Aaoifi

997 Words Apr 25th, 2014 4 Pages
International Standards for Islamic Finance
AAOIFI – Introduction AAOIFI & IFRS - Comparison on structural objectives AAOIFI & IFRS - Categories of accounting standards for Islamic financial institutions AAOIFI & IFRS - Examples of main differences Adoption of AAOIFI Standards How AAOIFI Standards Support Islamic Finance Industry www.aaoifi.com
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AAOIFI – Introduction • Responsible for formulation and issuance of international Islamic finance standards. • Has issued 68 standards: 25 accounting standards; 5 auditing standards; 6 governance standards (incl. on Shari’a supervision); 2 codes of ethics; and 30 Shari’a standards (rules for application of
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• Under Mudaraba investment management, IFI is not liable for loss arising from investments (except due to IFI’s misconduct, negligence, etc) – based on AAOIFI Shari’a standard. • AAOIFI accounting standards require ‘unrestricted’ investment account funds to be presented in statement of financial position as a separate item between liabilities and owners’ equity. • In contrast, based on IFRS, these would be presented as liabilities (along with other deposits).

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AAOIFI & IFRS - Examples of main differences (continued) Ijarah (Leasing) • An IFI’s major financing mechanisms are Operating Ijarah and Ijarah Muntahia Bittamleek (leasing that ends with transfer of asset ownership to lessee). • For both, asset ownership rests with IFI throughout the lease term. • In Ijarah Muntahia Bittamleek, there must be independent contract for transfer of asset ownership. • AAOIFI accounting standards require both Operating Ijarah and Ijarah Muntahia Bittamleek to be treated similar to Operating Lease. • In contrast, based on IFRS, both Operating Ijarah (especially if lease term is for major part of economic life of lease asset) and Ijarah Muntahia Bittamleek (due to the transfer of asset ownership by end of lease term) would normally be classified and treated as Finance Lease.

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