Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) held recently a public hearing of exposure drafts of two of its standards. The Egyptian Islamic Finance Association (EIFA) hosted the event at Hilton Cairo, Egypt.

Financial Accounting Standard (FAS) on ‘Ijarah’ and the governance standard, ‘Sukuk Governance’ were presented by the Secretary General of AAOIFI, Mr. Omar Mustafa Ansari and Dr. Mohamed Elbeltagy, Chairman of the Board of Directors of EIFA, respectively. The participants included Egyptian Islamic banking, finance and accounting professionals, Shari’ah scholars, auditing and law experts, academicians, researchers and other relevant stakeholders.

The public hearing is one of the mandatory steps in the standards development process at AAOIFI, and an opportunity for AAOIFI and the experts in the related fields to interact with and benefit from the knowledge, experience, and wisdom of professional individuals on the proposed standards.

The proposed FAS on “Ijarah” improves upon and supersedes “Ijarah and Ijarah Muntahia Bittamleek” (FAS 8) issued in 1995. This standard aims at setting out principles for the classification, recognition, measurement, presentation and disclosure of Ijarah type transactions, including their different forms entered into by the Islamic financial institutions (IFIs / the institutions), in both the capacities of lessor and lessee.

The purpose of developing a standard on ‘Sukuk Governance’ is to recommend principles with an objective to standardize the global practices in this area as well as to provide robust coverage of areas that are crucial for the transparent issuance of instruments and management of investments. The exposure draft sets out the standardized requirements for various stages in Sukuk management that comprise issuance, management, maturity or termination and restructuring phases. This comprehensive coverage will provide a framework which is expected to bring enhanced governance into practice and strengthen the trust in Sukuk markets.

Mr. Ansari expressed appreciation to the Egyptian Islamic Finance Association for their support in hosting the AAOIFI public hearing for the second time, and also to the participants for their active discussion and feedback on the exposure drafts. The Secretary General stated: “Egypt is a potential market for adoption of AAOIFI’s standards and represents a vibrant market to further develop its Islamic finance infrastructure in the MENA region. AAOIFI is glad to be able to interact with an enthusiastic group of industry professionals through this public hearing and offer our every possible support for the development of the industry in the country.”

The public hearing event which was conducted for 6 hours included a webinar participation option and was covered by multiple media outlets including the print media. Similar public hearings for the AAOIFI exposure drafts have taken place in different jurisdictions in 2019 including Bahrain, Malaysia, Morocco, Pakistan, Saudi Arabia and United Arab Emirates. Further hearings are scheduled to be held in other jurisdictions. All industry feedback received in the form of questions, comments, suggestions, and recommendations during these public hearings will be collated and taken back to the respective Boards for further discussion and deliberation before the issuance of the final standards.

Those interested in providing comments on the Ijarah, or Sukuk governance exposure drafts may still do so by emailing them to accounting@aaoifi.com or governance@aaoifi.com, respectively.