The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Accounting Board (AAB / the board) has held its 34^th meeting and approved exposure draft of its financial accounting standard (FAS) “Participatory Ventures” which will, once issued, supersede AAOIFI Financial Accounting Standard (FAS) 3 “Mudaraba Financing” and AAOIFI FAS 4 “Musharaka Financing”.

Given the significant developments within the industry over the past two decades, the emerging forms and arrangements for both Musharaka and Mudaraba necessitated the revision of FAS 3 and FAS 4 as was decided during the comprehensive AAOIFI FAS revision and review project launched several years back aiming to address the emerging needs of the market. The objective of the standard is to prescribe principles of accounting and financial reporting for the Shari’ah compliant participatory ventures.

On this occasion, Mr. Hamad Al Oqab, chairman of AAB, stated that: “It was inevitable to revise FAS 3 and FAS 4 due to significant advancements in the structure and application of products based on Musharaka and Mudaraba, as well as changes in global financial reporting standards for similar transactions and structures. Additionally, the revised FAS addresses important issues such as the accounting and financial reporting approaches for the investor, investee (both on the two sides of balance sheet) and the participatory venture per se. He further added that: “We would like to extend gratitude to AAB and working group members, and AAOIFI’s secretariat team for their dedicated efforts in developing the draft standard to effectively address the diverse cases and concerns of users of financial statements from across the industry”.