The Accounting Board (AAB / the board) of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) held its 21st meeting via video conference on 11 November 2020.

The agenda included a discussion on the use of LIBOR and the consequential impacts of having a different benchmark rate on transactions at different maturity levels. The AAB decided that that that a dedicated working group is required to be established to further evaluate the accounting implications and the need for guidance from AAOIFI.

The board discussed the status of FAS 23 “Consolidation”, FAS 24 “Investments in associates”, and FAS 10 “Istisna’a and parallel Istisna’a”. The members contemplated that definitions and treatments introduced in the recently issued standards may require reassessing these standards. It was decided that a separate standard will be developed for the special considerations for consolidations and business combinations. For FAS 10, the board decided to complete the revisions before the implementation date of FAS 1 (Revised 2021) “General Presentation and Disclosures in the Financial Statements of Islamic Financial Institutions”.

The exposure draft on “Presentation and Disclosures in the Financial Statements of Takaful Institutions” was presented. The board had initiated the comprehensive revision project for FASs on Takaful in 2018. This revised FAS shall supersede FAS 12 “General Presentation and Disclosures in the Financial Statements of Islamic Insurance Companies”. The board approved the exposure draft with minor corrections. The second part of the project shall include the accounting treatments for Takaful products and shall replace the three existing FASs i.e., FAS 13, 15 and 19. The board agreed that the exposure draft will be preliminary in nature due to complexity of the project and will be re-evaluated once the second part of the project, relating to accounting treatments, is complete and comments from the market participants received subsequent to the public hearings.

On the occasion, Mr. Hamad Al Oqab, Chairman, AAOIFI Accounting Board, stated: “The Takaful industry and its accounting practices have significantly developed and improved since AAOIFI issued the existing four standards on Takaful more than 15 years ago. The revised AAOIFI Conceptual Framework is nearing completion and it is essential to revise the standards on accounting and financial reporting for Takaful on a high priority basis. The standard

covering aspects of accounting for Takaful products will be the second output in the revision project”. He further added that “the objective is to provide a comprehensive guidance in a clear and understandable manner to the Takaful industry.”

The exposure draft will be issued shortly after completing the due process.

The final meeting of the board is scheduled to take place in December 2020.