The Accounting and Auditing Organization for Islamic Financial Institutions’ (AAOIFI’s) Accounting Board (AAB / the board) held its 36th meeting on 25-26 December 2023 during which it considered and reviewed the comments received in the public consultation stage the four exposure drafts of financial accounting standards (FASs). After due deliberation and incorporation of the responses to public and Shari’ah committee comments, the board finalised and approved for issuance FAS 44 “Determining Control of Assets and Business”, FAS 45 “Quasi-Equity (Including Investment Accounts)”, FAS 46 “Off-Balance-Sheet Assets Under Management” and FAS 47 “Transfer of Assets Between Investment Pools”.
The objective of FAS 44 “Determining Control of Assets and Business” is to establish the principles of assessing as to whether and when an institution controls an asset or a business, both in the case of underlying asset(s) of a participatory structure, as well as, for the purpose of consolidation of financial statements of subsidiaries.
AAOIFI FAS 45 “Quasi-Equity (Including Investment Accounts)” and FAS 46 “Off-Balance-Sheet Assets Under Management” improve upon and align the requirements related to investment accounts and other participatory instruments of different nature with the new framework and FAS 1 “General Presentation and Disclosures in the Financial Statements” and updated market practices.
AAOIFI FAS 47 “Transfer of Assets Between Investment Pools” prescribes the financial reporting principles and disclosure requirements applicable to all transfers of assets between investment pools and supersedes the earlier FAS 21 “Disclosure on Transfer of Assets”.
As part of the meeting agenda, and being the last meeting for the current year (2023), the board reviewed the annual performance report and elaborated on the progress of the projects carried forward to the next year. Furthermore, and given that the board will be completing its 4-year term by end of January 2024, the board considered and reviewed the performance report of its current term (2020-2023).
On this occasion, Mr. Hamad Al Oqab, chairman of AAB, stated that: “The board is pleased to announce the completion of developing and issuing these four financial accounting standards, as part of its revision project on FAS 27 “Investment Accounts” and FAS 21“Disclosure on Transfer of Assets”. He added that: “These standards are expected to significantly improve the financial reporting of Islamic financial institutions in relation to the respective scopes of these standards, all in line with the defined Shari’ah principles and rules”.
Mr. Omar Mustafa Ansari, the Secretary General, AAOIFI also stated: “The current board has performed extraordinarily well, and on behalf of AAOIFI’s secretariat and Board of Trustees we would like to thank all the board members and the relevant working group members for their tremendous efforts, remarkable devotion and great hard work which have been extended on a voluntary basis to support the mission and objectives of AAOIFI and the broader interest and objectives of the global islamic finance industry”.
It is expected that all the four standards will be issued before end of the current year after incorporation of board comments and the changes suggested at the public consulting stage and completion of the due process.
The standards can be accessed on AAOIFI website: link