The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), held a roundtable event on its exposure draft on Financial Accounting Standard (FAS) on “Ijarah” on Thursday, 12 September 2019. The event was kindly hosted by Al-Baraka Banking Group, Bahrain, at its headquarters, in Bahrain Bay.
The roundtable event culminates a series of public hearings conducted on the revision of FAS on Ijarah in Egypt, Pakistan, United Arab Emirates, Kingdom of Saudi Arabia and most recently in Turkey in 2019.
The agenda of the roundtable included discusion on emerging issues and challenges as well as Shari’ah underpinnings pertaining to Ijarah. It addressed the needs and requirements of the stakeholders and reporting requirements of Ijarah-based transactions with an aim to improve the existing exposure draft on Ijarah, which is close to global best practices of accounting.
In this regard, a select group of finance and banking leaders, representatives of central banks, CEOs and CFOs of leading banking and financial institutions, leading scholars and experts, and representatives of regional and international organizations, among others participated in the event and contributed their valuable insights.
The session was chaired by Mr. Firas Hamdan from Lebanon and Chairman of working group for FAS on Ijarah and Executive Director of Human Resources Department and Chairman of Islamic Banking Regulatory Committee / Banque Du Liban (the Central Bank of Lebanon), who provided an introduction to the Ijarah exposure draft and process of development of the draft standard which also included an overview and target output of the roundtable event. He emphasized that all industry feedback received to date from the various public hearing events was in the form of questions, comments, suggestions, and recommendations. This will be collated and taken back to the working group and thereafter will be raised to AAOIFIs Accounting Board (AAB) for further discussion and deliberation before issuance of the final standard which is expected before end of 2019.
Mr. Adnan Ahmed Yousif, President & Chief Executive of Al Baraka Banking Group, Bahrain joined the event briefly to welcome and address the participants. He stressed the importance of such events especially in terms of improving interaction with the stakeholders. He also appreciated the efforts exerted by AAOIFI towards gaining further expert insight from across the industry, locally and globally.
Mr. Omar Mustafa Ansari, Secretary General, AAOIFI, presented the exposure draft to around 40 participants, shedding particular light on understanding the new Ijarah accounting requirements, and discussing the key issues while emphasizing on differences from other international standards on leasing.
In consideration of the complex Shari’ah issues surrounding Ijarah accounting, the next session was also chaired by Shaikh Essam Ishaq, Chairman of the Shari’ah Committee on Accounting and Governance Standards of AAOIFI and Deputy Chairman of the AAOIFI Governance and Ethics Board (AGEB). This interactive session included one-on-one questions and answers with the speakers and other participants, while focus was set on Shari’ah related matters of Ijarah and its different types.
Mr. Ansari also expressed appreciation to Al Baraka Banking Group, Bahrain for their continued support and hosting of the roundtable, and highlighted the support of the industry and participants as was reflected in the active participation at this event, especially those who attended physically, including foreign delegation and senior representatives from Bank Negara Malaysia. He also added, “it is key to have a deeper and expert-level discussion to evaluate public feedback received so far on the Ijarah exposure draft. The roundtable provided a platform to interact with professionals who are directly impacted by the proposed standard in their relevant areas. This fruit-bearing interaction will help make AAOIFI FAS more robust, practical and better toned with Shari’ah requirements.”
The FAS on Ijarah revision project initiated in 2016 aims to address the issues faced by the Islamic finance industry in relation to accounting and financial reporting as well as to improve the existing treatments in line with the global best practices. The revised standard sets out principles for the classification, recognition, measurement, presentation and disclosures of Ijarah transactions including their different forms entered into by the Islamic financial institutions in the capacity of both the lessor and lessee. The revised exposure draft “Ijarah” issued in late 2018 will supersede the existing FAS 8 “Ijarah and Ijarah Muntahia Bittamleek”, accordingly.
Those interested in providing further comments on the exposure drafts on “Ijarah”, may still do so by directing their emails to [email protected] by 08 October 2019. The exposure draft can be accessed BY CLICKING HERE