The Accounting Board (AAB) of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has officially issued financial accounting standard (FAS) 40 “Financial Reporting for Islamic Finance Windows”.
The objective of this revised standard is to establish financial reporting requirements for Islamic finance windows and applicable to all conventional financial institutions providing Islamic financial services through an Islamic finance window. This standard improves upon and supersedes FAS 18 “Islamic Financial Services Offered by Conventional Financial Institutions”.
The public hearings for the standard, to obtain industry feedback, was held in English and Arabic languages in multiple jurisdictions during 2021. All comments and suggestions from the public hearings along with the written comments was presented to the working group, the AAOIFI Shari’ah committee and AAB for final discussions and deliberations.
On this occasion, Mr Hamad Al Oqab, Chairman of AAB, stated that “the board noted an increasing number of conventional financial institutions offering Shari’ah compliant products and services. To ensure adequate level of compliance, transparency and disclosure practices it was important that such conventional financial institutions comply with established Shari’ah principles and rules and financial reporting requirements. Accordingly, in response to the demand identified by the different stakeholders at various forums, the board prioritised the revision of FAS 18. He further added that, “it is expected that the revised standard shall improve the overall accounting and financial reporting practices by giving clarity to conventional financial institutions to present their Shari’ah compliant operations in a transparent manner”.
The issued standard can be accessed exclusively by the digital version (of AAOIFI standards) subscribers: by clicking here, and free subscription can be attained, on the AAOIFI website: www.aaoifi.com