The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Accounting Board (AAB / the board) has officially issued the revised exposure draft of Financial Accounting Standard (FAS) 29 “Sukuk in the Books of the Originator”.

This standard was developed as a part of a comprehensive project on Sukuk by AAOIFI commenced with an objective of improving the existing AAOIFI Shari’ah and financial accounting standards and filling the gaps identified by the experts in the industry. The objective of this standard is to set out the accounting and classification guidelines for Sukuk issued by Islamic financial institutions or other institutions. This standard deals with the presentation and disclosure of Sukuk issuance in the books of the originator with regard to its structure.

On this occasion, Mr. Hamad Al Oqab, Chairman of AAB, stated that “Due to the increase in the use of Sukuk instruments, it was crucial to develop a standard that addresses the accounting, classification, and financial reporting of Sukuk originators. This standard further provides guidance on the on-balance-sheet structures, whereby these may include instruments to be reported as equity, quasi-equity, financial liability or a non-financial liability. He further added that: “These classifications depend on the control of such assets comprising of power to control and nature of control i.e., for risks and rewards as well as varying benefits to the institution or the fiduciary responsibility on behalf of the Sukuk-holders”.

This standard provide guidance on the various structure of Sukuk and shall be read in conjunction AAOIFI Shari’ah Standard 17 “Sukuk”.

The series of public hearings are scheduled to be held in first and second quarter of 2023.

The issued standard can be accessed exclusively by the digital version (of AAOIFI standards) subscribers, and free subscription can be attained, on the AAOIFI website: www.aaoifi.com