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There are international organisations working with professional zeal and effectiveness for issuance of global accounting standards, adopted worldwide, and ultimately leading to possibly high-level of convergence. requirements under various reporting heads. The financial From information available in tables presented above, identifying reporting frameworks prescribed were as follows: the reporting framework to be adopted by the company, it is clearly observable that medium and small sized companies are Company Category Applicable Financial Reporting required by law to prepare and present financial statements Framework in compliance with other-than IFRSs reporting mechanisms, Listed IFRS issued by IASB and notified developed over the years. However, these companies are not for adoption by SECP through restricted from adopting IFRSs as reporting framework. This Companies Ordinance 1984. fact was mentioned in SRO 929 which appreciated that these companies might use IFRS for external reporting purposes. The Non-listed Companies Act 2017 has also brought two further noticeable Public Interest Company (PIC) IFRS issued by IASB and notified changes. As per Section 235 of repealed Companies Ordinance for adoption by SECP through 1984, the surplus on revaluation of fixed assets needed to be Companies Ordinance 1984. shown separately from equity in balance sheet. This was in Large Sized Company (LSC) IFRS issued by IASB and notified contradiction with requirement of IAS 16: Property, Plant and for adoption by SECP through Equipment, which directs that such surplus should be shown under Companies Ordinance 1984. equity portion. This inconsistency has been removed now, by not Medium Sized Company (MSC) IFRSs for SMEs issued by IASB and carrying forward the requirement in the new law. adopted by ICAP. Small Sized Company (SSC) Revised AFRSs for SSEs issued by The other change is quite historic in its nature. The very first time, ICAP. through Section 225 of the Companies Act 2017, the corporate law of Pakistan has allowed unreserved compliance with IFRS. This means that companies have been given the option, for In May 2017, after being in operation for more than three the very first time, to prepare and present financial statements decades, the Companies Ordinance 1984 was replaced by in accordance with IFRS only. There is no need to consider the newly enacted Companies Act 2017. The Third Schedule to the provisions contained in Fourth and Fifth Schedule to Companies Companies Act 2017 prescribes revised criteria for classification of Act 2017 for the preparation and presentation of such financial companies. The criteria are based on the information contained statements, if only IFRSs is adopted as financial reporting in previous year’s audited financial statements. As per the framework. This is a fundamental change, because IFRSs require criteria devised, again it is ensured that the coverage of IFRS as explicit compliance only when the reporting entity prepares and financial reporting framework is widened and more companies presents financial statements in 100% compliance with such IFRSs. are brought into the legal parameters to prepare their financial In this scenario, reporting entity does not need to consider the statements as per IFRS. In certain situations, such as when a national requirements of a particular jurisdiction, where such company is in its first year of its operations, or where due to other requirements are inconsistent with IFRSs issued by IASB. The specified reasons, audit of previous year’s financial statements exercisability of this option will require companies to redraft their could not take place, the company may not have previous year’s ‘statement of compliance’ paras contained in notes to financial audited financial statements. In such a scenario, it is suggested statements, where reference to IFRS only is to be made now. that expert advice be sought from qualified professionals for determination of applicable financial reporting framework, ICAP rigorously makes efforts for while considering the information extracted from current year’s/ previous year’s un-audited financial statements. As per the act, applicability of new or revised the categories of companies and prescribed reporting framework accounting standards. As an are as follows: active member of IFAC, ICAP has Applicable Financial Reporting always played its pivotal role for Company Category Framework adoption of IFRS as applicable PIC - listed/non-listed IFRS issued by IASB and notified for adoption by SECP through financial reporting framework. Companies Act 2017. LSC - non-listed/foreign IFRS issued by IASB and notified The above developments reflect that there has been a progressive for adoption by SECP through shift in the primary objective described above. It is now more than Companies Act 2017. ever expected, and regulated through amendments in legislation, LSC - u/s 42/45 IFRS issued by IASB and notified that corporate entities recognise the importance of uniform and for adoption by SECP through standardised financial reporting standards, meeting the information Companies Act 2017 and requirements of wide range of users as a group. These steps are Accounting Standards for Non enhancing the confidence of stakeholders, external to the reporting Profit Organisations (NPOs) issued entity, in financial reporting quality. This has only been possible by ICAP. due to the fact that corporate entities are made responsible for MSC - non-listed/private/foreign IFRSs for SMEs issued by IASB and preparation and presentation of their financial statements in adopted by ICAP. compliance with globally recognised accounting standards. MSC - u/s 42/45 IFRSs for SMEs issued by IASB and adopted by ICAP and Accounting Standards for NPOs issued by ICAP. The writer is a chartered accountant working as manager Small Sized Company (SSC) Revised AFRSs for SSEs issued by Taxation in a business group having diversified stakes, ICAP. Faisalabad. January - March 2018 The Pakistan Accountant 61