ISLAMABAD: M/s Hub Power Company (HUBCO) has once again requested an exemption from the application of International Financial Reporting Standards-9 (IFRS-9) concerning trade debts due to the ongoing issue of circular debt.
In a letter addressed to the Securities and Exchange Commission of Pakistan (SECP), the Power Company referred to SECP’s notification dated January 20, 2023, under reference number S.R.O. 67 (1)/2023. This notification had previously exempted companies with financial assets receivable from the Government of Pakistan from the requirements of IFRS-9 related to the Expected Credit Loss (ECL) Method for the financial year ending on or before December 31, 2024. During the exemption period, these companies were required to follow the provisions of IAS-39 Financial Instruments – Recognition and Measurement.
Hubco’s Chief Financial Officer, Muhammad Saqib, has informed SECP Chairman Akif Saeed that the circular debt issue persists, causing long-overdue late payment interest invoices. Hubco asserts that the late payment interest is a result of the circular debt rather than its business decisions. Applying IFRS-9’s impairment model to these invoices would result in significant impairment losses, reducing profitability and diminishing retained earnings.
Hubco has therefore requested SECP to extend the exemption from IFRS-9 for trade debts due from the Government of Pakistan, based on the same grounds outlined in its previous letter dated May 16, 2022. They seek a new notification under SECP’s powers provided by Section 225(3) of the Companies Act, 2017.
