AAOIFI Accounting Board holds its 32nd meeting and approves in principle Financial Accounting Standard 43 “Accounting for Takaful: Recognition and Measurement”

The Accounting board (the board / AAB) of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has held its 32nd meeting and approved in principle Financial Accounting Standard (FAS) 43 “Accounting for Takaful: Recognition and Measurement”.

The finalisation process entailed discussion on recommendations received from the working group including those received during the public hearings conducted during 2021 and 2022. The board accordingly adopted the final standard and approved it in principle in light of the suggested changes.

FAS 43 “Accounting for Takaful: Recognition and Measurement” aims to set out the principles for recognition and measurement of Takaful arrangements and ancillary transactions to faithfully present the information related to these arrangements to relevant stakeholders. This standard supersedes FAS 13 “Disclosure of Bases for Determining and Allocation Surplus or Deficit in Islamic Insurance Companies, FAS 15 “Provisions and Reserves in Islamic Insurance Companies” and FAS 19 “Contribution in Islamic Insurance Companies”.

The first work product of the comprehensive revision project for AAOIFI FASs on Takaful i.e., FAS 42 “Presentation and Disclosures in the Financial Statements of Takaful Institutions” was already approved in principle in the 29th AAB meeting held on 26 August 2021. The objective of this standard is to improve the presentation and disclosure requirements of Takaful arrangements, in line with the global best practices, and supersedes the existing FAS 12 “General Presentation and Disclosures in the Financial Statements of Islamic Insurance Companies”. This standard

On this occasion, Mr. Hamad Al Oqab, Chairman of AAB, stated: “During the process of revising the Takaful FASs, the AAOIFI accounting board has considered various factors, which in turn mandated development to comprehensive FASs on the accounting treatments and ancillary financial reporting matters relating to Takaful arrangements”. He further added: “It is expected that  the two standards will improve the financial reporting on Takaful and address the gaps emerged from the recent developments in the islamic insurance sector over the past years”.

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