• 01 Jul

    PRESS RELEASE: 1 July 2018, Manama, Kingdom of Bahrain


    CIBAFI Submitted Comments to the Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI)

    1st July 2018, Manama, Kingdom of Bahrain | Aligned with its role as an advocate of the Islamic Financial Services Industry (IFSI), the General Council for Islamic Banks and Financial Institutions (CIBAFI), the global umbrella of Islamic financial institutions, announced that it has submitted its comments on 28th June 2018 to the Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI) on the Revised Financial Accounting Standard No. 25: “Investments in Sukuk, shares and similar instruments”.

    The Exposure Draft has been issued on 30th May 2018 and was open for public consultation until 30th June 2018.

    In its comments, CIBAFI thanked the AAOIFI for giving the opportunity to the Islamic Financial Services Industry to comment on the Exposure Draft and provided collective feedback of its member institutions from over 33 jurisdictions, comprising the following key points.

    Firstly, the ED states that the investment categories are divided into: equity-type instruments; monetary debt-type instruments; non-monetary debt-type instruments; and other investment instruments. CIBAFI and its members are concerned that it might be difficult to apply these categories to Sukuk in general, especially to hybrid or mixed Sukuk which include equity and debt contracts (e.g. Murabahah/Mudarabah). The revised ED should address more clearly hybrid structures that represent convertible, exchangeable or perpetual Sukuk, which are structures that may mutate over time.

    Secondly, CIBAFI members noted that, although non-transferable Sukuk fall outside the scope of this ED, there may be some sukuk which are in principle tradable but which in practice represent syndicated financing, and might be better classified as ‘loans or receivables’ than investment instruments, even ones which will be held-to- maturity investments. This could in principle create a difficult borderline.

    Thirdly, CIBAFI noted that the definition of “participatory structure” in the ED refers among others to sharing losses. This could be taken to exclude Mudarabah structures, where the losses fall exclusively on the Rabb ul Mal, although in other respects it would be right to treat these as participatory. Some CIBAFI members suggest rewording the definition appropriately.

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