AAOIFI Accounting Board principally adopts FAS on Waqf and extends the effective date of the recently issued AAOIFI FASs

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) held its Accounting Board (AAB) on 22-23 June 2020 via video conference.

The AAB discussed matters emerging after the issuance of the AAB’s statement on COVID-19. It was concluded that the task force, that was formed for that particular matter, would continue with the mandate of identifying any accounting issues that may arise during the period of pandemic and may require specific guidance.

The AAB deliberated on the feedback received about the constraints in adopting and implementing the recently issued FASs. Institutions are facing practical difficulties in making the procedural shift in their operations due to the constraint placed by the pandemic; specifically the modifications required in the IT systems, and the training of relevant staff. In view of that, AAB decided to provide a one-year extension of the effective date of the recently issued AAOIFI FASs; from 1 January 2020 to 1 January 2021.

The AAB also considered the effect of FAS 30, “Impairment, credit losses and onerous commitments” on Takaful entities. A separate clarification has been issued by the AAB on the applicability of FAS 30 to Takaful / Islamic insurance entities.

Additionally the AAB was taken through a presentation on consequential amendments to various FASs that would be required after the upcoming revision of FAS 1. The Board requested the Secretariat to forward the matter to the relevant working group which will be expected to suggest a suitable way forward.

The Board also discussed the progress made on project on “Financial reporting by Waqf institutions”. The comments provided by AAOIFI’s Shari’ah Committee were contemplated along with those provided at the meetings held by the respective working group. The comments submitted to AAOIFI at the public hearing and the Waqf roundtable event held in early June 2020 were also discussed. After deliberation, the Board adopted the final standard which was issued in principle.

The Board deliberated on the exposure draft of the FAS on Zakah that was earlier approved in 2019 and was now being presented to the Board again together with the remarks of the working group. The Board decided to issue the standard and directed the Secretariat to initiate a joint project with the AAOIFI Shari’ah Board to develop application guidance for Zakah.

The Chairman of the Board, Mr. Hamad Al Oqab appreciated the continued commitment of the Board during these times of pandemic and stated: “the high expectations on this Board will always

be a driving force towards issuance of standards that address the industry needs and requirements on a time bases”.

The next AAB meeting is scheduled to be held in August 2020 via video conference.