AAOIFI issues Financial Accounting Standard 38 “Wa’ad, Khiyar and Tahawwut”

The Accounting Board (AAB) of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has officially issued financial accounting standard (FAS) 38 “Wa’ad, Khiyar and Tahawwut”. The board conducted extensive deliberations including multiple industry consultations where comments were received through public hearing events, as well as, in writing.


Mr Hamad Al Oqab, Chairman of AAB, stated that “the board included the Wa’ad and Khiyar project in its work plan, as these have become integral part of many Shari’ah compliant products, as well as, now increasingly being used as stand-alone products. The board observed that clear guidance is required to ensure that accounting treatments of Wa’ad and Khiyar are similar and comparable across jurisdictions and entities”. He further added that, “Tahawwut arrangements are also included in the scope of this standard as these are accepted as a method to manage market risks by the institutions”.

The objective of this standard is to prescribe the accounting and reporting principles for recognition, measurement and disclosure in relation to Shari’ah compliant Wa’ad (promise), Khiyar (option) and Tahawwut (hedging) arrangements for Islamic financial institutions. Wa’ad and Khiyar are used by institutions in various forms. Some are ancillary to other transactions, whereas a few are used as primary products. This standard intends to provide accounting principles for both of these, as well as the Tahawwut transactions which are normally based on Wa’ad or Khiyar, or a series or combination thereof.

The issued standard can be accessed BY CLICKING HERE

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