The Accounting Board (AAB / the board) of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) held its 28th meeting on 15-16 June 2022 which marked the second meeting for the year at AAOIFI head office, Manama, Kingdom of Bahrain.
The meeting commenced with a presentation and an update on the standards development and implementation process undertaken by the board for the period January to May 2022, including the agenda and projects in the pipeline for the year. During the period, more than eight working group meetings and seventeen short sub-committee and executive meetings had been held for multiple projects.
With respect to the revision of FAS 27 “Investment Accounts”, the standard on Quasi-Equity was approved in principle in the previous board meeting while in this meeting, the second output of the standard on control has been approved in principle. The board plans to discuss the third and last output of the standard about off-balance-sheet assets under management in the upcoming meeting.
The board agenda included reviewing the first version of the exposure draft on control. The standard aims to establish the principles of assessing as to whether and when an institution controls an asset or a business and shall be applicable to all institutions preparing financial statements in line with the requirements of AAOIFI Financial Accounting Standards (FASs) and Shari’ah compliant transactions. The review process entailed discussion on recommendations received from the respective working group. Accordingly, the board adopted the draft and approved it for issuance in light of the suggested changes.
The board also discussed the collaboration with AAOIFI Governance and Ethics Board (AGEB) on development of a standard on integrated reporting and the project was initiated by forming a joint committee which will undertake the process of assessing the significance and impact of non-financial factors on the financial reporting on entities.
The board was updated on the approved strategy and plan of the revision of AAOIFI auditing standards. The members approved the approach and the plan of the revision.
The board also considered the economic situation in certain hyperinflationary countries. The AAOIFI accounting board considered that there are certain Shari’ah issues that need to be addressed before it may be decided as to whether hyperinflationary accounting in line with generally accepted accounting principles shall be addressed under AAOIFI’s framework. Therefore, the board requested the AAOIFI Secretariat to prepare a working paper and after obtaining Shari’ah opinion in order to present the conclusions reached at in the upcoming board meeting.
On this occasion, Mr. Hamad Al Oqab, Chairman, AAB, stated that “in this meeting, the board approved in principle the first exposure draft of the standard on control that prescribes the scope and different conditions constituting control of an institution over an asset or a business. Based on the industry’s needs, the draft also covers the participatory structures that implies control over assets or businesses and provide guidance to users on on-balance-sheet and off-balance-sheet treatment for the different assets on the basis of control. The board also approved the project and plans for the year. The board is keen, as always, to ensure that AAOIFI financial accounting standards keep pace with the industry’s emerging needs”.
The board plans to hold its next meeting in September 2022.
All AAOIFI standards can be accessed exclusively by subscribers to the digital version of AAOIFI standards, and free subscription can be attained on the AAOIFI website: www.aaoifi.com