CBI Overhaul Complies With IFRS Standard

The Central Bank of Iran's plan to overhaul its financial oversight regime will increase the effectiveness of supervision over banks and provides the infrastructure for the complete implementation of IFRS standards, said an advisor to the governor of the central bank.

In a seminar on the implementation of international accounting standards held in the Management Department of the University of Tehran, Ahmad Badri also delved into different aspects of the overhaul of CBI's oversight regime for banks.

"The findings were informed by a methodology that combined quantitative data of financial statements and data outside of financial statements with expert opinion and comparative studies," he said.

CBI Governor Valiollah Seif had announced earlier this month that the plan will be completed by December 20.

Badri referred to the release of a set of balance sheet templates earlier this year in line with the execution of IFRS techniques, saying they entail 16 "fundamental changes". He said the most important change is the addition of a category for term deposit in banks' financial statements.

The balance sheet templates were first released by CBI in February to improve the financial transparency and international operations of Iranian banks.

International Financial Reporting Standards is a single set of accounting standards, developed and maintained by the International Accounting Standards Board with the intention of those standards being capable of being applied on a globally consistent basis—by developed, emerging and developing economies—thus providing 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.

IFRS standards are now mandated for use by more than 100 countries, including the European Union and by more than two-thirds of G20.

Major Reforms

Badri noted that 91 changes were made to improve the transparency of financial statements, the most significant of which requires banks to reveal their non-operational assets and the quality of their profits.

"Furthermore, 54 changes were made regarding conformity with IFRS and the most notable of those was the disclosure of the four banking risks (credit risk, operational risk, market risk and liquidity risk)."

The new financial statements for long-term deposits, he said, have three functions and the first one is the matching of debits/ credit/ accounts with prevalent standards. The second one is their conformity with the banking laws of the country.

The official then pointed to the matching of long-term deposits with the "theoretical framework of financial reporting" as the third function of the newly- added tool.

Badri said Iranian banks are undoubtedly in great need of adopting IFRS standards but noted that under the current circumstances, they are ready to undergo a speedy transformation.

"The central bank decided last year to move the banking system toward the complete compliance with IFRS standards in two stages," he said. "The first phase was made operational in many banks last year, but was done incompletely because many of the risk reports were not compiled accurately."

Pointing to the crisis of transparency in Iranian banks' financial statements, Badri called it the biggest weakness in bank statements.

"Among the main features in the banks' balance sheets, the figure for deposits is the only transparent and reliable data at present," he said.