The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Accounting Board (AAB / the board) held its 35th meeting on October 23-24 and deliberated in depth on three exposure drafts. The board approved the exposure draft of financial accounting standard (FAS) on “Promotional Gifts and Prizes” and revised FAS 14 “Financial Reporting for Islamic Investment Institutions” in principle.
The objective of the exposure draft of FAS on “Promotional Gifts and Prizes” is to prescribe the accounting and financial reporting requirements applicable to gifts and prizes that are awarded by the Islamic financial institutions to their customers, including quasi-equity and other investment accountholders.
AAOIFI FAS 14 “Investment Funds” was issued more than two decades ago and since then, many significant developments emerged in the Islamic finance industry. Therefore, there was a dire need for a revision of the standard as part of the comprehensive AAOIFI FAS revision and review project. The exposure draft of FAS on “Financial Reporting for Islamic Investment Institutions” aims to set out the principles for financial reporting for Islamic investment institutions particularly prescribing overall requirements for the presentation, minimum contents and recommended structure of their financial statements in a manner that facilitates truthful and fair presentation in line with Shari’ah principles and rules.
The board also deliberated on the exposure draft of FAS on “Tawarruq and Commodity Murabaha” and decided to defer the issuance of the exposure draft given that further research needs to be carried out in the form of impact assessment of the same.
On this occasion, Mr. Hamad Al Oqab, chairman of AAB, stated that: “The board is cognizant with the accounting and reporting needs of the Islamic financial institutions and is consistently developing and improving financial accounting standards to address the same.” He added that: “The revision process was holistic taking into due consideration the practical requirements and possible challenges that the industry may have in respect of the main areas covered by these exposure drafts. It is expected that the revised FAS 14 “Financial Reporting for Islamic Investment Institutions” and the exposure draft of FAS on “Promotional Gifts and Prizes” will further improve financial reporting of Islamic Investment Institutions.”
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