SECP exempts mutual funds from IFRS-10

ISLAMABAD: Securities and Exchange Commission of Pakistan has directed that the requirements of consolidation under section 237 of the 1984 Companies Ordinance and International Financial Reporting Standard-10 (IFRS-10) will not apply to investment by companies in mutual funds established under trust structure.

It is to facilitate the mutual fund industry and in accordance with the intent and purpose of the legislature, IFRS-10 deals with the preparation of consolidated financial statements of holding companies and subsidiaries. The scope of the definition of subsidiary and control given in the IFRS-10 was broader in nature. Due to this broader definition of subsidiary and control, financial sector was facing issues in consolidation of financial statements. In particularly asset management companies were of the view that applicability of broader definition of IFRS-10 to mutual funds will lead to risk of distortion and volatility in the financial statement of the asset management companies and their parent companies.

Further, preparing consolidated financial statements for asset management companies by consolidating the mutual funds under their management could hinder user’s ability to assess their fair and true position.

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