The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) held a public hearing on Monday, 24 July 2023 via video conferencing, on the exposure draft of its financial accounting standard (FAS) “Quasi-equity (including Investment Accounts)”, in collaboration with Russian Association of Experts in Islamic Finance (RAEIF) – Russia.

This standard prescribes the principles of financial reporting related to the participatory investment instruments that establish a control of the institution on behalf of the stakeholders other than the owners’ equity. Such instruments (including, in particular, the unrestricted investment accounts) normally qualify for on-balance-sheet accounting and are reported as quasi-equity. It also provides the overall criteria for on-balance-sheet accounting for participatory investment instruments and quasi-equity, as well as, pooling, recognition, derecognition, measurement, presentation and disclosure for quasi-equity. It further addresses financial reporting related to other quasi-equity instruments and certain specific issues.

Mr. Mohammad Majd Bakir, Director, Professional Standards Development, AAOIFI, delivered introductory remarks and a brief overview of the draft standard. On behalf of the supporting partners, Mr. Roustam Vakhitov, Co-founder of Academy of BEPS, international tax expert, member of RAEIF, Russia, delivered a welcome address, shedding particular light on the current ground reality with regards to the Islamic finance industry in Russia and the broader CIS region, as well as the application and implantation of AAOIFI standards in the region.

Consequently, the exposure draft was presented by Mr. Omar Mustafa Ansari, AAOIFI Secretary General, highlighting the content and structure of the exposure draft and the need identified by AAOIFI Accounting Board (the board) for a revision of FAS 27 “Investment Accounts”, particularly for the purpose of enhancing the financial reporting requirements in respect of relevant products and matters. The session was accompanied by an interactive Q&A round during which the participants raised specific questions and received answers and explanations on the same. They also provided comments and suggestions for improvement of the draft.

This session was attended by a large number of practitioners and experts in the areas of Islamic finance, Shari’ah, accounting, auditing, consulting, and the academia.

AAOIFI expressly acknowledges and appreciates the support of the industry and expert participants. All industry feedback received — in the form of questions, comments, suggestions, and recommendations — will be collated and taken back to the respective working group and will be raised to the board for further deliberation and consideration.

The exposure draft can be accessed through this link: