Edge Consultants - EC

Congratulations to SECP and ICAP Council & ICAP Accounting Standards Board!

This to inform that ICAP has developed an Accounting Standard for Financial Statements Disclosures of Zakat Received by an Entity . Its approved by SECP vide SRO 240 of 2024. The NPOs shall apply the standards for annual reporting periods beginning on or after January 1, 2024.

The financial reporting standards as applicable in Pakistan under third schedule of the Companies Act 2017 were not sufficient to provide specific disclosures for zakat utilization
Specific disclosures :
Para 9(a)
The accounting policy adopted for the utilization of zakat, stating the basis on which Zakat utilized by the entity is recognized in the financial statements. Where an entity has chosen to recognize zakat utilization at cost plus margin basis, the percentage of margin on cost shall also be disclosed by the entity
Para 9 (b)
Movement in the zakat balance during the reporting period, reconciling the opening and closing balances of zakat.
Information about the nature and amounts of costs/expenditures for which
zakat was utilized by the entity during the year.
Information about the nature and amounts of zakat received (including in kind) during the year.
Closing balance of zakat and its representation by the net assets (e.g. cash and bank balances, accrued liabilities).
Where an entity has recognized an item of zakat received in kind as per the requirement of financial reporting standards as applicable in Pakistan, it shall disclose its value including name of valuer, date and basis of valuation.

Sindh High Court follows Islamabad and Lahore High Courts in suspending FBR's SRO 1588(I)/2023, imposing a 40% tax on banks' windfall income. Legal challenges against the controversial tax continue to unfold across multiple jurisdictions.

The Sindh High Court (SHC) has suspended the operation of SRO 1588(I)/2023 until the next date of hearing, citing controversies over the vires of section 99D of the Income Tax Ordinance 2001. The Lahore High Court (LHC) had previously stayed the tax imposed under section 99D and SRO1588(I)/2023 at a rate of 40 percent on foreign exchange income of banks. The LHC has re-fixed the next date of hearing for January 15, 2024. The Islamabad High Court (IHC) had earlier suspended SRO 1588(1)/2023. The petitioner banks argue that the additional tax imposed is invalid and subject to approval by the National Assembly. The IHC expressed concerns about the ambiguity in section 99D and stated that the SRO remains in abeyance until approved by the National Assembly. The petitioner's counsel contends that section 99D represents excessive delegation of power by Parliament and challenges the validity of the SRO issued by the caretaker government. The counsel also criticizes the SRO for lacking details on the economic factors leading to windfall income. Additionally, the formula for calculating windfall income is criticized for using a six-year period instead of the specified three-year period.

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