Central Bank of Iran Directive Makes IFRS Mandatory
In order to protect the interests of banks and credit institutions' depositors and shareholders, and maintain the stability and health of banking system, the Central Bank of Iran has set a number of conditions vis-à-vis banks' financial statements whose fulfillment is necessary for shareholders' annual meetings to become viable. According to CBI's directive, banks and credit institutions are obliged to present their financial statements and their footnotes, based on the International Financial Reporting Standards, to their board members, independent auditors, registered inspectors and also depositors and shareholders for the 2016-17 fiscal year in line with CBI's updated sample. The directive emphasizes that banks and credit institutions must definitely avoid releasing discrepant financial statements for an accounting period. It also deems it necessary for banks and credit institutions' independent auditors to professionally consider only financial statements compatible with CBI's framework and avoid any vague conditional article that is hard to understand for shareholders and users. In other words, CBI has not put any limit on conditional articles but they have to be transparent and explain the details and results. The IFRS-based balance sheet templates were first released by CBI in February to improve financial transparency and the international operations of Iranian banks. CBI has seriously pursued the complete implementation of IFRS and other international banking requirements such as Basel Accords. It is noted that the categorization of assets, incomes and liabilities, in addition to the assessment of dividend shared among shareholders and depositors should be done with utmost care, in line with accounting standards and CBI regulations. In particular, CBI has highlighted a number of prerequisites to allow banks and credit institutions to hold their annual general meetings that are usually held in late summer. Among these, banks and credit institutions should send the final draft of their financial statements to CBI at least one month before the meeting. Independent auditors and registered inspectors should send their reports to CBI at least a month before the meeting. Banks also have to report their failures in complying with money and banking regulations and CBI's directives at least a month before the general meeting. Following the presentation of the final draft of independent auditors and registered inspectors' reports, these officials should hold a joint meeting with CBI supervisors to exchange ideas and resolve any possible ambiguity. The directive noted that the responsibility of failure in implementing the regulations lies with banks' CEOs and board members, and the banks will not get a permit to hold an annual general meeting unless they have adhered to all the aforementioned rules. IFRS are a single set of accounting standards, developed and maintained by the International Accounting Standards Board for application on a globally consistent basis by developed, emerging and developing economies. These standards help provide investors and other users of financial statements with the ability to compare the financial performance of publicly listed companies on a like-for-like basis with their international peers. After the lifting of sanctions imposed on Iran’s banking system, the necessity of conforming to IFRS was crucial to ease and speed up the process of absorbing foreign resources. IFRS standards are now mandated for use by more than 120 countries, including the European Union and by more than two-thirds of G20 states.