Manama, Kingdom of Bahrain | Aligned with its role as advocate of the Islamic Financial Services Industry (IFSI), the General Council for Islamic Banks and Financial Institutions (CIBAFI), the global umbrella of Islamic financial institutions, announced that it has provided its comments to the Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI) on its Exposure Draft (ED) of Financial Accounting Standard (FAS) No. 34: “Financial Reporting for Sukuk-holders”.
The Exposure Draft has been issued on 26th October 2017 and was opened for public consultation until 10th December 2017.
In its submission, CIBAFI thanked the AAOIFI for giving the opportunity to the Islamic financial Services Industry stakeholders to comment on Financial Accounting Standard (FAS) No. 34: “Financial Reporting for Sukuk-holders”. CIBAFI has provided collective feedback of its member banks from over 32 jurisdictions, comprising the following key points.
Firstly, the title of the ED may mislead into thinking that the ED is about financial reporting by sukuk-holders i.e. how investors in sukuk should account for their investments in their accounts. Therefore, it was recommended for the AAOIFI to reconsider the ED title to reflect more the purpose of the ED, and make clear in the introduction for which reporting entities this is intended.
Secondly, CIBAFI note that the ED classifies Sukuk structures based on the nature of investment as “business sukuk” and “asset sukuk”. The explanations in the ED are notably short and on the basis of this text, it would be very difficult to assign many of the sukuk practically in issue to one category or the other. CIBAFI members believe that more details about this classification should be provided, preferably with examples of its application to different types of sukuk currently used in practice and familiar to users of the standards.
Thirdly, there are some concerns on the adoption of this proposed standards as a part of most national frameworks. ED-34 states (in paras BC1-BC3) that the originator of the sukuk should make the disclosures as part of its own accounting. However, the originators of sukuk are not, in general, financial services firms, and would therefore not be required to use the AAOIFI standards in those jurisdictions, which apply them to their Islamic financial institutions (IFIs).
Full comments to the AAOIFI FAS 34 are available on CIBAFI website http://www.cibafi.org
In addition to policy and regulatory advocacy, CIBAFI continues to support the IFSI through various activities and initiatives. These include providing industry stakeholders with a platform to discuss emerging issues, representing the industry at major global financial events, and sharing knowledge through specialized publications and comprehensive professional development programmes.
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About the General Council for Islamic Banks and Financial Institutions (CIBAFI)
CIBAFI is an international organization established in 2001 and Headquartered in the Kingdom of Bahrain. CIBAFI is affiliated with the Organization of Islamic Cooperation (OIC). CIBAFI represents the Islamic financial services industry globally, defending and promoting its role, consolidating co-operation among its members, and with other institutions with similar interests and objectives. With more than 120 members from 32 jurisdictions, representing market players, international intergovernmental organizations and professional firms, and industry associations.
For more information about CIBAFI, please visit www.CIBAFI.org
Tel: +973 17357300 Email: media@cibafi.org
