chapter4-220821134528-40197f10 Chapter 4 AAOIFI Standards.ppt

Chapter 4
AAOIFI Standards
AAOIFI is responsible for developing and issuing standards for international Islamic finance industry.
Supported by over 200 institutional members from over 45 countries.
Members are central banks, regulatory authorities, financial institutions, accounting & auditing firms, legal firms, etc.

1. Chapter 4
AAOIFI Standards
PREPARED BY: KHALID ABDI

2. AAOIFI – Brief overview
AAOIFI •AAOIFI is responsible for developing and issuing standards for
international Islamic finance industry.
•Supported by over 200 institutional members from over 45
countries.
•Members are central banks, regulatory authorities, financial
institutions, accounting & auditing firms, legal firms, etc.
Standards •Total of 92 standards issued: (a) 52 Shari’a standards, (b) 26
accounting standards, (c) 5 auditing standards, (d) 7
governance standards, and (e) 2 codes of ethics.
•In addition, new standards are being developed and existing
standards reviewed.
•AAOIFI standards are followed – as part of regulatory
requirement or basis of internal guidelines – in jurisdictions that
offer Islamic finance across the world.
•Consequently, AAOIFI standards have introduced greater
harmonisation of international Islamic finance practices.
Adoption
of
Standards

3. THE OBJECTIVES OF AAOIFI ARE-:
1.To develop accounting and auditing thoughts relevant to Islamic financial
institutions,
2.To disseminate accounting and auditing thoughts relevant to Islamic
financial institutions and its applications through training, seminars,
publication of periodical newsletters, carrying out and commissioning of
research and other means,
3.To prepare, promulgate and interpret accounting and auditing standards
for Islamic financial institutions, and
4.To review and amend accounting and auditing standards for Islamic
financial institutions

4. Development and Review of Standards

5. Preliminary study:-
1.Based on suggestions from industry and standards committee and board.
2.Study is submitted for discussion at standards committee and board.
3.Also applies to review of existing standards.

Exposure draft:-
1.Prepared by consultants.
2.Discussions with industry.
3.Draft preparation overseen by standards committee.
4.Draft is subject to standards board’s approval.
5.Draft is distributed to industry and submitted to public hearing.
DEVELOPMENT OF AAOIFI STANDARD

6. Approval of standard:-
1.Final version of standard takes into account comments from industry and public
hearings.
2.Standard is subject to standards board’s approval.
3.Publication of standard Standards are issued through AAOIFI’s standards
publications.
4.Announcements on approval and issuance of standards carried out in industry
publications, etc. Development of AAOIFI Standards
Development of AAOIFI standard

7. Preliminary
study
Consultation
note
Exposure
draft
Review of
standard
Issuance of
standard
Final standard
Development and Review of Standards

8. Standards
under
development
and revision
Including on:
•New Shari’a standard/s relating to
governance (to give extensive and
comprehensive guidance).
•New governance standard.
•New / revised governance
standards relating to Shari’a
Supervisory Board.
Development and Review of Standards

9. How AAOIFI Standards Support Islamic Finance
Industry
Enhance confidence of users of Islamic finance products. And promote
growth of demand for Islamic finance.
AAOIFI standards reflect concept and essence of Islamic finance transactions.
And bring about organization of Islamic finance practices.
Promote better view of financial performance of IFIs. Enhance transparency
of financial reports.
AAOIFI standards also ensure convergence of financial reporting by IFIs. And
introduce greater clarity to the financial reports of IFIs.

10. AAOIFI Governance Standards

11. AAOIFI
Governance
Standards
•Shari’a Supervisory Board (SSB):
Appointment, Composition and Report.
•Shari’a Review
•Internal Shari’a Review.
•Audit and Governance Committee.
•Independence of SSB.
•Governance Principles.
•Corporate Social Responsibility (CSR).
AAOIFI Governance Standards

12. Shari’a
Supervisory
Board (SSB)
•Appointed by shareholders at
annual meeting.
•At least 3 members.
•Experts in Islamic commercial
jurisprudence.
•May include 1 member with
expertise in Islamic finance (rather
than jurisprudence).
AAOIFI Governance Standards (cont’d)

13. SSB (cont’d) •May not include significant
shareholder or member of Board of
Directors.
•May engage external consultants to
assist duties.
•Terms of engagement to be agreed
with the institution and included in
letter of appointment.
AAOIFI Governance Standards (cont’d)

14. SSB (cont’d) Main functions:
•Directing, reviewing and supervising
institution’s activities to ensure
Shari’a compliance.
•Shari’a advice and guidelines.
•Shari’a approval on products and
services.
•Shari’a review.
AAOIFI Governance Standards (cont’d)

15. Adoption of AAOIFI Standards

16. Adoption of
accounting
standards
•AAOIFI accounting standards have been made part of
mandatory regulatory requirement in jurisdictions such as
Bahrain, Jordan, Oman, Qatar, Qatar Financial Centre, Sudan,
and Syria.
•AAOIFI accounting standards have also been adopted by
Islamic Development Bank Group, a multilateral institution.
•In addition, AAOIFI accounting standards have also been
used as basis of national accounting standards in
jurisdictions such as Indonesia and Pakistan.
•In other jurisdictions including Brunei, Dubai International
Financial Centre, Egypt, France, Kuwait, Lebanon, Malaysia,
Saudi Arabia, South Africa, United Arab Emirates and United
Kingdom as well as in Africa and Central Asia, AAOIFI
accounting standards have been used voluntarily as basis of
internal guidelines by leading Islamic financial institutions.
Adoption of AAOIFI Standards

17. Adoption
of Shari’a
standards
•AAOIFI Shari’a standards have been made part of mandatory
regulatory requirement in jurisdictions such as Bahrain,
Pakistan, Sudan, and Syria.
•AAOIFI Shari’a standards have also been adopted by Islamic
Development Bank Group, a multilateral institution.
•In addition, AAOIFI Shari’a standards have also been used as
basis of national Shari’a guidelines in jurisdictions such as
Indonesia and Malaysia.
•In other jurisdictions including Brunei, Dubai International
Financial Centre, France, Jordan, Kuwait, Lebanon, Saudi Arabia,
Oman, Qatar, Qatar Financial Centre, South Africa, United Arab
Emirates and United Kingdom as well as in Africa, Central Asia
and North America, AAOIFI Shari’a standards have been used
voluntarily as basis of internal guidelines by leading Islamic
financial institutions.
Adoption of AAOIFI Standards (cont’d)

18. Thank You