AAOIFI’s Accounting Board (AAB) Translation Committee has finalised and approved the issuance of the Arabic version of Financial Accounting Standard (FAS) 35 “Risk Reserves”, The English version of this standard was issued on 6 June 2018.

This standard aims to define the accounting and financial reporting principles for risk reserves to be in line with global best practices for accounting and risk management. This standard complements FAS 30 “Impairment, Credit Losses and Onerous Commitments” and they shall be adopted simultaneously.

The standard provides principle based guidance on maintaining reserves, including the approach for maintaining and utilizing reserves. The standard require IFIs to disclose in the financial statements the basis for determining the transfers in and out of reserves, thresholds for specific reserves and the use of specific reserves. Moreover, it provides guidance for assessment and accounting for various risks involved, and recognize the need for varying levels of reserves in line with the dynamism of risks across the financial calendar. It also creates a link between the allowances for impairment, credit losses and onerous commitments against the reserves to be maintained for the participating stakeholders.

This standard became effective for the financial periods beginning on or after 1 January 2021.

To view the Arabic version, please click on the following link: Link