The Accounting Board (AAB) of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) in its continued endeavor to make the financial statements of institutions transparent, fair, understandable and comparable has officially published the exposure draft of the revised Financial Accounting Standard (FAS 1) “General Presentation and Disclosures in the Financial Statements of Islamic Banks and Financial Institutions” and seeks opinion and feedback from the Islamic finance industry.
The Board agreed to revise FAS 1 “General Presentation and Disclosure in the Financial Statements of Islamic Financial Institutions” along with the AAOIFI “Conceptual Framework for Financial Reporting by Islamic Financial Institutions” (the conceptual framework) in their first meeting held in 2016. However, the Board put the revision on hold, until the standards already identified in the initial strategy, where new standard are to be issued or revised as the case may be, are complete as these would have an impact on the reporting requirements prescribed in FAS 1. The revision of FAS 1 was once again initiated after the “AAOIFI Financial Accounting Standards (FAS) Review and Revision Project” concluded in late 2018 where the revision of FAS 1 and the conceptual framework was seen as a priority item for 2019.
The objective of the revised FAS 1 sets out the overall requirements for presentation of financial statements, the minimum requirement for the content of the financial statements, and a recommended structure of financial statements that facilitate faithful presentation in line with Shari’ah principles and rules and comparability with the institutions financial statements of previous periods, and the financial statements of other institutions. The revised FAS 1 has been formulated to aid both Islamic financial institutions, and other institutions who are desirous to adopt the AAOIFI FASs for accounting and reporting purposes.
Mr. Hamad Al-Oqab, Chairman, AAB, commenting on the issuance of the exposure draft stated that: “the objective of the revised FAS 1 is to align the accounting treatments and the reporting requirements of Islamic finance institutions to the maximum possible extent with the generally accepted accounting principles and to cater to the growing information needs of users of financial statements. With the exponential growth seen in the Islamic banking industry in the last decade the reporting requirements prescribed by the generally accepted accounting principles have simultaneously become more stringent, partly due to increased regulatory requirements”. He further added that “AAOIFI has been issuing and revising standards at a quick pace with 7 new standards issued between 2015-2019. The new
standards and revisions necessitates that FAS 1 is revised to conform to the reporting requirements prescribed in the newer FASs”.
The revised FAS 1 aims to improve upon the accounting treatments prescribed in line with the global best practices and supersedes the existing FAS 1. The revision is also in line with the modifications made to the AAOIFI conceptual framework. The Board will also revise the illustrative financial statements that will accompany FAS 1. The illustrative financial statements will not be part of the standard and instead be issued separately.
All comments on the exposure draft shall be directed – on or before 30 April 2020 to [email protected] All comments and suggestions of the public hearings as well as written comments will be presented to the AAB to discuss and make the changes it deems necessary.
The exposure draft can be accessed BY CLICKING HERE