AAOIFI Accounting Board holds its 41st meeting and approves in principle FAS 50 “Financial Reporting for Islamic Investment Institutions (Including Investment Funds)”

The Accounting and Auditing Organization for Islamic Financial Institutions' (AAOIFI's) Accounting Board (AAB / the board) held its 41^st meeting on 2 November 2024, in the Kingdom of Bahrain. The board approved in principle the issuance of the Financial Accounting Standard (FAS) 50 "Financial Reporting for Islamic Investment Institutions (Including Investment Funds), which supersedes present FAS 14 "Investment Funds".

The new standard sets out the principles of financial reporting for Islamic investment institutions (IIIs) particularly prescribing overall requirements for the presentation, minimum contents and recommended structure of their financial statements. The scope of the standard has been expanded to include different types of IIIs in addition to the Islamic investment funds. In order to align with the new framework and the recently issued AAOIFI FASs, the concept and the financial reporting principles for quasi-equity have also been introduced.

Mr. Hamad Al Oqab, chairman of the AAB, at this occasion, stated: "The new standard gives special consideration to add value and strengthen the financial reporting requirements for Islamic investment institutions and to eventually benefit a broader set of stakeholders."

The board also performed a preliminary review of the proposed exposure draft for revision of FAS 26 "Investment in Real Estate". The board advised the respective working group to further evaluate the need, scope and approach of such standard in line with the board's established strategy, whereby, AAOIFI FASs shall add on to the generally accepted accounting principles, without duplicating the efforts and creating confusions in the industry. According to such strategy, AAOIFI FASs are developed where value addition is ensured, in terms of addressing certain specific Shari'ah principles and rules or appropriately incorporating a unique business model or transaction structure.

The proposed exposure draft to replace the current Standard on Auditing and Assurance (SOAA) 4 "Testing for Compliance with Shari'ah Rules and Principles by an External Audit" was presented to the board for its input and guidance. The board performed a thorough review and noted the comments provided by Professional Auditing Standards Committee (PASC). The board generally agreed with the approach and provided comments with regard to the possible improvement of the same before finalisation as exposure draft, which is primarily in the mandate of the AAOIFI Governance and Ethics Board.

Mr. Omar Mustafa Ansari, Secretary General of AAOIFI expressed gratitude for the board and it's respective working groups' and committees' unwavering commitment and contribution in developing and revising the standards in order to address the evolving requirements of the industry.