AAOIFI approves exposure draft on revised financial accounting standard
Source: Middle East Insurance Review | Feb 2021
The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has reviewed and approved the exposure draft of revised financial accounting standard (FAS 1) ‘General Presentation and Disclosures in the Financial Statements of Islamic Banks and Financial Institutions’. The revised standard included consequential amendments to other standards and the full set of illustrative financial statements.
The Accounting Board (AAB) of the AAOIFI also reviewed a progress report on 2020 financial accounting standards development and approved its plan for 2021.
The revision of FAS 1, along with the AAOIFI Conceptual Framework, was initiated on a priority basis in line with the recommendations of the ‘AAOIFI Financial Accounting Standards (FAS) Review and Revision Project’ carried out in 2018. The project aimed to assess the need to revise/review all existing FAS, if necessary. The board approved and issued the initial exposure drafts of revised FAS 1 along with the revised framework in 2019. However, after further contemplation and in light of the recommendations from respective working groups, including comments from the takaful working group, and working groups for revision of FAS 23 and FAS 24 and AAOIFI’s Technical Advisory and Interpretations Committee (TAIC), the board perceived the need to reissue the exposure draft.
The revised FAS 1 consists of two parts: Part 1 is applicable to all institutions and part 2 is applicable only to Islamic banks and similar Islamic financial institutions. The revised FAS 1 has adopted certain terminology that differs from what is set out in the respective FAS, for better understanding of the nature of the transactions and for standardisation of its use. The standardised terminology shall be introduced in the new FAS. However, until these FAS are revised, the standardised terminology adopted in FAS 1 shall supersede what is used in the respective FAS. The revised FAS 1 aims to assist preparers to produce financial statements that are clear, understandable and aid the users to take better economic decisions, said the AAOIFI.
The board has successfully finalised four standards, one AAB statement on COVID-19 and two exposure drafts. For the remaining FAS currently undergoing revision, the board elaborated and decided to assign more priority to revision of FAS 3/4, FAS 7/10, FAS 14, FAS 23/24, among others.
AAB chairman Hamad Al Oqab called on the AAOIFI to closely monitor implementation and other challenges that the industry may face following the issuance of the final standards. M