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
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
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.
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)
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)