Pakistan grants 'relaxation' of IAS 39

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15 Feb 2009

The Securities and Exchange Commission of Pakistan (SECP) has granted a 'relaxation' of the requirements of IAS 39 by allowing impairment losses on available-for-sale (AFS) equity securities to be charged against equity, rather than against profit or loss as IAS 39 requires.

Click for SECP Announcement (PDF 79k). The 'relaxation' is valid till 31 December 2009. The 'relaxation' was granted in response to requests from various financial institutions in Pakistan, including mutual funds, insurance companies, leasing companies, banks, and the corporate sector in general. The SECP said it granted the relaxation because recognising impairment losses on AFS equity securities through profit or loss 'will not reflect the correct financial performance of the corporate entities'. Nonetheless, the SECP's announcement said that 'those companies who are willing to follow the full requirements of IAS 39 are encouraged to do so'. The current and former presidents of the Institute of Chartered Accountants of Pakistan (ICAP) expressed support for the 'relaxation'. Asad Ali Shah, current ICAP President, said that 'such deviations from IFRSs have been witnessed in extraordinary situations in the world'. The Competition Commission of Pakistan, however, expressed concern that failure to recognise losses could be viewed as deceptive marketing of securities.


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