The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Accounting Board (AAB / the board) has officially issued the exposure draft of its financial accounting standard (FAS) “Participatory Ventures”.

The objective of the exposure draft is to establish the principles of accounting and financial reporting for the participatory ventures.

The exposure draft sets out the overall accounting and financial reporting principles for recognition, measurement, presentation and disclosures to apply in relation to participatory ventures in the books of account of the investor(s), the working partner(s), as well as, and the participatory ventures including most of the common structures / products based on Mudaraba and Musharaka.

The revised FAS will supersede the existing FAS 3 “Mudaraba Financing” and FAS 4 “Musharaka Financing”.

On this occasion, Mr. Hamad Al Oqab, chairman of the AAB, stated: “I would like to express my sincere appreciation to the board members and AAOIFI secretariat for their efforts in the standard development process in response to the ever-changing dynamics of the industry.” He added: “at this meeting, the board approved the exposure draft for issuance in principle. It was inevitable to revise FAS 3 and FAS 4 due to significant growth in terms of size, products, structures and forms of Musharaka and Mudaraba, as well as, the need to align the same with the new “AAOIFI Conceptual Framework for Financial Reporting” and FAS 1 “General Presentation and Disclosures in the Financial Statements”. He further added: “As the exposure draft is now presented to public consultation in a series of public hearing sessions, we look forward to receiving comments and feedback from the Islamic finance industry and its broader stakeholders.”

To obtain industry feedback, AAOIFI plans to hold a number of public hearing events for the exposure draft during 2024.

The issued exposure draft can be accessed exclusively by the digital version (of AAOIFI standards) subscribers on the AAOIFI website: www.aaoifi.com