Financial Reporting Framework 14-4-2010

[Saadia sikander] 10661
[Ahsan tanvir] 8734

[Hira Shariq] 10933
Financial Reporting Framework
Prepared by:
To provide
informatio
[Fahad]
[Pick the date]
n about
the
financial
position,
financial
performan
ce,
and cash
flows of an
entity that
is useful to
in Pakistan
a wide
range of
users in
making
economic
decisions.
[IAS – 1.7]
EMBA - Assignment
Financial Reporting Framework in Pakistan
Table of Contents
1. Executive Summary................................................................................................3
1.1. Development of Financial Reporting Framework..............................................3
1.2. Key Players in Financial Reporting Framework.................................................3
1.3. Adoption process of IAS and its current status.................................................3
1.4. Financial Reporting Framework in Action.........................................................4
2. Development of Financial Reporting Framework in Pakistan..................................5
2.1. Mughal Dynasty - The Ancient Accounting History of Sub-continent................5
2.2. British Dynasty - Evolution of Formal Accounting in Sub-continent..................5
2.3. Post Independence Era – 1947 – ......................................................................6
3. Key Players in Setting Financial Reporting Framework in Pakistan.........................8
3.1. Overview.......................................................................................................... 8
3.2. International Accounting Standard Board.........................................................8
3.3. Securities & Exchange Commission of Pakistan...............................................9
3.4. Institute of Chartered Accountants of Pakistan..............................................10
3.5. State Bank of Pakistan....................................................................................10
4. Adoption Process of IAS and its Current Status....................................................11
4.1. Process Overview...........................................................................................11
4.2. Accounting Framework - A Three Tier Framework..........................................11
4.3. Adoption Status of IFRS/IAS............................................................................13
5. Financial Reporting Framework in Action.............................................................15
5.1. Listed Companies other than Insurance, NBFC, Modaraba & Banks...............15
5.2. Banking Companies........................................................................................15
5.3. Insurance Companies.....................................................................................16
5.4. Non Banking Finance Companies (NBFC).......................................................16
5.5. Modarabas......................................................................................................17
Bibliography............................................................................................................20
[IFA REPORT] 2 |Page

EMBA - Assignment
1. Executive Summary
This report is divided into four sections. The first sections discuss the
historical development and origin of accounting standards in Pakistan. The
second section mentions the key players involved in setting financial
reporting framework. The third section elaborates the whole adoption process
of IAS/IFRS and its current status while fourth section focuses on how the
financial reporting framework is in action.
1.1. Development of Financial Reporting Framework

The origin and historical development of accounting standards in Pakistan
have its roots linked to Mughal Dynasty where they used Persian mode of
accounting. Later with the rise of British rule in India, the accounting rules
also changed and have been developed over time since then and Company
Act 1913 was formed.
After the Independence, Pakistan continued working on refining the laws and
implemented Companies Ordinance 1984 which is being followed till date
with few amendments over the period.
1.2. Key Players in Financial Reporting Framework

The Key Players in setting financial reporting framework includes:
• International Accounting Standard Board (IASB)

• Securities and Exchange Commission of Pakistan (SECP)
• Institute of Chartered Accountants of Pakistan (ICAP)
• State Bank of Pakistan (SBP)
1.3. Adoption process of IAS and its current status

SECP is primary responsible for setting the financial reporting framework in
Pakistan and seeks recommendation from ICAP on this matter. ICAP prepares
and circulates draft rules to its members and obtains their feedback.
ICAP has divided the accounting framework into three tier framework based
on the public accountability, separation of owners/management and size.
Following are the three layers as recommended by ICAP and notified by SECP.
• Tier 1: Publicly Accountable Entities

• Tier 2: Medium Sized Entities (MSEs)
• Tier 3: Small Sized Entities (SSEs).

EMBA - Assignment
1.4. Financial Reporting Framework in Action

Following table summarizes the key categories of entities along with the
respective regulatory authority.
Category Regulating Authority

Listed Companies other than, Securities and Exchange Commission of
Insurance, NBFCs’, Modaraba and Pakistan (SECP)
Bank
Banking Companies Securities and Exchange Commission of
Pakistan and State Bank of Pakistan.
Insurance Companies Securities and Exchange Commission of
Pakistan.
Non Banking Finance Companies Securities and Exchange Commission of
(Leasing Companies, Investment Pakistan.
Companies,
Modarba Securities and Exchange Commission of
Pakistan and Registrar of Modarba

EMBA - Assignment
2. Development of Financial Reporting Framework in

Pakistan
The current financial reporting framework in Pakistan has been developed
gradually. The historical development of the financial framework is divided
into 3 key distinct periods; the Mughal’s, the Britisher’s and the post
Independence period.
2.1. Mughal Dynasty - The Ancient Accounting History of Sub-continent

The accounting method in the subcontinent has started developing in 15th
century under the Mughal Dynasty. Until 1583 there was a Hindu method of
accounting before the adoption of the Persian mode, during the Era of
Jalaluddin Muhammad Akbar, the third Mughal Emperor. This method of
accounting used by Bengali traders was a double-entry system used by
Indian traders.
2.2. British Dynasty - Evolution of Formal Accounting in Sub-continent

With the fall of Mughal Empire and the rise of the British Empire in the
subcontinent, the change in leadership also brings changes in the accounting
system. The Britishers, along with other things, also brings with them the
formal accounting, as we understand it today. This formal accounting system,
along with the concept of limited liability and statutory audit came to the
Indian subcontinent in the middle of the 19th century during the British rule,
when the Companies Acts of 1850 and 1857 were initially enacted.
The Acts required that the companies should submit their accounts including
half-yearly audits and auditors’ reports. These Acts were followed by the
Companies Act 1883 which required detailed audit guidelines in term of
appointment, remuneration and duties of auditors.
2.2.1. Companies Act 1913

The Companies Act 1883 was followed by the Companies Act 1913 which
mandated that every company maintain books of accounts with respect to:
1. Sales and purchases
2. Receipts and payments of money
3. Assets and liabilities of a company
Under the requirements of this law, no person should act as an auditor of the
company unless he/she held an auditor’s certificate granted by the provincial
government.

EMBA - Assignment
The central government, however, held the right to issue this certificate to
members of certain professional bodies, namely; the Institute of Chartered
Accountants in England and Wales (ICAEW), Institute of Chartered
Accountants of Scotland (ICAS), and Institute of Chartered Accountants of
Ireland (ICAI), who were immediately recognized as qualified auditors. There
were no examinations required for obtaining the practitioner’s certificate until
1918.
2.2.2. Formal Examination for the Issuance of Auditing Certificate

In 1918 the Government of Bombay instituted a Government Diploma in
Accounting and constituted detailed rules regarding the examination and
training of those who wanted to obtain the diploma and the license to audit.
All provinces in British India soon adopted these rules. It was not until 1932
that the Government of British India framed auditor’s certificates rules to
control and regulate the auditing profession.
2.3. Post Independence Era – 1947 –

After gaining independence in 1947, Pakistan adopted as is the Companies
Act of 1913 and the auditor’s certificate rules, 1932.
In 1952, as a first step toward the institutional development of the profession,

the practicing accountants (back then called Registered Accountants) formed
a private body known as the Pakistan Institute of Accountants (PIA) to look
after their own interests and to take up the accounting professional matters
with the government.
With the formation of the Institute of Chartered Accountants of Pakistan

(ICAP) in 1961 the accounting profession marked a major post-independence
development. This step was the result of persistent pressure from the
Pakistan Institute of Accountants, and the government’s realization that the
profession has grown in stature and importance. Another major development
in the institutional structure was the creation of the Institute of Cost and
Management Accountants of Pakistan (ICMAP) in 1966 (as a follow up to the
formation of Pakistan Institute of Industrial Accountants) to regulate the
profession of cost and management accountants.
2.3.1. 1971 – 1984

In 1970, the Securities and Exchange Authority, a semi-autonomous body
created by the government, developed certain rules (that became effective in
1972) to improve financial reporting practices in the country primarily
through disclosures.

EMBA - Assignment
Pakistan became a member of The International Accounting Standard

Committee (IASC) shortly after its formation in 1974. Since Pakistan doesn’t
have any national accounting standard of its own, the Institute of Chartered
Accountants of Pakistan (ICAP) encouraged its members to recommend to
their corporate clients to prepare their financial statements in conformity with
international accounting standards. Use of international accounting standards
was not mandated for listed companies, until the enactment of the
Companies Ordinance 1984.
2.3.2. 1984 - to date

Companies Ordinance 1984 included some critical requirements, given the
corporate context of the country.
Financial statements of listed companies continued to improve with a number

of new international accounting standards issued by the IASC (now known as
the International Accounting Standards Board IASB). These standards were
issued as part of a core standards project specified by International
Organization of Securities Commissions (IOSCO) to IASC before it would
consider endorsing IAS for cross-border listing of companies on the
international stock exchanges of the world. Most of these standards were
adopted by SECP (Securities and Exchange Commission of Pakistan) on the
recommendation of ICAP along with many old standards that were not
adopted earlier.
Another major development in the financial reporting system is the Code of

Corporate Governance issued on March 28, 2002. Several features of the
Code have specific reference to financial reporting and auditing issues.

EMBA - Assignment
3. Key Players in Setting Financial Reporting

Framework in Pakistan
3.1. Overview
The responsibility of accounting standards setting in Pakistan is largely
vested with Securities & Exchange Commission of Pakistan (SECP) and
Institute of Chartered Accountants of Pakistan (ICAP).
Companies in Pakistan are required by Company Law to comply with

requirements related to International Financial Reporting Standards (IFRS)
and International Accounting Standards (IAS as developed by International
Accounting Standard Board (IASB). All the companies in Pakistan are required
to comply with IASs / IFRSs under section 234 of the Companies Ordinance,
1984 that are notified by Securities & Exchange Commission (SECP).
SECP notifies the accounting standards based on the recommendations of

ICAP. In the event of difference between IAS/IFRS, with Company law or SECP
notifications, the law / notifications prevail.
In addition to the above, the listed companies are required to show

compliance with the regulations of Stock Exchanges on which they are listed
and Code of Corporate Governance. The State Bank of Pakistan (SBP) also
plays its role in standard setting where SECP and ICAP seek recommendation
from SBP for setting standards particularly for Banking Companies and
Development Financial Institutions (DFI).
The Key Players involve in the development of Financial Reporting Framework

in Pakistan are:
3.2. International Accounting Standard Board
International Accounting Standards (IAS) and International Financial

Reporting Standards (IFRS) are Standards, Interpretations and the
Framework adopted by the International Accounting Standards Board (IASB).
Many of the standards forming part of IFRS are known by the older name
of International Accounting Standards (IAS). IAS was issued between 1973
and 2001 by the Board of the International Accounting Standards
Committee (IASC).
The IASC Foundation is an independent, not-for profit private sector

organization working in the public interest. Its principal objectives are:

EMBA - Assignment
• Develop a single set of high quality, understandable, enforceable and

globally accepted international financial reporting standards (IFRSs)
through its standard-setting body, the IASB
• Promote the use and rigorous application of those standards
• Take account of the financial reporting needs of emerging economies

and small and medium-sized entities (SMEs)
• Bring about convergence of national accounting standards and IFRSs to

high quality solutions
The governance and oversight of the activities undertaken by the IASC

Foundation and its standard-setting body rests with its Trustees, who are also
responsible for safeguarding the independence of the IASB and ensuring the
financing of the organization. The Trustees are publicly accountable to a
Monitoring Board of public authorities.
3.3. Securities & Exchange Commission of Pakistan
The responsibility of setting accounting standards is largely vested with

Securities and Exchange Commission of Pakistan (SECP). SECP notifies the
IAS standards with the recommendation of Institute of Chartered Accountants
of Pakistan (ICAP).
SECP was set up in pursuance of the Securities and Exchange Commission of

Pakistan Act, 1997. This Act institutionalized certain policy decisions relating
to the constitution and structure, powers, and functions of the SECP, thereby
giving it administrative authority and financial independence in carrying out
its regulatory and statutory responsibilities.
The SECP became operational in January 1999 and has come a long way
since then. It was initially concerned with the regulation of corporate sector
and capital market. Over time, its mandate has expanded to include
supervision and regulation of insurance companies, non-banking finance
companies and private pensions. The SECP has also been entrusted with
oversight of various external service providers to the corporate and financial
sectors, including chartered accountants, credit rating agencies, corporate
secretaries, brokers, surveyors etc. The challenge for the SECP has amplified
manifold with its increased mandate.

EMBA - Assignment
3.4. Institute of Chartered Accountants of Pakistan
Institute of Chartered Accountants of Pakistan acts as an advisor to SECP on

the adoption and adaptation of IAS in Pakistan. SECP notifies the accounting
standards based on the recommendations of ICAP and in the event of
difference between IAS/IFRS, with Company law or SECP notifications, the law
/ notifications prevail.
ICAP was established on July 1, 1961 to regulate the profession of

accountancy in Pakistan. It is a statutory autonomous body established under
the Chartered Accountants Ordinance 1961. With significant growth in the
profession, the CA Ordinance and Bye-Laws were revised in 1983, and are
periodically reviewed to align them globally. It is a professional body of Chartered
Accountants in Pakistan, and represents accountants employed in public practice, business and
industry, and the public and private sectors.
ICAP is a member of the International Federation of Accountants (IFAC), International

Accounting Standards Board (IASB), Confederation of Asian & Pacific Accountants (CAPA),
International Innovation Network (IIN) and South Asian Federation of Accountants (SAFA).
3.5. State Bank of Pakistan
In addition to the rules and standards set by the SECP in consultation with
ICAP, Banking companies also needs to comply with the regulations of State
Bank of Pakistan in Financial Reporting.
The State Bank of Pakistan (SBPB) is the Central Bank of Pakistan. The SBP
started its operation on July 1, 1948 and is responsible for regulating and
monitoring of Banking and Monetary System of Pakistan. Some of the
important functions of the bank are as follows:
• Issues the legal tender currency

• Implements the monetary and credit policy
• Regulates the financial market
• Acts as a banker to the banks
• Acts as a banker to Government
With regards to the management of the bank, the Board of Directors plays a
significant role. The Board consists of the Governor being the chairman of the
board, Secretary Finance, Government of Pakistan and seven directors.
[IFA REPORT] 10 | P a g e
EMBA - Assignment
4. Adoption Process of IAS and its Current Status

4.1. Process Overview
As discussed above that the primary responsibility of setting Financial
Reporting framework is vested with SECP who seeks recommendation from
ICAP on technical matters. The recommendation process starts with the
consultation with the stakeholders belongs to different sectors, including
practicing Chartered Accountants, representatives of Government and
different trade bodies.
The Accounting & Auditing Standards Committee (AASC), a sub committee of

the ICAP council, conducts review, deliberations and prepares an exposure
drafts / new IFRSs. This exposure draft is then disseminated to corporate
sector and members of ICAP followed by extensive consultation with
members and send its recommendation to council.
Council Recommends to SECP for notification under Section 234 of the

Companies Ordinance 1984. SECP further conducts its internal deliberations
and review process, leading to notification.
4.2. Accounting Framework - A Three Tier Framework

ICAP has implemented three levels of standards to provide a comprehensive
framework of accounting and financial reporting that:
• Covers all entities of varying sizes

• Addresses the degree of public interest involved in such entities
In line with international practice, the criteria for classification of Tiers are
based on:
• Public accountability
• Separation of owners/management
• Size
Following are the three layers as recommended by ICAP and notified by SECP.
• Tier 1: Publicly Accountable Entities

• Tier 2: Medium Sized Entities (MSEs)
• Tier 3: Small Sized Entities (SSEs)
4.2.1. Tier 1: Publicly Accountable Entities

Tier 1 companies include either of the following:
• Listed companies
EMBA - Assignment
• It has filed, or is in the process of filing, its financial statements with

the SECP or other regulatory organization for the purpose of issuing
any class of instruments in a public market.
• It holds assets in a fiduciary capacity for a broad group of outsiders,
such as a bank, insurance company, securities broker/dealer, pension
fund, mutual fund or investment banking entity
• It is a public utility or similar entity that provides an essential public
service
• It is economically significant on the basis of criteria such as total
assets, total income, number of employees, degree of market
dominance, and nature and extent of external borrowings
The criteria for economically significant is as follow:
i. Turnover in excess of Rs. 1 billion, excluding other income

ii. Number of employees in excess of 750
iii. Total borrowings (excluding normal trade credit and accrued liabilities)
in excess of Rs, 500 million
In order to be called economically significant any two of the criteria

mentioned in (i), (ii) and (iii) above have to be met.
The criteria followed are based on the previous year’s audited financial
statements. Entities can be delisted from this category where they do not fall
under the criteria as aforementioned for two consecutive years.
Tier 1 entities should comply with Approved Accounting Standards i.e. IASs as
notified and relevant statute requirements.
4.2.2. Tier 3 – Small Sized Entities

Small Sized entities are those entities that meet the following criteria:
• Have paid up capital plus undistributed reserves (total equity after

taking into account any dividend proposed for the year) not exceeding
twenty five million rupees
• Have annual turnover not exceeding two hundred million rupees,
excluding other income
In order to qualify as a small entity, both of the above mentioned conditions

must be satisfied.
Tier 3 entities should comply with the proposed Standard on Accounting and
Financial Reporting by Small Size Entities and relevant statute requirements.
4.2.3. Tier 2 - Medium Sized Entities
EMBA - Assignment
Tier 2 includes all entities which are not Tier 1 or Tier 3 and should comply
with the proposed Standard on Accounting and Financial Reporting by the
Medium Sized Entities and relevant statute requirements
4.3. Adoption Status of IFRS/IAS

The adoption status of IFRS / IAS as on February 16, 2010 is as follows:
IAS
TITLE
#
IAS 1 Presentation of Financial
Statements
IAS 2 Inventories
IAS 7 Cash Flow Statements
IAS 8 Accounting Policies, Changes in

Accounting Estimates and Errors
IAS 10 Events After the Balance Sheet
Date
IAS 11 Construction Contracts
IAS 12 Income Taxes
IAS 16 Property, Plant and Equipment
IAS 17 Leases
IAS 18 Revenue
IAS 19 Employee Benefits
IAS 20 Accounting for Government

Grants and Disclosure of
Government Assistance
IAS 21 The Effects of Changes in
Foreign Exchange Rates
IAS 23 Borrowing Costs
IAS 24 Related Party Disclosures
IAS 26 Accounting and Reporting by

Retirement Benefit Plans
IAS 27 Consolidated and Separate
Financial Statements
IAS 28 Investments in Associates
IAS 29 Financial Reporting in

Hyperinflationary Economies
IAS 31 Interests in Joint Ventures
IAS 32 Financial Instruments:

Disclosure and Presentation
EMBA - Assignment
IAS 33 Earnings Per Share
IAS 34 Interim Financial Reporting
IAS 36 Impairment of Assets
IAS 37 Provisions, Contingent Liabilities

and Contingent Assets
IAS 38 Intangible Assets
IAS 39 Financial Instruments:

Recognition and Measurement
IAS 40 Investment Property
IAS 41 Agriculture
IFRS-1 First-time Adoption of

International Financial
Reporting Standards.
IFRS-2 Share-based Payment
IFRS-3 Business Combinations (This

IFRS supersedes IAS-22)
IFRS-4 Insurance Contracts
IFRS-5 Non-Current Assets Held for

Sale and Discontinued
Operations ( This IFRS
supersedes IAS-35)
IFRS-6 Exploration for and Evaluation
of Mineral Resources
IFRS-7 Financial Instruments :
Disclosures ( This IFRS has
superseded IAS 30 and
Disclosure requirements of IAS
32)
IFRS-8 Operating Segments ( This IFRS
has superseded IAS 14)
IFRS-9 Financial Instruments
EMBA - Assignment
5. Financial Reporting Framework in Action

5.1. Listed Companies other than Insurance, NBFC, Modaraba & Banks
This category includes the companies other than Insurance, Non Banking
Finance Companies, Modarabas and Banking companies that are listed on
one or more exchanges of the country that includes:
• Karachi Stock Exchange

• Lahore Stock Exchange
• Islamabad Stock Exchange
5.1.1. Applicable Laws & regulations

The applicable laws governing this category include:
• Companies Ordinance 1984.

• International Financial Reporting Framework (IFRS) as applicable in
Pakistan
• Stock Exchange Listing Regulations
• Code of Corporate Governance
5.1.2. Regulatory Authority
The Securities and Exchange Commission of Pakistan (SECP) is the sole
regulator of such companies.
5.2. Banking Companies

This category includes the Banks and Development Financial Institutions
(DFIs) as incorporated under Banking Ordinance 1962 and licensed by State
Bank of Pakistan.


Pakistan
• Companies Ordinance 1984
• Stock Exchange Listing Regulations (Particularly Code of Corporate
Governance)
• Banking Ordinance 1962
• Prudential Regulations (Corporate, SMEs’ and Consumers)
• Islamic Financial Accounting Standards as recommended by
ICAP(incase of Islamic Bank)
EMBA - Assignment
Banks and DFIs are regulated by:
• Securities and Exchange Commission of Pakistan

• State Bank of Pakistan
5.3. Insurance Companies

This category includes the Life Insurance companies, Non-life Insurance
companies and Takaful Companies the Banks and Development Financial
Institutions (DFIs) as incorporated under Banking Ordinance 1962 and
licensed by State Bank of Pakistan.


Pakistan
• Insurance Ordinance and Rules
• Islamic Financial Accounting Standards as recommended by
ICAP(incase of Takaful)

Insurance companies are regulated by Securities and Exchange Commission
of Pakistan.
5.4. Non Banking Finance Companies (NBFC)

This category includes companies registered under the NBFC Regulations
such as Leasing Companies, Investment Banks, Asset Management
Companies, Real Estate Management Companies and Venture Capital
Investment Companies.

• International Financial Reporting Framework (IFRS).

Governance)
• NBFC Regulations
• NBFC Rules
• Prudential Regulations for NBFCs’
EMBA - Assignment
• Prudential Regulations for Leasing Company

NBFCs are largely regulated by Securities and Exchange Commission of
Pakistan (SECP).
5.5. Modarabas
This category includes Modarabas registered with Securities and Exchange
Commission of Pakistan and Registrar of Modaraba.

• International Financial Reporting Framework (IFRS).

Governance)
• Modarba Act and Rules

Modarabas are regulated by:
• Securities and Exchange Commission of Pakistan

• Registrar of Modarba
EMBA - Assignment
Summary of Financial Reporting Framework

Category Applicable Laws and Regulations Regulating Authority
Listed Companies other • Companies Ordinance 1984. Securities and Exchange Commission of
than, Insurance, • International Financial Reporting Framework Pakistan (SECP)
NBFCs’, Modaraba and (IFRS) as applicable in Pakistan
Bank
Banking Companies • International Financial Reporting Framework Securities and Exchange Commission of
(IFRS) as applicable in Pakistan Pakistan and State Bank of Pakistan.
• Stock Exchange Listing Regulations (Particularly
Code of Corporate Governance)
• Banking Ordinance 1962
• Prudential Regulations (Corporate, SMEs’ and
Consumers)
Insurance Companies • International Financial Reporting Framework Securities and Exchange Commission of
(IFRS) as applicable in Pakistan Pakistan.
• Insurance Ordinance and Rules
Non Banking Finance • International Financial Reporting Framework Securities and Exchange Commission of
Companies (Leasing (IFRS). Pakistan.
Companies, Investment • Companies Ordinance 1984.
Companies,
• NBFC Rules.
• Prudential Regulations for NBFCs’
• Prudential Regulations for Leasing Company
Modarba • International Financial Reporting Framework Securities and Exchange Commission of
(IFRS). Pakistan and Registrar of Modarba
EMBA - Assignment
• Modarba Act and Rules
EMBA - Assignment
Bibliography
Topic in this Development of Financial Reporting Framework in

Report Pakistan
Author Prof. Dr. Khawaja Amjad Saeed
Global Prospects of Accounting Education and Certification Process: Focus on

Source
Pakistan”
Publisher Pergamon Press, New York
Topic in this
Financial Reporting Framework in Action
Report
Author -
Source A Presentation on Introduction to Financial Statements and Audit
Publisher Institute of Chartered Accountants of Pakistan (ICAP)
Topic in this
Adoption process of IAS and its current status.
Report
Author Asad Ali Shah
Source Presentation : Practical Implementation of IFRS in Pakistan
Topic in this
Adoption process of IAS and its current status.
Report
Author Shabbir Younus Khairullah
Presentation : Accounting Framework for Small and Medium

Source
Entities

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[Saadia sikander] 10661

[Ahsan tanvir] 8734

[IFA REPORT] 2 |Page

1.1. Development of Financial Reporting Framework

1.2. Key Players in Financial Reporting Framework

• International Accounting Standard Board (IASB)

1.3. Adoption process of IAS and its current status

• Tier 1: Publicly Accountable Entities

[IFA REPORT] 3 |Page

1.4. Financial Reporting Framework in Action

Category Regulating Authority

[IFA REPORT] 4 |Page

2. Development of Financial Reporting Framework in

2.1. Mughal Dynasty - The Ancient Accounting History of Sub-continent

2.2. British Dynasty - Evolution of Formal Accounting in Sub-continent

2.2.1. Companies Act 1913

1. Sales and purchases

2. Receipts and payments of money

3. Assets and liabilities of a company

[IFA REPORT] 5 |Page

2.2.2. Formal Examination for the Issuance of Auditing Certificate

2.3. Post Independence Era – 1947 –

In 1952, as a first step toward the institutional development of the profession,

With the formation of the Institute of Chartered Accountants of Pakistan

2.3.1. 1971 – 1984

[IFA REPORT] 6 |Page

Pakistan became a member of The International Accounting Standard

2.3.2. 1984 - to date

Financial statements of listed companies continued to improve with a number

Another major development in the financial reporting system is the Code of

[IFA REPORT] 7 |Page

3. Key Players in Setting Financial Reporting

Companies in Pakistan are required by Company Law to comply with

SECP notifies the accounting standards based on the recommendations of

In addition to the above, the listed companies are required to show

The Key Players involve in the development of Financial Reporting Framework

3.2. International Accounting Standard Board

International Accounting Standards (IAS) and International Financial

The IASC Foundation is an independent, not-for profit private sector

[IFA REPORT] 8 |Page

• Develop a single set of high quality, understandable, enforceable and

• Promote the use and rigorous application of those standards

• Take account of the financial reporting needs of emerging economies

• Bring about convergence of national accounting standards and IFRSs to

The governance and oversight of the activities undertaken by the IASC

3.3. Securities & Exchange Commission of Pakistan

The responsibility of setting accounting standards is largely vested with

SECP was set up in pursuance of the Securities and Exchange Commission of

[IFA REPORT] 9 |Page

3.4. Institute of Chartered Accountants of Pakistan

Institute of Chartered Accountants of Pakistan acts as an advisor to SECP on

ICAP was established on July 1, 1961 to regulate the profession of

ICAP is a member of the International Federation of Accountants (IFAC), International

3.5. State Bank of Pakistan

• Issues the legal tender currency

4. Adoption Process of IAS and its Current Status

The Accounting & Auditing Standards Committee (AASC), a sub committee of

Council Recommends to SECP for notification under Section 234 of the

4.2. Accounting Framework - A Three Tier Framework

• Covers all entities of varying sizes

• Tier 1: Publicly Accountable Entities

4.2.1. Tier 1: Publicly Accountable Entities

• It has filed, or is in the process of filing, its financial statements with

The criteria for economically significant is as follow: