• Pakistan is included in the IFAD GAAP Convergence Studies
• National Professional Organisation Website: Institute of Cost and Management Accountants of Pakistan
• National Professional Organisation Website: The Institute of Chartered Accountants of Pakistan
• Response to IFAC Member Body Survey on Standard Setting and Regulation
• World Bank ROSC Accounting and Auditing Report

Update for November 2007
Update for October 2006
Update for April 2006
Update for September 2005
Update for August 2005
Update for June 2005
Update for October 2002
Update for October 2001
Update for April 2001
Update for January 2001
Update for October 2000

Karachi:

Deloitte (Pakistan) partner Asad Ali Shah recently presented an update on financial reporting in Pakistan. Pakistan has developed three tiers of financial reporting standards – for public interest entities, medium-sized entities and small entities. The goal of the Institute of Chartered Accountants of Pakistan (ICAP) is that the public interest tier be IFRS compliant by 2009. Currently, the ICAP has not adopted the Pakistani equivalents of IFRS 1 and IFRS 4, and the Securities and Exchange Commission of Pakistan – the governmental body that must approve standards after ICAP adoption – has not yet approved the Pakistani equivalents of IAS 29, IFRS 7, and IFRS 8. Mr Shah's presentation also discusses impediments and problems in implementing IFRSs. Click to download Update on Financial Reporting in Pakistan (PDF 143k).

Asad Ali Shah, a partner in the Deloitte Touche Tohmatsu member firm in Pakistan, spoke on Implementation of IFRS and SME Standards–Pakistan Experience at a meeting of the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) in Geneva earlier this week. ISAR is sponsored by the United Nations Conference on Trade and Development. Click to download Mr Shah's Presentation (PDF 36k).

The South Asian Federation of Accountants sponsored the First South Asian Accounting Summit on 18-19 April 2006 in Karachi, Pakistan. Speakers included three IASB representatives – IASB Chairman Sir David Tweedie, Board Member Warren McGregor, and Director of Standards for SMEs Paul Pacter. Representatives of the Institute of Chartered Accountants of Pakistan (ICAP) presented an update on the adoption of IFRSs in Pakistan. They noted that the ICAP has identified three tiers of entities with different standards applying to each, as follows:

• Tier 1. Publicly accountable entities, including listed companies and banks and other financial institutions must apply IFRSs as adopted in Pakistan.
• Tier 2. Medium-sized entities apply a separate set of standards developed by ICAP (under development, around 60 pages).
• Tier 3. Small-sized entities apply a separate set of standards developed by ICAP (under development, around 6 pages).

On 27 September 2005, at a meeting in London of accounting standard setters from over 50 countries sponsored by the IASB, Deloitte Partner Asad Ali Shah (Karachi, Pakistan) presented the Status and Roadmap: Compliance with IFRS in Pakistan (PDF 222k). Mr. Shah, who chairs the Professional Standards and Technical Advisory Committee of the Institute of Chartered Accountants of Pakistan, presented an update on the adoption of IFRSs in Pakistan and also discussed compliance, enforcement, and views of regulators, among other issues. He cited a number of benefits of adopting IFRSs in Pakistan, including:

• Lower cost of capital
• Cross-border mergers, globalisation, FDI
• Single set of reliably, high quality standards, issued by an independent body (IASB)
• Countries like Pakistan do not have the resources to develop their own standards
• Why re-invent the wheel when IASB is doing it?
• Focus on enforcement rather than development
• Required by IFAC's statement of members' obligations

The Chairman of the Securities and Exchange Commission of Pakistan (SEC), Dr. Tariq Hassan, has urged "across-the-board adoption of the International Financial Reporting Standards (IFRSs) in order to bring transparency in the corporate sector in Pakistan". Here is an excerpt from his remarks at a seminar on IFRSs organised by the Institute of Cost and Management Accountants of Pakistan:

Click for Press Release (PDF 6k).

IASs 1 to 41

As of June 2005, Pakistan has adopted all IASs except 29 Financial Reporting in Hyperinflationary Economies and 41 Agriculture word for word. Pakistan has neither eliminated any options nor inserted any additional disclosures.

Regarding IAS 41, the Council of the Institute on 29 April 2005 also decided to adopt IAS 41. The case for its notification (formal adoption) is before the Securities and Exchange Commission of Pakistan.

IFRSs 1 to 7

Pakistan has not yet adopted any of IFRSs 1 to 7. Nor has Pakistan 'de-notified' any of the IASs that were superseded by an IFRS. Effectively, therefore, until the new IFRSs are adopted, the old IASs remain applicable. Because IFRS 2 Share-based Payment, IFRS 4 Insurance Contracts, and the assets held for sale portion of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations were, effectively, new standards not dealt with in prior IASs, the matters covered by these standards are not addressed in Pakistani GAAP.

Amendments to IASs During 2004-2005

During 2004-1005, the IASB amended IAS 19, IAS 36, IAS 38, and IAS 39. These amendments have not been incorporated into the IASs adopted in Pakistan. Practice is generally to follow the amendment, but that is not a legal requirement. The Securities and Exchange Commission of Pakistan is currently considering this issue.

SIC and IFRIC Interpretations

Pakistan does not formally adopt SIC and IFRIC Interpretations, because there is no provision for their notification in the Companies Ordinance, 1984. However, as the SIC and IFRIC interpretations are interpretations of the relevant standards, they are assumed to be adopted and are required to be complied with.

Applicability to Banks

IAS 39 and IAS 40 are not currently applicable to banks. This is under consideration by the State Bank of Pakistan for periods ending on or after 31 December 2006.

• Rotation of auditors. All listed companies are now required to change their auditors at least every five years.
• Restricted services. Auditors of listed companies cannot either themselves or through their management consultancy firms/companies perform any management, software, or financial consultancy services for those companies.

The April 2001 update (below) included a complete list of IAS adopted in Pakistan to date. The only change since then is that ICAP has sent IAS 40, Investment Property, to its members for the adoption by SECP. The following IASs are in process of adoption by SECP:

• IAS 22 Business Combinations (1998)
• IAS 36 Impairment of Assets (1998)
• IAS 39 Financial Instruments: Recognition and Measurement (1998)
• IAS 40 Investment Property

The following IASs are in the process of adoption by SECP:

• IAS 22 Business Combinations (1998)
• IAS 36 Impairment of Assets (1998)
• IAS 39 Financial Instruments: Recognition and Measurement (1998)

The ICAP has also issued Technical Releases and Selected Opinions, which are merely further interpretations of IAS on the basis of local specific circumstances. Specialized regulations have been established for banks and insurance companies.

• IAS 35 Discontinuing Operations
• IAS 37 Provisions, Contingent Liabilities and Contingent Assets
• IAS 38 Intangible Assets

Adoption of IAS 39, Financial Instruments: Recognition and Measurement, is under consideration.

• IAS 1 Presentation of Financial Statements (Revised 1997)
• IAS 2 Inventories (Revised 1993)
• IAS 4 Depreciation Accounting (Reformatted 1994)
• IAS 7 Cash Flow Statements (Revised 1992)
• IAS 8 Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies (Revised 1993)
• IAS 10 Events After the Balance Sheet Date (Revised 1999)
• IAS 11 Construction Contracts (Revised 1993)
• IAS 12 Income Taxes (Revised 1996)*
• IAS 14 Segment Reporting (Revised 1997)
• IAS 16 Property, Plant and Equipment (Revised 1998)
• IAS 17 Leases (Revised 1997)
• IAS 18 Revenue (Revised 1993)
• IAS 19 Employee Benefits (Revised 1998)
• IAS 20 Accounting for Government Grants and Disclosure of Government Assistance (Reformatted 1994) IAS 21, The Effects of Changes in Foreign Exchange Rates (Revised 1993)
• IAS 23 Borrowing Costs (Revised 1993)
• IAS 24 Related Party Disclosures (Reformatted 1994)
• IAS 25 Accounting for Investments (Reformatted 1994)
• IAS 26 Accounting and Reporting by Retirement Benefit Plans (Reformatted 1994)
• IAS 27 Consolidated financial Statements and Accounting for Investments in Subsidiaries (Reformatted 1994)
• IAS 28 Accounting for Investments in Associates (Revised 1998)
• IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions (Reformatted 1994)
• IAS 31 Financial Reporting of Interests in Joint Ventures (Revised 1998)
• IAS 32 Financial Instruments: Disclosure and Presentation (Revised 1998)
• IAS 33 Earnings Per Share (1997)
• IAS 34 Interim Reporting (1998)

*Applicability of IAS 12 (Revised 1996) has been deferred until periods beginning on or after 1 January 2002. Until then IAS 12 (Reformatted 1994) applies.

The following IAS are in the process of adoption by SECP.

• IAS 35 Discontinuing Operations (1998)
• IAS 36 Impairment of Assets (1998)
• IAS 37 Provisions, Contingent Liabilities and Contingent Assets (1998)
• IAS 38 Intangible Assets (1998)
• IAS 39 Financial Instruments: Recognition and Measurement (1998)

Specialised regulations have been established for banks and insurance companies.