Common control transactions: SECP orders cos to follow accounting standards

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has ordered companies to follow accounting standards on “Accounting for Common Control Transactions” approved by the Board of Institute of Chartered Accountants of Pakistan (ICAP).

According to a notice issued by the SECP here on Friday, the SECP has ordered that the accounting standard on “Accounting for Common Control Transactions” annexed to this notice, approved by the Board of the Institute of Chartered Accountants of Pakistan, be followed, by companies, when carrying out common control operations and preparing financial statements as of June 30, 2022.

Provided that the Commission can, in the public interest, ex officio or on request made to it, grant an exemption to any company from compliance with all or part of the requirements of the said standard, added the SECP.

The objective of general purpose financial reporting is to provide information about a reporting entity’s financial position, performance and cash flows that is useful to existing and potential investors, lenders and other creditors in making decisions. on the provision of resources to the entity.

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Entities engage in business combinations under common control (BCUCC) for a variety of reasons, including in connection with group restructurings and reorganizations.

The objective of this accounting standard is to establish principles for recognizing the effects of BCUCC and group restructurings in the general purpose financial statements of a receiving entity.

The accounting standard therefore aims to improve the relevance, reliability and comparability of the information that the receiving entity provides in its financial statements about a BCUCC or a group restructuring transaction.

The accounting standard establishes principles and requirements for how the receiving entity: (a) recognizes and measures in its financial statements a BCUCC or group restructuring transaction; and (b) determines what information should be disclosed to enable users of financial statements to assess the nature and financial effects of a BCUCC or group restructuring transaction, the SECP added.

Copyright Business Recorder, 2022

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