The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) held the 12th meeting of its Accounting Board (AAB) recently in Bahrain.
In this meeting, the Board approved the exposure draft on the Financial Accounting Standard (FAS) on ‘Wa’ad, Khiyar and Tahawwut’ after due deliberations of comments and recommendations received by the working group. The new standard aims at setting out principles for the classification, recognition, measurement with related presentation and disclosure of wa’ad, khiyar and tahawwut transactions. The standard reflects the different types which are mainly classified in to two types – Ancillary Wa’ad or Khiyar and Product Wa’ad or Khiyar. The standard attempts to capture the practices and different forms entered into by the Islamic Financial Institutions (IFIs).
It is expected that this standard will improve on the overall accounting and financial reporting practices of the IFIs and will bring them closer to the global best practices, without any compromise on Shari’ah principles or the essence of the transaction. AAOIFI Secretariat will hold public hearings for the standard in different jurisdictions to receive industry feedback and comments.
The Board was presented with a summary report of the Board’s performances. The report included the overall acheivements dated from 2015 – when the new Board was formed. This includes a total of 12 AAB Meetings and over 40 working group meetings. The AAB also finalized 10 exposure drafts, with 4 critical standards finalized and issued for the market. The public hearing sessions totalled 15 sessions across 9 countries.
Commenting on this occassion, Mr. Hamad Al. Oqab, the Chairman of AAOIFI Accounting Board praised the work of the Board with the respective working groups and stated that “the accomplishments is in line with the intial strategy for the Board. The standards issued to date stayed true to our vision of harmonizationa and standardization of accounting practices of the Islamic finance industry. The Board will continue to work on critical issues and standards and those in the pipeline are crucial to the industry.”
The Board was also presented with the preliminary results of the AAOIFI FAS review and revision project. This project is designed to review and revise existing AAOIFI FASs and to provide recommendations thereon. Phase one of the project was designed to review and revise existing AAOIFI FAS including the conduct of detailed analysis of each standard and benchmarking against other comparable global standards and best practices to identify and recommend areas of improvement or a complete overhaul, if required.
In this regards the ‘AAOIFI FAS Review and Revision Survey’ – an online survey was launched in October 2018, in both laguages of English and Arabic. The comprehensive survey was to gather responses from the market with regards to the use of AAOIFI FAS.
The second phase is to gather industry opinion by a roundtable event. The event was held on Wednesday, 19 December 2018 and was hosted by Al Baraka Bahrain group at its Headquarters, Bahrain Bay.
This event hosted a selected group of finance and banking leaders, representatives of central banks, CEOs and CFOs of leading banking and financial institutions, leading scholars and experts, and representatives of regional and international organizations, among others.
The AAB meeting concluded with the review of 2018 performance and approval of AAB plan for 2019. The priotity A category projects include finalization of standard on ‘Ijarah’, ‘Tawarruq and commodity Murabaha’, ‘Waad, Khayar and Tahawwut’, and ‘Zakah’. Other projects intiated and is scheduled for issuance of exposure draft is the revision of ‘General presentation and disclosures in the financial statements of Islamic Banks and Finacial Institutions’ (FAS 1), revision of ‘Takaful accounting and reporting’. Other projects in the pipeline also include ‘Waqf accounting’, revision of Framework (Phase two of FAS 1 revision), revision of FAS 14.