The Institute of Chartered Accountants of Pakistan


Circular No. 10/2006		December 27, 2006

ALL MEMBERS OF THE INSTITUTE Dear Member TR-5 - IASB STANDARDS - COUNCIL'S STATEMENT ON APPLICABILITY (REVISED 2006)

Please refer to ICAP Circular No. 09/2006 dated December 16, 2006 on the above subject.

It may be noted that in paragraph 2.3 of the TR-5 sent along with the aforesaid Circular the reference of 'IAS 39' has inadvertently been included in the list of IASs/IFRSs not yet adopted/notified.

In addition subsequent to the notification of IFRS 2, 3, 5 and 6 on December 6, 2006 by SECP, the reference of IFRSs to paragraph 2.3 has also been amended.

You are requested to kindly replace the enclosed page.

Any inconvenience caused is very much regretted.

Thanking you

Yours truly

Shahid Hussain
Director Technical Services

Encl.: As above

ACCOUNTING	TR-5 (Revised 2006)

IASB STANDARDS-COUNCIL’S STATEMENT ON APPLICABILITY

		9.	IFRSs are designed to apply to the general purpose financial statements and other financial reporting of all profit-oriented entities. Profit-oriented entities include those engaged in commercial, industrial, financial and similar activities, whether organized in corporate or in other forms. They include organizations such as mutual insurance companies and other mutual cooperative entities that provide dividends or other economic benefits directly and proportionately to their owners, members or participants. Although IFRSs are not designed to apply to not-for-profit activities in the private sector, public sector or government, entities with such activities may find them appropriate.

	2.2	The Council desires to direct all members to ensure that in accordance with the obligations undertaken by the Institute the auditor, while expressing an opinion on financial statements, should satisfy himself that they do comply with IASs/IFRSs in all material respects and that in the event of any departure from or inconsistency with such standards, the auditors' report should contain suitable qualification. It should however be emphasized that IASs/ IFRSs do not override the local statutory provisions under Companies Ordinance, 1984 and the disclosure requirements under the Fourth and Fifth Schedules. Compliance with IASs/IFRSs shall be mandatory in so far as such standards are not inconsistent with local regulations or standards, directives or pronouncements issued by this Institute.

	2.3	The Council is conscious of the present set of circumstances prevailing in Pakistan, in relation to compliance with some of the IASs / IFRSs and in view thereof has decided that for auditors of all companies while expressing an opinion on financial statements the compliance with the following standards shall, until notified otherwise, not be deemed to be mandatory: IAS 29 IAS 41 IFRS 1, 4, 7 and 8

	2.4	Applicability of Accounting and Financial Reporting Standards for Medium-Sized Entities and Small-Sized Entities
		2.4.1	The Institute has developed and the Council in its meeting held on July 28, 2006 has approved two separate sets of accounting and financial reporting standards for Medium-Sized Entities (MSEs) and Small-Sized Entities (SSEs). These standards will be called as 'Accounting and Financial Reporting Standards for Medium-Sized Entities and Small Sized Entities'.
		2.4.2	The Institute directs its members that while expressing an opinion on financial statements of MSEs or / SSEs (whichever is applicable) they shall ensure compliance with the Accounting and Financial Reporting Standards for MSEs or / SSEs.
		2.4.3	Entities qualifying as MSE or SSE are defined below: QUALIFYING ENTITIES Medium-Sized Entity (MSE) A Medium-Sized Entity (MSE) is an entity that: a) is not a listed company or a subsidiary of a listed company; b) has not filed, or is not in the process of filing, its financial statements with the Securities and Exchange Commission of Pakistan or other regulatory organisation for the purpose of issuing any class of instruments in a public market; c) does not hold 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; d) is not a public utility or similar entity that provides an essential public service;