ISLAMABAD: The Secu­ri­ties and Exchange Commi­ssion of Pakistan (SECP) rejected an application by Engro Powergen Qadirpur (EPQ) for relaxation of disclosure requirements of International Financial Reporting Standards (IFRS).

The decision was made in the commission meeting held on Tuesday on the grounds that maximum disclosure of information of financial statements was required, and such exemptions to companies from provisions of IFRS will suppress the objective of comparability and transparency through financial statements.

EPQ, a public listed company, had requested the SECP to waive the requirement of additional disclosures in the company’s financial statement for few years.

The Commission had issued a notification SRO 24(I)/2012 in January 2012 whereby power sector companies were granted waiver from the requirement of IAS-21 to extent of requirements in respect of accounting principle of capitalisation of exchange difference, subject to the condition that ‘those power sector companies which have chosen to capitalise exchange differences shall not be permitted to recognise Embedded Derivatives under IAS-39 and for the periods beginning on or after January 01, 2013.

Such companies shall be required to provide ‘additional disclosure’ as if accounting for embedded derivative under IAS-39 had been adopted in preparing the financial statements, the SRO said.

EPQ had availed itself of exemption granted by the Commission under SRO 24(I)/2012 and chose to capitalise the exchange differences.

The company also complied with the conditions prescribed in the aforesaid SRO. Financial Statements of the company for the year ended December 31, 2013 contained ‘additional disclosure’ as required by the Commission’s notification.

However, on the grounds of issues faced by EPQ for the provision of this additional disclosure in its financial statement had requested to waive the requirement of additional disclosures in the company’s financial statement for a few years.

The company, in its request, pleaded that audit firms in Pakistan do not have local expertise to verify these additional disclosures and they are engaging their foreign offices to obtain assistance of foreign experts.

The services provided by these foreign experts are extremely expensive as they charge on hourly basis in dollars, resulting in extra burden on the company.

The Commission in its order stated that ‘no company in power sector other than Engro Powergen Qadirpur has requested for waiver from this requirement’.

Exemptions to individual companies from provisions of IFRS will defeat the objective of comparability and transparency of financial statements.

It also stated that waiver from the requirement of IAS-21 and condition of providing additional disclosures under IAS-39 was allowed on the request of a number of power companies and after consultation with Institute Of Chartered Accountants Of Pakistan (ICAP).

Power sector companies as well as major audit firms were also taken on board by the ICAP and after extensive consultation waiver from IAS-21 for power sector companies was recommended by ICAP.

No such implications were highlighted by either any power sector company or audit firm.

Published in Dawn, December 25th, 2014