Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) organised a focus group roundtable on the challenges of accounting and financial reporting for Islamic financial institutions (IFIs) operating in hyperinflationary economies via video conferencing on Monday, 30 January 2023.
The roundtable event hosted more than 50 subject-matter experts and industry practitioners from a number of jurisdictions, worldwide, for an in-depth discussion on multiple issues related to IFIs that operate in hyperinflationary economies. This included impact studies, financial analysis, and empirical findings by select speakers on the implementation of hyperinflation accounting in their respective jurisdictions.
Mr. Mohammad Majd Bakir, Director, Professional Standards Development, AAOIFI, presented welcoming remarks and brief overview of the planned development project for a financial accounting standard on financial reporting and accounting for hyperinflation by IFIs.
Mr. Firas Hamdan, Executive Director, Banque Du Liban, Republic of Lebanon; member, AAOIFI Accounting Board, delivered a keynote speech, shedding light on the need of a dedicated standard in this regard and highlighting the main aspects where IFIs require special financial reporting and accounting guidance under AAOIFI conceptual framework, particularly in view of the decision taken by the board to develop, on a priority basis, a stand-alone FAS in this regard, duly aligned with AAOIFI conceptual framework for financial reporting and related Shari’ah guidance.
The first session featured a number of presentations providing country-specific empirical findings, as well as, from Shariah perspective. The first presentation was delivered by Mr. Faizan Ahmed, Chief Financial Officer, Trust Bank Amanah, Republic of Suriname, also including key findings on “Hyperinflation – case study of Trust Bank Amanah, Suriname”. Mr. Darrel Scott, financial consultant, former member, International Accounting Standards Board (IASB), United Kingdom, delivered the second presentation on overview of IAS 29 – with examples drawn from Zimbabwe country experience. Dr. Anwar Misbah Soubra, Islamic University of Beirut, Republic of Lebanon, delivered the third presentation titled “Hyperinflation from Shari’ah perspective”. At the end of this session, the floor was opened for questions by the participants who raised certain practical issues and cases as to application of treatment and restatement of financial statements, among others.
The second session commenced with a presentation delivered by Ms. Amal Almasri, Head of Supervision Department – Islamic Banks, Central Bank of Syria, member, AAOIFI Accounting Board, under the title “The effects of hyperinflation in Syria.”
An open discussion ensued, covering topics mainly revolved around Shari’ah issues specific to the application of hyperinflation accounting, specific business model issues and impact on stakeholders in terms of application of hyperinflation accounting, possible solutions and outline for a financial accounting standard on hyperinflation accounting, and impact assessment of hyperinflation on IFIs in the region.
Mr. Omar Mustafa Ansari, AAOIFI Secretary General, moderated the session, that involved an in-depth discussion of the above points and issues on hyperinflation accounting. This was followed by an interactive Q&A round shedding a particular light on understanding the accounting and presentation requirements as reflected in the topics discussed. The secretariate will compile the main expert comments and submit the proceeding and result of this event to the respective working group for its elaboration and recommendation of course of action for development of the dedicated financial accounting standard through the AAOIFI Accounting Board (AAB).