Accounting and Auditing Organization for Islamic Financial Institutions

Work Plan

AAOIFI FAS Review and Revision project – in summary

In our continued pursuit to issue comprehensive international standards to the Islamic finance industry and to be in line with global best practices, the AAOIFI Accounting Board (AAB) with the Secretariat initiated a project in May 2018 to review and revise all existing AAOIFI FASs. To this effect a committee was formed with experts from the industry to provide recommendations and guidance on the approach. The scope included a detailed analysis of each standard including benchmarking them against other comparable global standards and other global best practices to identify areas of improvement.

Committee members

Mr. Hamad A. Al Oqab as Chairman of the standards revision committee

Deputy CEO, Al Baraka Banking Group (also Chairman AAB)

Mr. Abdelhalim Elsayed Elamin

Director General, Procurement and Contracting, Ministry of Finance & Economic Planning, Sudan (also member of AAB)

Mr. Muhammad Jusuf Wibisana

Partner, Price Waterhouse Coopers, Republic of Indonesia (also member of AAB)

Mr. Syed Najmul Hussain

Partner, KPMG Taseer Hadi & Co., Islamic Republic of Pakistan (also member of AAB)

Mr. Haroon Tabraze

Faculty Member, Institute of Business Administration, Islamic Republic of Pakistan

Mr. Imtiaz Ibrahim

Partner, EY, State of Qatar

Mr. Khalid Al kayed

Chief Executive Officer Bank Nizwa, Sultanate of Oman

Mr. Mahesh Balasubramanian

Partner, KPMG, Kingdom of Bahrain

Standards Review and Revision project – work plan

Final conclusions and recommendations from the committee was reviewed at the 13^th AAB meeting held on 22-23 March 2019 at the AAOIFI head office in the kingdom of Bahrain. A comprehensive two-year action plan was finalized. Each FAS revision are categorized based on urgency and market need.

The following is a summary of the FAS revision project. A final report is will issued shortly.


AAOIFI Financial Accounting Standard (FAS)	Final Board conclusions of the FAS review and revision project
Conceptual Framework for Financial Reporting by Islamic Financial Institutions	Currently under revision with exposure draft issued 30 December 2019; Exposure draft available for comments http://bit.ly/2Q94zcu Target final output: a revised conceptual framework
FAS 1 “General Presentation and Disclosure in the Financial Statements of Islamic Banks and Financial Institutions”	Currently under revision with exposure draft issued 30 December 2019; Exposure draft available for comments http://bit.ly/39sO56C Target final output: a revised FAS 1 including illustrative financials
FAS 3 “Mudaraba Financing” FAS 4 “Musharaka Financing”	Board approved to be revised; Mudaraba and Musharaka have similarities in application, structure and Shari'ah rulings. For example, there are only minor differences in management and Loss allocation; therefore, the Board approved FAS 3 and FAS 4 to be revised and the working group to recommend the suitability of a combined FAS. Target final output: possible combined FAS under the concept of Islamic Investments.
FAS 7 “Salam and Parallel Salam” FAS 10 “Istisna’a and Parallel Istisna’a”	Board approved to be revised; Salam and similarly Istisna’a are forward sales transactions/ contracts where one or two legs of the transaction are deferred to the future. The main differences are in the subject matter, which therefore can be dealt with within the same standard. Target final output: possible combined FAS under the concept of deferred delivery sales contracts/ transactions
FAS 9 “Zakah”	Currently under revision with exposure draft Board approved; to be issued; Target final output: a revised FAS on Zakah
FAS 12 “General Presentation and Disclosure in the Financial Statements of Islamic Insurance Companies FAS 13 “Disclosure of Bases for Determining and Allocating Surplus or Deficit in Islamic Insurance Companies” FAS 15 “Provisions and Reserves in Islamic Insurance Companies” FAS 19 “Contributions in Islamic Insurance Companies”	Currently under revision by a dedicated working group of experts and Shari’ah scholars on Takaful; A short industry specific survey to be launched shortly; Target final output: a comprehensive FAS on Takaful
FAS 14 “Investment Funds”	Board approved to be revised Target final output: a comprehensive standard on investment funds
FAS 16 “Foreign Currency Transactions and Foreign Operations” FAS 21 “Disclosure on Transfer of Assets” FAS 22 “Segment Reporting”	Board approved core principles to be added to FAS 1 Target final output: to be superseded by FAS 1
FAS 18 “Islamic Financial Services Offered by Conventional Financial Institutions”	Board approved to be improved to be in line with new AAOIFI FAS format Target final output: improved and reformat
FAS 23 “Consolidation” FAS 24 “Investments in Associates”	Board approved to be revised Revision to be in line with globally accepted accounting principles on accounting for consolidation / business combinations and accounting for subsidiaries, associates and joint ventures. Target final output: possible combined FAS under the concept of consolidation / business combinations
FAS 26 “Investment in Real Estate”	Board requested research and survey to determine the scope and extension of revision required Target final output: WIP
FAS 27 “Investment Accounts”	Board approved core principles to be added to FAS 1 Target final output: to be superseded by FAS 1
“Guidance Note on first time adoption of AAOIFI Accounting Standards by an Islamic Financial Institution”	Currently under revision with exposure draft issued 30 December 2019; Exposure draft available for comments http://bit.ly/348cSti Target final output: Guidance note withdrawn and be issued as a standard

All


AAOIFI Financial Accounting Standard (FAS)	Final Board conclusions of the FAS review and revision project
Conceptual Framework for Financial Reporting by Islamic Financial Institutions	Currently under revision with exposure draft issued 30 December 2019; Exposure draft available for comments http://bit.ly/2Q94zcu Target final output: a revised conceptual framework
FAS 1 “General Presentation and Disclosure in the Financial Statements of Islamic Banks and Financial Institutions”	Currently under revision with exposure draft issued 30 December 2019; Exposure draft available for comments http://bit.ly/39sO56C Target final output: a revised FAS 1 including illustrative financials
FAS 3 “Mudaraba Financing” FAS 4 “Musharaka Financing”	Board approved to be revised; Mudaraba and Musharaka have similarities in application, structure and Shari'ah rulings. For example, there are only minor differences in management and Loss allocation; therefore, the Board approved FAS 3 and FAS 4 to be revised and the working group to recommend the suitability of a combined FAS. Target final output: possible combined FAS under the concept of Islamic Investments.
FAS 7 “Salam and Parallel Salam” FAS 10 “Istisna’a and Parallel Istisna’a”	Board approved to be revised; Salam and similarly Istisna’a are forward sales transactions/ contracts where one or two legs of the transaction are deferred to the future. The main differences are in the subject matter, which therefore can be dealt with within the same standard. Target final output: possible combined FAS under the concept of deferred delivery sales contracts/ transactions
FAS 9 “Zakah”	Currently under revision with exposure draft Board approved; to be issued; Target final output: a revised FAS on Zakah
FAS 12 “General Presentation and Disclosure in the Financial Statements of Islamic Insurance Companies FAS 13 “Disclosure of Bases for Determining and Allocating Surplus or Deficit in Islamic Insurance Companies” FAS 15 “Provisions and Reserves in Islamic Insurance Companies” FAS 19 “Contributions in Islamic Insurance Companies”	Currently under revision by a dedicated working group of experts and Shari’ah scholars on Takaful; A short industry specific survey to be launched shortly; Target final output: a comprehensive FAS on Takaful
FAS 14 “Investment Funds”	Board approved to be revised Target final output: a comprehensive standard on investment funds
FAS 16 “Foreign Currency Transactions and Foreign Operations” FAS 21 “Disclosure on Transfer of Assets” FAS 22 “Segment Reporting”	Board approved core principles to be added to FAS 1 Target final output: to be superseded by FAS 1
FAS 18 “Islamic Financial Services Offered by Conventional Financial Institutions”	Board approved to be improved to be in line with new AAOIFI FAS format Target final output: improved and reformat
FAS 23 “Consolidation” FAS 24 “Investments in Associates”	Board approved to be revised Revision to be in line with globally accepted accounting principles on accounting for consolidation / business combinations and accounting for subsidiaries, associates and joint ventures. Target final output: possible combined FAS under the concept of consolidation / business combinations
FAS 26 “Investment in Real Estate”	Board requested research and survey to determine the scope and extension of revision required Target final output: WIP
FAS 27 “Investment Accounts”	Board approved core principles to be added to FAS 1 Target final output: to be superseded by FAS 1
“Guidance Note on first time adoption of AAOIFI Accounting Standards by an Islamic Financial Institution”	Currently under revision with exposure draft issued 30 December 2019; Exposure draft available for comments http://bit.ly/348cSti Target final output: Guidance note withdrawn and be issued as a standard