Pakistan Revises SOE Policy, Introduces IFRS-Based Reporting Framework

ISLAMABAD: The federal government has revised its State-Owned Enterprises (Ownership and Management) Policy, 2023, introducing an International Financial Reporting Standards (IFRS)-based system for state-owned enterprises (SOEs) while preserving the State Bank of Pakistan’s (SBP) legally mandated financial reporting rules for institutions under its supervision.

The Finance Division issued the notification on October 2 after the federal government approved the amendments on September 30 under the State-Owned Enterprises (Governance and Operations) Act, 2023.

The revisions replace paragraph 31 of the existing SOE policy, specifying the accounting standards applicable to state-owned entities, the treatment of exemptions and adjustments authorised by the Securities and Exchange Commission of Pakistan (SECP), and the reporting obligations of organisations regulated by the central bank.

Under the updated policy, IFRS for the purposes of the SOEs Act will encompass all financial reporting standards notified periodically by the SECP under Section 225 of the Companies Act, 2017.

SBP Reporting Rules Retain Priority for Regulated Entities

The revised policy establishes a separate provision for organisations falling under the SBP’s regulatory authority.

For these entities, the financial reporting requirements prescribed by the central bank under the Banking Companies Ordinance, 1962, will prevail whenever they conflict with the IFRS framework.

These requirements cover circulars, directives and other instructions issued by the SBP under the relevant ordinance.

The amendment also makes clear that the revised policy will not limit or interfere with the central bank’s statutory authority, responsibilities or directions concerning institutions under its supervision.

Such powers and requirements will continue to take precedence in accordance with the State Bank of Pakistan Act, 1956.

This arrangement preserves the SBP’s authority to regulate financial reporting within its jurisdiction while making SECP-notified standards the general reference point for IFRS compliance among state-owned enterprises.

SECP Exemptions to Cover Eligible State-Owned Companies

The government has also specified how exemptions and modifications authorised by the SECP will apply to state-owned businesses.

Under the amended rules, any changes to IFRS requirements or exemptions granted by the commission to companies under Section 225 of the Companies Act, 2017, will also extend to SOEs registered with the SECP under the same legislation.

However, this provision remains subject to the special exception established for entities regulated by the SBP.

The revised policy consequently differentiates between state-owned companies governed by the Companies Act and organisations that must also comply with the central bank’s separate statutory reporting requirements.

Finance Division Tasked With Framework for Statutory SOEs

The amendments additionally assign the Finance Division responsibility for preparing a comprehensive financial management framework for statutory state-owned enterprises.

The division will develop the framework in consultation with the Auditor General of Pakistan (AGP).

Furthermore, all SOEs must establish internal audit processes and appropriate mechanisms in line with Sections 19 and 20 of the State-Owned Enterprises (Governance and Operations) Act, 2023.

According to the notification, additional provisions and implementation details are outlined in Annexure 6.