KARACHI: Securities and Exchange Commission of Pakistan (SECP) has absolved modaraba companies – engaged in operating lease business – from preparing and submitting half-yearly financial statements.
This move is in accordance with the requirements of International Accounting Standard (IAS)-17 – adopted by the Institute of Chartered Accountants of Pakistan (ICAP).
The ICAP had recommended that modarabas conduct their leasing business as financial lease to comply with the requirements of IAS-17 and prepare half-yearly financial statements accordingly. Modarabas had, however, rejected the same on the plea that operating lease business – being Sharia-compliant – was acceptable to them.
Sources said certain unresolved issues of IAS-17 had led to an undue delay in the preparation of half-yearly accounts of modarabas, for the period ended December 31, 2003.
The SECP – by issuing circular number 10-2004 – has resolved the matter, by passing the following order: “In view of the practical difficulties faced by the modaraba sector – as reported by Modaraba Association of Pakistan – the SECP has waived the application of IAS-17 on modarabas.”
The order adds: “In order to facilitate the modaraba sector, it is clarified that the application of IAS-17 to modarabas has been deferred till further order.”
Sources hoped following this order, the auditors of modarabas would start approving and authenticating their half-yearly financial statements.
In another development, the SECP has barred bank defaulters, assessees in default and defaulters of government dues from sitting on the Board of Directors of modarabas.
Sources said, now all directors – presently holding the office of directorship of modarabas – would have to submit the “Clean Clearance Certificate” from the Credit Information Bureau of the State Bank of Pakistan.
Besides, these directors would have to submit separate declarations – officially termed “affidavits” – to the SECP disclosing all personal information including previous assignments held and details of taxes paid.
These steps, sources claimed, would help improve management in the modarabas of the country.