The Accounting Board (AAB) of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has officially issued financial accounting standard (FAS) 39 “Financial Reporting for Zakah”. The objective of this standard is to establish the principles of financial reporting related to Zakah attributable to different stakeholders of an Islamic financial institution and provides guidance on two main categories of institutions namely “institutions obliged to pay Zakah” and “institutions not obliged to pay Zakah”.
This standard improves upon and supersedes FAS 9 on “Zakah” and aims at setting out the accounting treatment of Zakah in the books of the institutions, including the presentation and disclosure by an Islamic financial institution. The accounting and financial reporting requirements such as recognition, presentation and disclosure requirements of this standard shall apply to institutions that are obliged to pay Zakah on behalf of certain or all stakeholders. Institutions that are not obliged to pay Zakah shall apply the disclosure requirements of this standard for certain or all stakeholders, as relevant.
The public hearings for the standard, to obtain industry feedback, was held in English and Arabic languages in multiple jurisdictions during 2020 and 2021. All comments and suggestions from the public hearings along with the written comments was presented to the working group, the AAOIFI Shari’ah committee and AAB for final discussions and deliberations.
On this occasion, Mr Hamad Al Oqab, Chairman of AAB, stated that “the board included the revision of FAS 9 “Zakah” in its work plan needed enhancement that were identified during the comprehensive review and revision project initiated by AAB for the existing AAOIFI FASs. This was also done keeping in view the additional accounting and computations related matters are already set out in the Shari’ah standard 35 “Zakah”. He further added that, “this revised standard provides guidance with regards to the recognition, presentation and disclosure of Zakah attributable to relevant stakeholders. While computation of Zakah shall be generally applicable individually to each institution (or entity) within a group, this standard shall be applicable on all consolidated and separate / stand-alone financial statements of an institution.
The issued standard can be accessed exclusively by the digital version (of AAOIFI standards) subscribers: by clicking here, and free subscription can be attained, on the AAOIFI website: www.aaoifi.com.