BANKING SECTOR: NEW GUIDELINES INTRODUCED TO ADOPT INTERNATIONAL ACCOUNTING STANDARDS
Baghdad, Iraq - New Guidelines for Banks to Align with International Accounting Standards
The Central Bank of Iraq (CBI) has introduced new guidelines requiring banks in the country to adopt International Financial Reporting Standards (IFRS) and make significant changes to their financial reporting practices. This move is aimed at increasing transparency and consistency in financial reporting practices among Iraqi banks.
Key Requirements for Banks
- Calculate the impact of Expected Credit Loss (ECL) allowance as at January 1, 2020, and allocate it over five years starting from 2020.
- Not distribute dividends from 2019 unless they have deducted a share of the ECL allowance for 2020.
Confusion Around IFRS Standards in Iraq
Despite efforts by the CBI to adopt IFRS standards, there remains confusion around their implementation in Iraq. The Iraqi Company Law (2004) does not specifically mention IFRS standards, leading many companies to use National Accounting Standards (NAS) instead.
- This lack of clarity has resulted in some companies applying different accounting standards, which can lead to inconsistencies and make it difficult for investors to compare financial performance across companies.
No Plan to Adopt IFRS for SMEs
Unlike the banking sector, small and medium-sized enterprises (SMEs) in Iraq are not required to adopt IFRS standards. Instead, they continue to use National Accounting Standards. There is no plan to introduce IFRS for SMEs in the near future.
Translation of IFRS Standards
The IFRS Foundation coordinates the annual publication of official Arabic translations of IFRS standards. The translation process ensures that the latest updates to IFRS standards are available to Iraqi companies and stakeholders.
Conclusion
While progress has been made towards adopting international accounting standards in Iraq, there is still much work to be done to ensure consistency and transparency across all sectors of the economy.