The Accounting Board (AAB) of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has officially published the exposure draft of AAOIFI’s accounting standard on “Impairment and Credit Losses” and seeks to invite opinion and feedback from the Islamic finance industry.
The standard sets out the accounting rules and principles for impairment and credit losses, covering current and expected losses, in line with global best practices. It takes into account the ever-changing best practices and the genuine requirements of the Islamic finance industry across the globe. It also sets out classification of assets and exposures in consideration of the credit risk and other risks involved. The exposure draft applies the forward looking approach in determination of expected credit losses, in line with other standard setters for the assets and instruments that are classified as financial instruments from Shari’ah perspective. It also defines other globally acceptable impairment, write-down and provisioning approaches for other assets and exposures, without compromising on Shari’ah rules and principles.
The standard along with the expected outcome of simultaneous project for development of standard for reserves will supersede the earlier FAS 11 “Provisions and Reserves”. It is worth to note that public hearings will be held in September 2017 in different parts of the world to obtain the industry feedback on the exposure draft. Details of the public hearings, with respect to dates and venues, will be announced very soon. In the meantime, comments on the exposure draft are welcome and should be directed no later than 30 September 2017 to this email: [email protected] All the comments and suggestions of the public hearings will be presented to AAB in an upcoming meeting to discuss and make necessary changes to the standard.
The exposure draft can be accessed on the AAOIFI website By CLICKING HERE