Page 46 - CMA Journal (May-Jun 2026)

F oc us S ec t ion

Financial Instruments, Expected Credit Measurement of Assets and Revaluation Employee Bene ts—IAS 19, Public time value of money if it is material. The discount rate The Capacity of Actuarial, Data and References
Losses and Public Debt: IAS 39 and IFRS – IAS 16 Sector Pensions should be a pre-tax rate and represent market Training • Ali, S., & Khan, M. (2025). Impact of government budget announcement on exchange rate of
https://econpapers.repec.org/
Pakistan:
EconPapers.
event
study.
An
judgements about the time value of money, including
9 The revaluation model, which writes assets up to or For de ned bene t obligations, including government judgments about the additional risks that exist for the For making the implementation of IAS 19, IAS 37 and • RePEc:src:jafeec:v:8:y:2025:i:1:p:1-18
Ali, S., & Khan, M. (2025). Modeling exchange rate volatility in Pakistan: An application of ARCH,
Public sector units (PSU) have nancial assets ( nancial down to fair value without their revaluation surplus pension schemes, liabilities must be calculated using liability (International Accounting Standards Board, IFRS 9, it demands expertise which is not available so • GARCH, GARCH-M and EGARCH. Policy JSSR. https://policyjssr.com/
Auditor General of Pakistan. (2025, December 22). Pakistan launches comprehensive reforms to
far in the public sector of Pakistan in the era of volatile
being recorded in pro t or loss, is allowed under IAS 16
liabilities of PSUs) and Pakistan has nancial liabilities (Property, Plant and Equipment) (International actuarial assumptions, one of which is the discount 2025). Chosen discount rates are very judgmental in FX. The current sta and provincial accountants as well overhaul public sector accounting system. Associated Press of Pakistan.
https://www.app.com.pk/
(external sovereign bonds, foreign commercial loans). Accounting Standards Board, 2025). During a rate required by IAS 19 (Employee Bene ts) (Príma high-volatility environments. Adopting sensible as the nance teams of the SOEs, including Pakistan • Auditor General of Pakistan. (2025, December 24). The IPSAS Transition: Pakistan’s Leap to
Accrual Accounting [LinkedIn post]. https://www.linkedin.com/
changes to IAS 37 that the IASB is currently proposing,
The move from cash-based to accrual-based public IAS 21 The E ects of This accounting reform (SBP 2025) from IAS 39 to IFRS hyper-in ationary or high-volatility scenario, the fair Consulting, 2025). In Pakistan, where unfunded and may provide necessary clarity on the measurement of Railways, should be provided with a speedy skill • Baloch, R. (2025). KP audit reveals rs354bn nancial irregularities in local government funds.
partially funded pension schemes dominate, the
Pro t by Pakistan Today. https://pro t.pakistantoday.com.pk/
sector reporting, instituted in line with International Changes in Foreign 9 can be called a big transition. The incorporation of values of goods and services purchased or used for the liabilities are enormous (PIDE, 2025), and increasing the provisions when uncertainty exists, and, therefore, development program. Institute of Cost and • Center for Peace and Development Initiatives (CPDI). (2026). Budget transparency remains
limited in Pakistan. Daily Times. https://dailytimespk.com/
Public Sector Accounting Standards (IPSAS), represents Exchange Rates IFRS 9 will change how future credit losses are construction of imported capital assets, such as a devaluation further raises the cost of pensions. Linking could be an area of focus for all Pakistani public sector Management Accountants of Pakistan (ICMA) could be • Daily Times. (2025, December 22). Pakistan initiates transition to accrual-based accounting.
a pivotal shift in the eld of public sector accounting in (International Accounting recognized in the books of accounts by public sector power plant constructed with imported equipment, discount rates to government bond yields, particularly accountants (International Accounting Standards a front runner in designing these programs and • https://dailytimes.com.pk/
Fitch Ratings. (2025). Fitch expects Pakistan to allow rupee to gradually weaken. The News.
Pakistan, aiming for greater transparency and Standards Board, 2025). accountants, subsidiary the expired incurred-loss may experience signi cant uctuations as a result of when those yields rise due to currency risk premiums, Board, 2025). certi cation of IPSAS/IFRS accountants in public sector. https://www.thenews.com.pk/
accountability (Gondal, 2025; Auditor General of model to an expected-credit-loss (ECL) model, which exchange rate variations even though no actual reduces the present value of pension obligations, since Don't let the above-mentioned challenges mean that Climate Finance Transparency • Gondal, M. A. (2025). Pakistan moves to accrual-based accounting across all levels of govt. The
News. https://www.thenews.pk/
Pakistan, 2025). But the ongoing transition is against a Numerous public sector would involve predictions of future credit losses change in the good or service has taken place (Auditor a higher discount rate lowers the liability. Conversely, IPSAS/IFRS has gone wrong. On the other hand, with The IPSASB also released a new Climate-related • IMF. (2025). IMF urges Pakistan to boost scal transparency, limit mid year budget changes. ABP
Live. https://news.abplive.com/
continued backdrop of Pakistani rupee (PKR) entities in a scenario of through forward-looking scenarios (Pakistan Today, General of Pakistan, 2025). when the nance ministry applies a lower risk-free rate, accrual accounting, transparency is required as risks disclosures Standard (IPSASB SRS 1) which mandates • International Accounting Standards Board (IASB). (2025). Amendments to IAS 21: Translation to
devaluation and volatility in the foreign exchange (FX) PKR that is weak and 2025). The observations from audit reports in other countries such as PKR government securities, pension liabilities are evidenced that you may otherwise have not that governments make climate-related disclosures in • a Hyperin ationary Presentation Currency (November 2025). https://www.ifrs.org/
International Accounting Standards Board (IASB). (2025). Exposure Draft: Provisions—Targeted
market (Ali & Khan, 2025; Fitch Ratings, 2025). This volatile are battling More and More ECL with Devaluation of indicate that the omissions of asset 'understated' increase (Ministry of Finance, Pakistan, 2025). In an noticed (International Federation of Accountants, their general-purpose nancial statement • Improvements (Amendments to IAS 37). https://www.ifrs.org/
International Federation of Accountants (IFAC). (2025, December). It’s time to accelerate the
article discusses the challenges faced in public sector three key dilemmas. PKR depreciation expenses negatively impact on the illiquid market like the PKR bond market, however, 2025). For Pakistan, however, three vital steps need to (International Public Sector Accounting Standards implementation of accrual-based IPSAS standards in the Caribbean. https://www.ifac.org/
accounting presented by PKR depreciation and Many government nancial statements (Tsholotsho Council, 2025). some degree of judgment is inevitable in determining be taken to extract bene ts. Board, 2025). Pakistan is extremely vulnerable to • International Public Sector Accounting Standards Board (IPSASB). (2025, December). IPSASB
SRS 1, Climate related Disclosures. https://www.ipsasb.org/
suggests speci c policy/ capacity building steps that projects and SOEs Foreign receivables (e.g., loan to domestic power Ensuring that revaluation is done regularly (standard the appropriate market-based discount rate for IAS 19 Foreign-currency translation, calculation of ECLs and climate shocks and climate nance is generally in • K Electric. (2025). K E seeks two year extension on IFRS 9 ECL exemption amid persistent circular
debt pressures. Energy Update. https://www.energyupdate.com.pk/
recommends 3–5 years) and the revaluation for an
will help in answering these. company in USD) re-translated at a higher closing rate foreign currency (World Bank, 2025). The costs of • Masud, Z., et al. (2025). An anatomy of Pakistan’s exchange rate regime. IPRI Research Paper.
operate with dual of PKR will lead to higher nominal PKR value of the asset class is done in the same way, are the issues that compliance (Príma Consulting, 2025). revaluation of assets can be automated with digital climate grants and/or climate loans in PKR are directly https://zafarmasud.com/
Introduction currency revenue and asset. But, the borrower's ability to pay back (PD) could the public sector needs to solve in Pakistan's context Devaluation also interacts with other actuarial systems. Pakistan currently has an integrated nancial impacted by devaluation. Climate disclosure along • Ministry of Finance, Pakistan. (2025). Debt to GDP ratio and scal indicators (June 2025).
https://www. nance.gov.pk/
expenditure. Determining whether the functional (The Express Tribune, 2025). Revaluation of assets can management information system (IFMIS) in place to with existing standards will aid citizens and • Ministry of Finance, Pakistan. (2025). Recommendation on IFRS 9 exemption for government
The New Accounting Model in Pakistan has been currency should be PKR or a foreign currency has potentially be a ected negatively when the be subject of volatability if not applied 'stringently' assumptions, such as salary growth and mortality or track actual expenditures at real-time, using the PIFRA nancial assets. https://www. nance.gov.pk/
functioning on the basis of cash for decades, and had envisioned change in PKR further deteriorates its leading to a lack of transparency (Baloch, 2025). early retirement rates. When the PKR weakens, salary SAP. New programs include the “Open Budget & development partners in interpreting the impacts of • Ministry of Planning Development and Special Initiatives, Pakistan. (2025). PSDP 2025 26
guidelines: outcome driven, performance based allocations. Pro t by Pakistan Today.
the advantage of creating a simple model, but at the become a complex and contentious issue. nancial health (Ali & Khan, 2025). According to IFRS 9, adjustments often accelerate to match in ation, which Expenditure Initiative” (DDO Dashboard), which seeks FX uctuation on climate investments (International • https://pro t.pakistantoday.com.pk/
Public Sector Accounting Standards Board, 2025).
NIPA delegation. (2025). NIPA delegation visits PPRA headquarters to explore procurement
same time, it led to concealment of public assets and • Translation of foreign-currency denominated ECL should be determined on a forward-looking basis Revenue Recognition (now, for most in turn raises future bene t payments (PIDE, 2025). This to better equip citizens to monitor and oversee reforms. Associated Press of Pakistan. https://www.app.com.pk/
liabilities and scal risks. The Auditor General of debt: Foreign debt denominated in foreign taking account of reasonable and supportable part superseded by IFRS 15): IAS 18 dynamic underscore the urgency for Pakistan’s public (Ministry of Planning Development and Special Conclusion • Ocansey, E. O. N. D., Oppong, D., & Antwi, S. (2025). The in uence of globalization on public
sector accounting practices in developing countries: A systematic review. African Journal of
Pakistan (AGP) started a pioneering change towards currency (such as from IMF, World Bank or bilateral information about the future economic conditions Historically, IAS 18 (Revenue) had the guidance of sector entities to strengthen actuarial capacity and Initiatives, 2025). Restructuring and scaling these The transition from conventional cost accounting and • Accounting and Financial Research, 8, 117-132. https://doi.org/10.52589/ajafr-aqlwberp
PIDE. (2025). Social protection in Pakistan: Reforms for inclusive equity. https://pide.org.pk/
using accrual-based accounting which is similar to lenders) needs to be re-translated on every (International Accounting Standards Board, 2025). A recognising revenue when the risks and rewards of align with IAS 19, particularly as institutions like systems across all public entities, along with inserting accounting systems to IPSAS/IFRS in the public sector • PIFRA. (2025). Integrated Financial Management Information System (YPIFMIS) report. AGP
International Financial Reporting Standards (IFRS), but statement date at the closing rate. A 10% devaluation scenario would lead to an increased ECL ownership of the assets transferred, while IFRS 15 Pakistan Railways (2025) move toward IFRS 9 exchange rates information from the State Bank of is bold reform which would serve as model for • Pakistan. https://www.agp.gov.pk/
Pakistan Railways. (2025). Pakistan railways records Rs51.37bn loss in one year. Minute Mirror.
will include public sector characteristics in December depreciation of PKR adds 10% to the liability side of provision, which due to the direct impact would lead recognises revenue based on the transfer of control, compliance. Pakistan (SBP), is the best approach to minimize developing countries, if implemented successfully https://minutemirror.com.pk/
2025 (Auditor General of Pakistan, 2025; Daily Times, the balance sheet (assuming there is no additional to a decrease in government’s net assets presented which is evaluated for each performance obligation Share-based Payment: IAS 22 manual errors and apply standards in a consistent (International Federation of Accountants, 2025 and • Pakistan Today. (2025, March 25). ICAP issues guidelines on IFRS 9 application to circular debt.
https://pro t.pakistantoday.com.pk/
2025). The reforms would have a positive e ect on borrowing) – resulting in signi cant balance-sheet (K-Electric, 2025). (International Accounting Standards Board, 2025). In manner (NIPA delegation, 2025; PPRA, 2025). Ocansey et al., 2025). But the route is riddled with • PPRA. (2025). PPRA, DAGP ink MoU to strengthen transparency and accountability in public
procurement. Associated Press of Pakistan. https://www.app.com.pk/
improving the quality, completeness and reliability of volatility (Ministry of Finance, Pakistan, 2025). Governmental Receivables - IFRS 9 Pakistan, there are numerous non-exchange Responding to this, IAS 37 (Provisions, Contingent Improve Audit, PAC Oversight and technical hurdles, most tellingly the issue of the • Príma Consulting. (2025). IAS 19 Pakistan: Pension & bene t valuation guide.
government nancial statements (Gondal, 2025). transactions of the public sector which are not scope of Liabilities and Contingent Assets) stipulates that a ongoing devaluation of the Pakistani rupee and • https://primaconsulting.org/
Senate of Pakistan. (2025). Whistleblower Protection and Vigilance Commission Bill, 2025
• The lack of exchangeability: In 2025, the exemption typical IFRS 15 such as taxes, grants or fees. The IPSASB provision should be recognized if there is a present Whistleblower Protection volatility in the foreign exchange market (Ali & Khan, (passed by Senate May 2025). https://www.senate.gov.pk/
But there is a tough economic reality facing the new International Accounting Standards Board (IASB) obligation that results from a past event, and an 2025; Fitch Ratings, 2025). To overcome these • State Bank of Pakistan. (2025). BPRD Circular Letter No. 7 of 2023: IFRS 9 e ective in Pakistan
accounting system. In mid-2025, one PKR cost about issued recent amendments in IAS 21, which guide in The Securities and Exchange Commission of the has been working on a public-sector speci c revenue estimate of the obligation's costs can be made with The Public Accounts Committee (PAC) should account challenges, it is not only essential to adhere to IAS 21, • from 1 January 2024. https://www.sbp.org.pk/
The Express Tribune. (2025, March 2). Govt orders SOEs to disclose assets.
recognition standard (International Public Sector
on this issue of misappropriation of funds by public
278 USD, with its value decline by almost 90% since the case of unavailability of exchangeability of the Pakistan (SECP) has awarded an exemption on Accounting Standards Board, 2025). reasonable accuracy (International Accounting entities with IPSAS/IFRS (Auditor General of Pakistan, IAS 39/ IFRS 9, IAS 16, IAS 18, IAS 19, and IAS 37, but • https://tribune.com.pk/
The News. (2025, December 30). Rupee largely stable this year, but poised for minor, gradual
1995 (Masud et al., 2025). While exchange rate volatility currency. Although the PKR is currently implementation of the IFRS 9 model for ECL on Standards Board, 2025). In a devaluation scenario the 2025). A Civil Society Governance Diagnostic concerted e orts are also needed to invest in digital depreciation in 2026. https://www.thenews.pk/
has remained elevated, sovereign external debt exchangeable, ‘recurring episodes of liquidity nancial assets nally due from the Government of Also from a PKR-volatility point of view, a government contingent liabilities that may come back upon the Assessment carried out by the Transparency infrastructure, audit oversight, actuarial capabilities, • Transparency International Pakistan. (2025). Civil Society Governance Diagnostic Assessment
for Pakistan. https://transparency.org.pk/
continues to hurt the scal balances (Ministry of squeeze’ in the Pakistani interbank market at times Pakistan (GoP) to implement the IFRS 9 model of ECL grant of USD 100m, disbursed at a rate of 200 per USD, Pakistani government may: International Pakistan in 2025 shows that the public and transparent disclosure (PIFRA, 2025; Senate of • Tsholotsho Council (Zimbabwe). (2025). Tsholotsho council accounts in shambles (example of
may have a smaller PKR value if it is disbursed later
IAS 16 violation). https://www.newsday.co.zw/
Finance, Pakistan, 2025, The News, 2025). This is a for such nancial assets till 31 December 2025 when the rate of USD is 280. In the case of accrual If the government guarantees a foreign currency loan grievance mechanism is dysfunctional and will suggest Pakistan, 2025). The Centre for Peace and Development • Wealth Pakistan. (2025, December 29). Gradual currency adjustment expected as Pakistan’s
setting that is directly challenging the faithful approaches the ‘lack of exchangeability' scenario (K-Electric, 2025). It was argued that it might resulting accounting, the revenues should be recorded when for an SOE, and as a result of subsequent events, the a strengthening of PACs at the national and provincial Initiatives writes that, if achieved, Pakistan's success • external stability improves in FY2026. INP. https://www.inp.net.pk/
World Bank. (2025, December). World Bank approves $700mn nancing for Pakistan (Pakistan
representation as required by IPSAS/IFRS (Ocansey et (SBP, 2025). in volatile nancial statements and breach of loan the government has control of the resources, rather Pakistan Rupee depreciates, the guarantee liability (in level. Furthermore, under the Whistleblower will show how high-volatility economies can develop Public Resources for Inclusive Development). ARY News. https://arynews.tv/
al., 2025). One practical risk is that the same public entities might covenants due to IFRS 9 (Pakistan Today, 2025). But the than when cash is received (World Bank, 2025). While PKR terms) will increase, possibly forming a condition Protection and Vigilance Commission Bill, 2025 (Senate credible public nancial management that is
transparent and based on trust (2026). IMF (2025)
use di erent rates or estimation methods in Government of Pakistan has proposed to not increase devaluation has no e ect on control, it does result in a passed) an Independent Commission will be formed to
Foreign Exchange Translation and developing nancial statements, which can result in the exemption after 2025 (Ministry of Finance, in IAS 37 (Ministry of Finance, Pakistan, 2025). safeguard whistleblowers reporting nancial writes in a paper that, if successful, Pakistan will prove
Functional Currency Determination: non-comparability of such statements, thereby Pakistan, 2025). As of that date, public sector entities measurement di erence which needs to be disclosed. Because of this, the legal claims also need to be irregularities (Senate of Pakistan, 2025). The that high-volatility economies can foster credible
Presently, there are no e ective policies and
public nancial management based on transparency
IAS 21 & IPSAS 4 negating the transparent aspect of IPSAS goal. would also have to switch to IFRS 9 which would hence approaches in place to tackle non-exchange revenue disclosed and sometimes recognized as provisions – as promulgation of such a law and formalization of its and trust. It is important that over the next 24 months
there could be claims from contractors or foreign
Foreign currency transactions and nancial statements (Ocansey et al., 2025; Center for Peace and require them to model ECL at volatile exchange rates measurement in the face of high exchange rate investors for an exchange-rate loss (Ali & Khan, 2025). enforcement would go hand in hand with they be crucial, and the global public sector
posing a signi cant challenge technically and in data
volatility within the public entities of Pakistan (IMF,
standard-setting.
community will also be keeping a close watch on them
should be translated in accordance with the standard Development Initiatives, 2026). collection (State Bank of Pakistan, 2025). 2025). IAS 37 requires the accounting for provisions with the (Wealth Pakistan, 2025; The News, 2025).
44 ICMA’s Chartered Management Accountant, May-Jun 2026