Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) held the fourth meeting of its Accounting Board (AAB) in the current term on 15th and 16th of January 2017 at the head office of the Islamic Development Bank (IDB), in Jeddah, the Kingdom of Saudi Arabia.
The exposure draft of the accounting standard on “Murabaha and other deferred payment sales” was approved for issuance for comments and public hearing, whereby the working group and the secretariat were directed by the Board to issue the exposure draft after ensuring the improvements identified by the Board. The revised standard is expected to for bring uniform accounting treatments for Murabaha and other deferred payment sales, which are closer to the generally accepted accounting principles without compromising on the Shari’ah requriements for the transaction’s financial reporting. The revised standard will also introduce the accounting for the liability side of Murabaha and other deferred payment sales transaction.The exposure draft, will be shortly available on the AAOIFI website. Public hearings will be held shortly to get the industry feedback on the exposure draft. The project will continue for issuance of a standard on Tawarruq and commodity Murabaha as well.
The Board also approved the work plan for 2017 and agreed on the targets for finalization of several projects. The plan inlcudes several standards that are expected to be finalized during the year, including Sukuk, impairment and credit losses, Wa’ad and Khiyar and Wakala. In addition, work on the standards on Zakah, Tawarruq and General Presentation and Disclosures for Islamic Banks will continue with expected exposure drafts to be issued during the year or early next year.
The Board further discussed and approved in principal the draft standard on “Sukuk issuance”. The exposure draft is expected to be shortly finalized after taking into consideration the improvements identified by the Board. The standard is expected to prescribe the accounting and reporting requirements for Sukuk issuances (i.e. the obligor / originator’s accounting) including Sukuk that meet the criteria for off balance sheet accounting as well as accounting as equity, quasi-equity or liability.
In addition, the Board approved the scope, key treatments and contents for the upcoming accounting standard on “Impairment and credit losses” (in line with generally accepted accounting principles and the regulatory guidelines). The Board provided specific guidance to the executive team and the working group on the lines on which the standard needs to be finalized and decided that the same shall be published as an exposure draft during first quarter of 2017.
The next AAB meeting is proposed to be held by on the 18th and 19th of March 2017, in Bahrain.