Accounting

Standards in
Pakistan
Submitted To: Sir Shoaib Sajjad
Submitted By: Muhammad Abdullah FA20-BAF-003
Muneeb Ali FA20-BAF-006

 
 Table of Content
• 1 Acknowledgements
• 2 An Abstract
• 3 Introduction to Issue
• 4 Significance of the Issue
• 5 IFRS Accounting Standards
• 6 Practical Study of the Organization
• 7 Data Collection Methods
• 8 SWOT Analysis
• 9 Conclusion
• 10 Recommendations
• 11 References
 Acknowledgement
• First of all I am Thankful to ALLAH Almighty who granted
me this opportunity that I am here to present this Topic. I am
thankful to my collegue without his help it is not a easy job.
• We would like to thanks our Teacher Sir Shoaib Sajjad. Who
guide us and provide us knowledge without that it would never
be possible
 Abstract
• Worldwide application of IFRS (International Financial Reporting Standard) not only
standardize the accounting treatments but also helpful in producing true and fair financial
statements. All the counties using IFRS (International Financial Reporting Standard) can
easily make comparisons of their financial statements across the industries and countries.
Because of its fair results these are highly reliable standards for the allocation of
resources and for keeping the accounting records. ICAP (Institute of Chartered
Accountants of Pakistan) is responsible for the implementation of these standards in
Pakistan. ICAP (Institute of Chartered Accountants of Pakistan) suggests theses standards
to SECP (Securities and Exchange Commission of Pakistan), SECP (Securities and
Exchange Commissionof Pakistan) implement these standards but there are some
contradictions between these standards and the companies’ ordinance 1984. ICAP
(Institute of Chartered Accountants of Pakistan) council formulates a strategy to provide a
roadmap for the implementation of these standards. Despite of all its advantages IFRS
(International Financial Reporting Standard) adoption gave some challenges e.g. Non-
compliance with existing regulations, different views of SECP (Securities and Exchange
Commission of Pakistan) etc. but these standards plays an important role in the increased
economic revenues of Pakistan.
 Introduction to issue
• This research study elaborates the importance of IFRS (International Financial Reporting Standard) and
its adoption in Pakistan. IFRS (International Financial Reporting Standard) gives helpful standards for
the developing countries that can increase the economic revenues by showing the true and fair position
of the economy. This paper contains the precise discussion of IFRS (International Financial Reporting
Standard) and detailed discussion of IFRS (International Financial Reporting Standard) adoption in
Pakistan.
• First part of this research outcome gives the IFRS (International Financial Reporting Standard)
principles and their relative importance.
• Second section connotes the adoption of IFRS (International Financial Reporting Standard) in Pakistan
and its execution by ICAP (Institute of Chartered Accountants of Pakistan) then implementation by
SECP (Securities and Exchange Commission of Pakistan). ICAP (Institute of Chartered Accountants of
Pakistan) council formulates the strategy for the compliance of these standards with those of the existing
laws and regulations, italso monitor these standards once implemented.
• Third section of the paper elaborates the importance of IFRS (International Financial Reporting
Standard) implementation in Pakistan. There are numerous advantages of IFRS (International Financial
Reporting Standard) including comparative analysis of, true and fair statements, appropriate allocation
of resources, investor’s confidence etc.
• The forth and last part of the study states the obstacles in the adoption of IFRS (International Financial
Reporting Standard) in Pakistan.
 Significance of IFRS
Accounting Standards
• 1-IFRS (International Financial Reporting Standard) was formulated for
the standardization of accounting regulations all over the world. IFRS
(International Financial Reporting Standard) are very useful for making the
comparisons of the financial statements (Morais & Fialho, 2008)
• 2-It directs to proficient capital allocation (McCreevy, 2005). It
helps the investor to manage their portfolio in most
profitable way.
• 3-According to a research study IFRS (International Financial Reporting
Standard) supports the cross-border investments. And it not only helps to
expand the investment arena but also help the investors to make profits
with diversified portfolio (Lee & Fargher, 2010). It is also reported that
IFRS (International Financial Reporting Standard) fabricates better quality
financial statements as compared to the existing regulations, so it reduces
the cost of capital.
IFRS Accounting Principles
• IFRS (International Financial Reporting Standard) and
Pakistan made major progress in updating its accounting
standards up to international level (Financial Standards
Report, 2010).
 IFRS Accounting
Standards in Pakistan
• Following are the principles of IFRS (International Financial Reporting Standard):
• First time adoption of IFRS (2010)
• Share-based payment (2010)
• Business combinations (2010)
• Insurance contracts (2006)
• Non-current assets held for sale and discontinued operations (2010)
• Exploration for and evaluation of mineral resources (2006)
• Disclosures of financial instruments (2009)
• Operating segments (2010)
•  There are some principles of IFRS (International Financial Reporting Standard) that were specially
formulated for the small and medium size enterprises that are:
•  Presentation of financial statements (2010)
•  Inventories (2005)
•  Cash flow statement (2010
•  Accounting policies and changes in accounting estimates and errors (2005)
•  Events after the reporting period (2005)
•  Construction contracts (1995)
•  Income taxes (2001)
•  Property, plant and equipment (revised 2009)
•  Leases (2010)
•  Revenue (1995)
•  Employee benefits (revised 2009)
•  Accounting for government grants and disclosures of government assistance (2009)
•  The effects of changes in foreign exchange rates (2005)
•  Borrowing costs (revised 2009)
•  Related party disclosures (2005)
•  Accounting and reporting by retirement benefit plans (1998)
•  Consolidated and separate financial statements (2010)
•  Investment in associates (revised 2009)
•  Financial reporting in hyperinflationary economies (revised 2009)
•  Interests in joint ventures (revised 2009)
•  Presentations and disclosures of financial instruments (2010)
•  Earnings per share (2005)
•  Interim financial reporting (19
 Practical study of Pakistan with
IFRS Accounting Standards
• 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.
Data Collection Methods
• This data has been collected form following ways:
• 1 Financial Report by Government
• 2 Influence of IFRS in Pakistan
• 3 Different Interviews
 SWOT Analysis
• Strenghts
• Focus on investors.
• Loss recognition timeliness.
• Comparability.
• Standardization of accounting and financial reporting.
•  
• Weaknesses
•  
• . It would increase the cost of implementation for small businesses.
• It would increase the amount of work placed on accountants.
• It would require changes at the educational level as well.
• Opportunities
• IFRS are designed to bring consistency to accounting
language, practices and statements,
• It will help businesses and investors make educated financial
analyses and decisions.
• It will bring efficiency to financial markets around the world.
• Threats
• Difference in GAAP and IFRS
• Training and Education
 Conclusion
• Summing up the whole study in only few word of a line, IFRS (International Financial Reporting Standard) the world’s most
acceptable standards producing true and fair financial statements is composed of such principles that are sufficient for keeping the
financial statements updated and comparative for analysis across the industries and countries. It includes all the principles
regarding the accounting treatment of all material objects. IFRS (International Financial Reporting Standard) also enhances the
cross-border earnings and built investor’s confidence. IFRS is implemented in Pakistan by ICAP (Institute of Chartered
Accountants of Pakistan) under the supervision of SECP (Securities and Exchange Commission of Pakistan). Strict strategy is
established by the ICAP (Institute of Chartered Accountants of Pakistan) council for the implementation of IFRS (International
Financial Reporting Standard). After implementing these standards council review its effects on daily basis. SECP (Securities and
Exchange Commission of Pakistan) made appropriate changes as required in the existing regulations. IFRS (International
Financial Reporting Standard) is important for the implementation because of its countless benefits e.g. comparative attribute,
resource allocation, enhanced investment, diversified portfolios, and improved financial statements and cost effective as it gives
regulations according to the status of entities. Despite of its familiarity there are some hurdles in its implementation like the
contradictions with existing regulations, difference in the method of recoding accounting transactions, difference in dividend
distribution policies, issues of the mutual funds status i.e. mutual fund is not the company so the asset management companies cant
consolidate he financial statements of mutual funds etc. Limitations of the research study includes the IFRS (International
Financial Reporting Standard) implementation in SME, its regulations adopted by the local industries, solutions to overcome the
hurdles in IFRS (International Financial Reporting Standard) adoption and the enhanced economic revenues are not discussed in
detail. The benefits of IFRS (International 12 International Financial Reporting Standards on Pakistan Financial Reporting
Standard) adoption in Pakistan are not reported in monetary terms. Future researches could elaborate the benefits of IFRS
(International Financial Reporting Standard) in Pakistan in monetary terms and also elaborate the implementation of IFRIC
(International Financial Reporting Issues committee) 4 &12 and about IAS (International Accounting Standards) 39 and the
strategy adopted by ICAP (Institute of Chartered Accountants of Pakistan) & SECP (Securities and Exchange Commission of
Pakistan) for the execution of these standards. IFRS leads the developing nations towards their way to progress.
 Recommendation
• Government Should take strick actions for IFRS
implementation in all companies of Pakistan.
•  
• After the Implementation of IFRS in country Government
should monitor that in business companies
• Financial statements are made according to IFRS.
 References
• [1] M.A. Skotarczyk, The Effect of Culture on the Implementation of
International Financial Reporting Standards, 2011.
• [2] R. Ball, International Financial Reporting Standards (IFRS): Pros
and cons for investors, Accounting & Business Research, 36, (2006),
5-27.
• [3] M.E. Barth, W.R. Landsman and M. Lang, International accounting
standards and accounting quality, Journal of Accounting Research, 46,
(2008), 467-498.
• [4] H. Daske, L. Hail, C. Leuz and R. Verdi, Mandatory IFRS
reporting around the world: Early evidence on the economic
consequences, Journal of Accounting Research, 46, (2008), 1085-1142.
• [5] Financial Standards Report, (December, 2010), Pakistan.
Thank You