The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Accounting Board (AAB / the board) has officially issued Financial Accounting Standard (FAS) 42 “Presentation and Disclosures in the Financial Statements of Takaful Institutions”, and Financial Accounting Standard (FAS) 43 “Accounting for Takaful: Recognition and Measurement” in culmination of the comprehensive revision project of AAOIFI FASs on Takaful.

FAS 42 “Presentation and Disclosures in the Financial Statements of Takaful Institutions” aims to prescribe and improve the presentation and disclosure requirements for the financial statements of Takaful institutions, in line with the global best practices and align the same with the new AAOIFI framework and the newer standards, and to reflect the business model of the Takaful institutions in a fair and more understandable manner. The standard shall be applicable to all Takaful institutions regardless of their legal form or size, including Takaful window operations. It is also applicable to the Takaful institutions while presenting consolidated financial statements, as well as, stand-alone or separate financial statements. FAS 42 “Presentation and Disclosures in the Financial Statements of Takaful Institutions” supersedes FAS 12 “General Presentation and Disclosures in the Financial Statements of Islamic Insurance Companies”.

The objective of FAS 43 “Accounting for Takaful: Recognition and Measurement” is to set out the principles for the recognition and measurement of Takaful arrangements. The standard shall be applicable to the Takaful institutions and their managed participants’ Takaful fund (PTF) and managed participants’ investment fund (PIF) in respect of Takaful arrangements, re-Takaful arrangements, investment contracts with participants with or without discretionary features and ancillary transactions. FAS 43 “Accounting for Takaful: Recognition and Measurement” supersedes earlier FAS 13 “Disclosure of Bases for Determining and Allocation Surplus or Deficit in Islamic Insurance Companies”, FAS 15 “Provisions and Reserves in Islamic Insurance Companies” and FAS 19 “Contributions in Islamic Insurance Companies”.

On this occasion, Mr. Hamad Al Oqab, Chairman of AAB, stated that: “It was imperative to revise the existing standards on Takaful and develop a set of standards in response to the needs and demands by the global Takaful industry for guidance, taking into consideration the significant development in the Takaful industry over the last decade”. He further added that: “The board is in constant endeavour to make financial statements of the Islamic financial institutions, including Takaful institutions, transparent, fair, understandable and comparable. Both FASs on Takaful have been developed to align the accounting treatments and the reporting requirements of the Takaful institutions, to the maximum extent possible, with the generally accepted accounting principles without compromising Shari’ah principles and rules”.

FAS 42 “Presentation and Disclosures in the Financial Statements of Takaful Institutions” can be accessed by CLICKING HERE

FAS 43 “Accounting for Takaful: Recognition and Measurement” can be accessed by CLICKING HERE