The financial sector is undergoing changes. New standards and regulations call for changes in the status quo for financial institutions. And your microfinance institution is not spared.
Local and global finance partners are increasing in demand for transparency in financial reporting. The time is now for your MFI to position herself as a role model rural transformative financial institution by adopting the International Financial Reporting Standards (IFRSs) specifically IFRS 9 for the computation of impairment provision based on historical and futuristic events.
Failure to comply with the best global financial reporting standards risks your MFI to losing out on fund mobilization to give out as loans. You must demonstrate good governance by complying with both local regulatory reporting requirements as well as best international practices and in accordance with International Financial Reporting Standards.
Financial institutions like yours have more to lose from inefficient financial processes and now that you been faced with intensified regulatory compliance demands.
Over the years, your financial institution has had complications with credit loss and as such, you had done too little, too late, to recognize losses on wobbly assets under International Accounting Standard Thirty-Nine (IAS 39). IFRS9 becomes ideal with its anticipation of the expected loss for the 12 months and lifetime on your financial assets.
In July 2014, the International Accounting Standards Board (IASB) released a final version of the IFRS 9 standard, aimed at replacing most of the previous guidance detailed in IAS 39. The new accounting standard for financial instruments: – accounting, measurement, and recognition was effective 1st January 2018. Under IAS 39, loan loss provisions were made only when losses had actually been incurred, even if financial institutions would see trouble coming. However, IFRS 9 obliges you to provide for expected credit losses instead. This is a game-changing the standard that takes prudence to the next level.
Timely alignment of IFRS 9 by your financial institution with the regulatory Bank supervision and impairment allowances will improve stakeholder transparency, reporting and enhance financial stability. However, the benefits of the standard will potentially depend on its proper and consistent use. Summit Consulting Ltd has developed the summitIFRS 9 Toolkit for your ultimate compliance at only Ugx10m – exclusive of VAT.
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Contact our IFRS 9 Champion; Godfrey Ssenyonjo on +256 775845691, or email@example.com