01 June 2017

Executive Summary of IFRS Project Status

1. Introduction

CBE has undertaken a conversion project in order to adopt the IFRS as issued
by the IASB to align the reporting of its consolidated financial statements. To
achieve this, the bank decided to procure consultant service and awarded
KPMG following a tender with reference RFP No. 36/2015/16. The project kick
off took place on October 31, 2016.

Status of the project

Estimated % or project delivery

98%
Starting date Final
date
31 October 2016 28 April 2017

Detailed Status (Key activities summary)

Assessment Phase Nov Dec16 100%

Training Feb Mar17 100%

Design Phase Feb Mar17 100 %

Implementation
Feb Apr17 98%
Phase

Note:-The participants in the training are from Finance, Internal audit, Fund mgt,
risk mgt, credit portfolio, MIS, HR transaction, legal, acquired asset Adm., Building &
construction, Corporate credit, Commercial credit, credit appraisal , ERP project,
OSM.

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The following table lists major activities at each phase of the project and its status.

No Major Activities Period Status

Assessment Phase
Review and analysis of the financial statements of CBE
1 Nov-Dec16 Completed
as of 30 June 2015 and 2014.
Interviews with CBE personnel in order to understand
2 the accounting policies and treatment of the different Nov-Dec16 Completed
line items included in its financial statements
Identification of accounting differences between Local
3 Dec16 Completed
GAAP and IFRS (as a first-time adopter).
High level Assessment of the impacts in systems and
4 Dec16 Completed
processes, business and people
Documentation of observations and
recommendations; as well as a critical path required to
5 Nov-Dec16 Completed
complete the implementation of the project, including
the coordination of the participation of certain experts
Developing and proposing a plan for IFRS training to
6 Dec16 Completed
key members of CBEs staff.
Perform a detailed technical assessment of the
difference in the Banks Accounting policies, procedure
7 and financial statement presentation against IFRS and Nov-Dec16 Completed
assist in formulating of accounting policies and
procedure.
Design Phase
Conduct workshops to discuss and highlight key
1 Dec16 Completed
consideration for CBE management team
CBE Steering Committee makes key decision on
2 Feb17 Completed
options to adopt for the IFRS adaption process
Select accounting and reporting options based on
3 Feb17 Completed
CBEs decisions
Recommendations on required changes to CBEs
4 Feb - Mar17 Completed
accounting policies, procedure and Chart of account
Evaluate and define requirements for systems and Dec -
5 Completed
processes Mar17
6 Design solution and develop implementation plan Feb - Mar17 Completed

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 Customise and conduct training for 1, Feb17 Completed
Process Council Members
7 CBE IFRS project team members and Head Jan - Mar17 Completed
office representatives (two phases)
Directors and District managers Mar17 Completed

Implementation Phase
In
1 Configure and test systems and processes Mar-Apr17
progress
In
2 Deploy solutions and conduct trainings Mar-Apr17
progress
Nov In
3 Collect and validate data
Mar17 progress
Prepare accounting policy and procedure and also In
4 Feb-Apr17
reviewed Chart of account. progress
Prepare opening balance sheet and comparative In
5 Mar17
financial statements progress
Prepare IFRS financial Reporting for July 1, 2014, June In
6 Mar-Apr17
30, 2015 and June 30, 2016 progress
Project close out and assist CBE define post-project
7 Apr17 To be done
activities to support IFRS adaption process

2. Accomplishment in terms of TOR

No. TOR Deliverable

provided

1. Conduct situational assessment of the Bank

regarding its accounting practice and
financial reporting Final assessment
report
2. Highlight the key accounting issues and
implications for first time adoption of IFRS

3. Perform a detailed technical assessment

of the differences in the Banks
Accounting policy and
Accounting policies, procedure and
Chart of accounts
financial statement presentations against
IFRS and assist in formulation of
review report
accounting policies and procedure

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 4. Assist in the conversion of financial reports
for the fiscal year 2014/15 and 2015/16
Draft IFRS reports
5. Review the financial reports of the Bank and (Consolidation and
ensure that realization, measurement, Separate)
presentation and disclosure are in line with
IFRS

6. Review and provide qualitative inputs on Workshop summary

Banks management discussion and analysis documents and key
management sign-offs

7. Provide tailor-made training to some Trainings for different

selected staffs as per the gaps identified a CBE teams
minimum of 200 hours

3. Major summery points and remaining task

The Bank has selected the required standards that are relevant to its business and
applied it so as to convert the financial statements of the fiscal period end July 1,
2014, June 30, 2015 and 2016. We should consider the following points in order to
complete the project and to sustain the IFRS within the Bank.

3.1 The draft financial statements are received and it is prepared

according to the standards currently enacted as at June 30, 2016. The only
remained items are deferred tax & few items in relation to financial risk
disclosures.
3.2 The following standards have been decided by the bank to adopt
early even if the effective dates of the standards are future dates.
IFRS 9 : Financial Instruments effective date 1 January 2018

IFRS 15 : Revenue from Contracts with Customers effective

date 1 January 2018

IFRS 16 : Lease effective date 1 January 2019

3.3 The draft financial statements has not incorporated these new
standards of IFRS 9 & 16 due to the following reasons:-

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 Exception has been noted on 126 contracts from the total lease contacts of
1,046 according to KPMG reports. However, we have prepared the remaining
information commented to be provided and will communicate them to settle
the outstanding issue and hence to be incorporated in the draft report.
The collection of data for developing model for impairment calculation based
on IFRS 9 for loans and advances is ongoing. However, it requires an
extensive and complete data to calculate probability of default (PD) and loss
given default (LGD) for 12 months and lifetime of each loans.
The documentation and archiving of data in relation to loans and advances
are either missed or incomplete. Some of the information which are required
regarding loans and advances but not exhaustively found includes
- collateral type & amount,
- credit risk grading,
- date of default,
- days in delinquency,
- recovered cash flow from defaulted loan,
- Acquired, foreclosed and written off loans relevant to calculate expected
credit loss.
It requires sufficient time in order to gather and complete these data.
However, as we head towards the end of the financial year end 30 June 2017,
it requires that the bank to publish its prior year financials as at 30 June 2016
as soon as possible for timely report preparations.

On the basis of IFRS 9 standards requirements and provided information with the
maximum efforts made by CBE, KPMG advice the bank to close out the June 2016
reports with the current enacted standards.

And to develop a model based on IFRS 9 which will be used for the fiscal year
June 30, 2017 within the next six months.

4. way forward
a) It requires establishing the IFRS team under Finance process. The
proposal is presented by finance process.
b) To close out the current financial period ends June 30, 2017 with
KPMG assistance and to develop a new model with the new IFRS 9
requirements.
c) It needs to negotiate with KPMG for support service for certain
period of time (one year).

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d) tasks to elaborate the newly converted financial statement for
external auditor by KPMG,
e) Incorporating the IFRS process in to systems and developing of
different templates that are used to capture the relevant data and
provision of extensive training to the IFRS team