The Accountant

The Accountant By The Accountant, 28th Feb 2013 | Follow this author | RSS Feed
Posted in Wikinut>Business>Accounting & Finance

This page will focus on issues relating to Accounting & Finance topics.

Islamic Finance

The rapid global growth in Islamic finance has led to a number of reporting issues and challenges, notably the question of how it fits into the global IFRS framework....

ACCA and KPMG over the space of 18 months established 3 high-level international roundtables in Malaysia, Dubai and London, to examine a number of the key reporting issues and has now produced a report based on those discussions, which involved a range of experts in Islamic Finance, including bankers and finance professionals working in the sector, along with regulatory authorities, academics and ratings agencies.

The report calls for greater consistency in the way Islamic Finance is reported financially and urges the International Accounting Standards Board (IASB) and the Islamic Finance industry to work together to develop guidance, standards and educate the investor community on key issues.

It also makes a number of specific recommendations.

The IASB should consider issuing guidance on the application of International Financial Reporting Standards (IFRS) when accounting for certain Islamic financial products which are offered by Islamic financial institutions and conventional banks.

It should also consider issuing guidance on additional disclosures that could be made for stakeholders who are seeking information on the entity’s Sharia-compliant operations.

The IASB should work with the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and other leading Islamic finance standard setters and regulators globally to establish the gaps between IFRS and Islamic accounting standards and to review the needs of users. This should also include a review of terminology used in IFRS, and consider whether such sensitive terms as ‘interest’ – forbidden in all forms in Islamic banking- can be amended or added to.

If Islamic finance is to be part of the IASB agenda, the IFIs should support IASB by forming an expert advisory group, including Islamic scholars from various jurisdictions, which could contribute to the development of new standards and help with the overall review or provide advice on an ad hoc basis.

The IFIs need to conduct further outreach and education, particularly with the investor community, while providers of professional qualifications should look into the relevance of Islamic Finance to their syllabuses and the members.

The industry needs to engage more with local regulators to understand their expectations of financial reporting and the disclosure of Islamic financial instruments.


Accountability, Accounting And Finance, Accounting Education, Accounting Review

Meet the author

author avatar The Accountant
I have B.Sc, M.Sc(In view) and an Associate of Institute of Chartered Accountants of Nigeria. My current interests is in writing and reviewing articles and paper on Accounting and Finance topics.

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author avatar Sivaramakrishnan A
15th Mar 2013 (#)

To accommodate the "interest" terminology is not easy but has to be overcome anyway - siva

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