Tuesday, March 19, 2024

Barclays Kenya adopts new accounting rule

Barclays Bank of Kenya has set the pace by becoming the first local bank to adopt the new accounting law dubbed the International Financial Reporting Standard 9.

The new accounting guidelines under the International Financial Reporting Standard (IFRS) 9 will come into force on January 1, 2018. This will be a shift from the current International Accounting Standard (IAS) 39 rule.

On Monday, Barclays held a forum in which it expounded on how the new banking rule will affect its operations and the general banking sector. Following the new accounting rule, it is expected that there will be both a reduction in retained earnings and available capital.

By adopting the new model, Barclays Bank is expected to take in minimal shocks when this new law comes into effect.  “In the last couple of years, the local banking sector has been subjected to increased regulation with far reaching consequences on profitability including KBRR and the interest rates law. In both cases, and especially as a result of the law, banks have had to review their business models in order to defend and grow their numbers,” says Barclays in a statement.

Additionally, according to the Barclays Bank of Kenya’s Chief Finance Officer, Yusuf Omari, BBK will improve on its debt collection strategies in an effort aimed at enhancing its compliance with the new rule. “We will change our collection strategy to make sure that our clients do not default payments,” he said.

Strikingly, mobile lending will be more affected than corporate lending in the new accounting regime. This means that as a borrower, you will need to keep your credit score in good condition to avoid getting blocked from accessing loans. Apparently, you will be blacklisted if you continuously default.

During the forum, accounting firm ICPAK said that it was already working on streamlining guidelines for IFRS9 that shall be used by local banks and other financial institutions.

The new law will further introduce a new model of classifying financial assets which will be driven by cash flow characteristics and the business model in which assets are held.

This sort of classification will determine how financial assets and liabilities are accounted for in the banks’ financial statements.

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