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Not every company in Pakistan reports under full IFRS. The Third Schedule of the Companies Act, 2017 classifies companies, and the classification decides the financial reporting framework they use. Getting this right avoids both over-engineering small companies' accounts and under-reporting larger ones.
The classification
| Class | Typically includes | Framework |
|---|---|---|
| Public interest companies | Listed companies and other entities of public interest, such as those holding public funds | IFRS as notified by SECP |
| Large-sized companies | Companies above the Third Schedule thresholds for paid-up capital, turnover or employees | IFRS as notified by SECP |
| Medium-sized companies | Companies between the small and large thresholds | IFRS for SMEs |
| Small-sized companies | Companies below the small thresholds | Accounting and Financial Reporting Standard for small-sized entities (AFRS for SSEs) |
The thresholds — paid-up capital, turnover and number of employees — are set in the Third Schedule and SECP's notifications. Companies may often choose a more comprehensive framework voluntarily.
Disclosure schedules
Beyond the accounting framework, the Act prescribes disclosure requirements: the Fourth Schedule for listed companies and their subsidiaries, and the Fifth Schedule for non-listed companies.
When your class changes
Growth can move a company into a higher class. When that happens, plan the transition early: comparatives may need restating, new accounting policies (for example on financial instruments or leases) may apply, and systems may need to capture more data. Auditors will expect a clear transition analysis.
Common pitfalls
- Assuming a private company is automatically "small" without checking every threshold.
- Applying full IFRS disclosures in a small company's accounts, adding cost without benefit.
- Missing the switch to a higher framework after a strong year.
Companies reporting under full IFRS should also plan for IFRS 18, which replaces IAS 1 for annual periods beginning on or after 1 January 2027 internationally; its application in Pakistan follows SECP's notification.
Not sure where your company stands? We classify your company and prepare financial statements under the right framework. Accounting and financial reporting services.
This guide is general information based on the law as we understand it on the date shown, not advice for your situation. Tax rules change often — please speak to us before acting on it. See our disclaimer.