30 Dec The Accounting and Auditing Organisation for Islamic Financial Institutions ( AAOIFI) has issued a new accounting standard on investment. This paper focuses on the issue relevant to the need for Islamic accounting standards in reporting Islamic Financial Institutions (IFIs), in the context of Malaysia. Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is an independent industry body dedicated to the development of internatio.

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Proceeds from issue of bonds. It aaoifi accounting standards reproduced here by agreement with Aaoifi accounting standards. Consequently, the standards have introduced greater harmonization of Islamic finance practices in all major Islamic finance markets throughout the world. The implications will be seen when the accounting for sukuk transactions is considered in detail.

An internal rate of return calculation will show this to be approximately 6. This would include such matters as additional footnote disclosures so that investors knew what proportion of a company’s dividend payments represented impure income, what part of its retained earnings were impure and which of the company’s stqndards were liable to Zakah.

Normally only one of those would display depending upon your screen size. Islamic investors would like to have such information in respect of the financial statements of all publicly traded companies, with the exception of those companies carrying on aaoifi accounting standards prohibited activities such as alcohol distribution.

The precise accounting terminology is that Trader plc does not “de-recognise” the building.

Shari’a Standards

Pertinent points that have been incorporated in the new FAS 27 included updated guidance on accounting treatment for on-balance sheet and off-balance sheet investment accounts. Tap here for MENU. Neither answer is “more right” than the other. Net income after the mudarib’s share. Aaoifi accounting standards text descriptions are slightly different to recognise the fact that although Trader plc’s payments to sukuk holders in standaards of the amount they subscribed for the sukuk are regarded as a financial expense, they are not interest.


Aaoifi accounting standards Language English Arabic. Liability under sukuk financing transaction. This means that under IFRS the sukuk transaction is regarded purely aaoifi accounting standards a financing transaction; Trader plc recognises a financial liability in respect of the sukuk while retaining the building on its balance sheet even though Trader plc does not own it during the life of the sukuk transaction.

Accounting for sukuk under IFRS and AAOIFI accounting standards

Nor does “Statement of Financial Accounting No. Retained profit of current year. Add back non-cash interest expense. Proceeds from sukuk financing transaction.

Before aaoifi accounting standards an illustrative sukuk transaction, it is helpful aoifi consider the case of a hypothetical company, Trader plc which makes a conventional public bond issue with the following terms and consequential cash flows:. Sukuk investors stake in investment fund.

Accounting, Auditing and Governance Standards. Proceeds from sale of building. The effective cost of finance under the sukuk transaction is approximately aaoifi accounting standards. These assumptions give rise to the following income statement, cash flow statement and balance sheet for Trader plc over the five year life of the bond.

Add back non-cash financing expense. From our standards development and revision program over the past year, we have issued, amongst others, a new accounting standard on investment account and a aaoifi accounting standards accounting standard on consolidation.

Accounting, Auditing and Governance Standards

This is not due to bias, but rather to inherent difficulties either in identifying the transactions and other events to be measured or in devising and applying measurement and presentation techniques that can convey messages that correspond with those transactions and events. Furthermore, Trader plc gives details of the sukuk financing transaction in the notes aaoifi accounting standards the financial statements so that investors are not misled by the fact that the building aaoifi accounting standards included on Trader plc’s aaoifi accounting standards sheet even standarsd it is not owned.


In such circumstances, the reporting of a sale would not represent faithfully the aaoifi accounting standards entered into if indeed there was a transaction. Join my email list. Distribution to sukuk holders. Illustrative public bond issue transaction summary. For example, an entity may dispose of an asset to another party in such a way stxndards the documentation purports to pass legal ownership to that party; nevertheless, agreements may exist that ensure that the entity continues to enjoy the future economic benefits embodied in the asset.

The sukuk transaction is designed to replicate the economics of the conventional bond transaction from the perspective of Trader plc. Net cash from aaoifi accounting standards in investing activities. As Trader plc retains all of the risks and rewards in relation to the building, the transaction has been accounted for as standarrs financing transaction and the building has not been derecognised from Trader plc’s balance sheet.

Net cash from financing activities.