicability period of optional temporary exemption from applying IFRS 9 – Financial Instrument as given in para 20A of IFRS 4 – Insurance Contracts (IFRS 4) which is extended for annual periods beginning before January 1, 2026 subject to fulfilling the same conditions as are prescribed by para 20B of IFRS 4.

Through SRO 986(I)2019 (02-09-2019) SECP has granted exemption to all companies that have executed their power purchase agreements before January 1, 2019 as follows:

(a) IFRS 16 (Leases) to the extent of the power purchase agreements executed before the effective date of IFRS 16 i.e. January 1, 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 capitalization of exchange differences under (b) above, recognition of embedded derivative under IFRS 9 (Financial Instruments) shall not be permitted.

Through BPRD Circular No. 3 of 2022 dated 05 Jul 2022, IFRS 9 Application Instructions were issued by the SBP. Para 2.2.3 of Application Instructions state that:

“The investments in subsidiaries and associates shall be valued at cost in FIs standalone financial statements and these investments will be subject to testing for impairment under IAS-36. However, the investments in associates will be measured using equity method of accounting in their consolidated financial statements.”

The Implementation of IAS-39 has been held in abeyance by the SBP for Banks and DFIs. Other Companies were required to use IAS 39 (published in 2009 edition of IFRS) to prepare financial statements.

Subsequently, IAS 39 has been replaced by IFRS 9.