Aligned with its role as 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 provided its comments on 3rd April 2017 to the Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI) on its Financial Accounting Standard No. 29: Sukuk Issuance.
In its submission, CIBAFI thanked the AAOIFI for giving the opportunity to the Islamic financial Services Industry stakeholders to comment on Financial Accounting Standard No. 29: Sukuk Issuance before its issuance and provided comments comprising three key points.
Firstly, CIBAFI recommends establishing and further enhancing a close coordination between the AAOIFI, the Islamic Financial Services Board (IFSB) and the International Islamic Financial Market (IIFM), as CIBAFI understands that both IFSB and IIFM have done or are doing some work on Sukuk related projects. It will therefore be important to ensure consistency of guidelines and recommendations to facilitate the implementation.
Secondly, CIBAFI notes that clarification on recognition & de-recognition of assets in the books of the Sukuk originator and the Special Purpose Vehicle (SPV) are not detailed enough in the draft document. This issue often triggers discussions and inconsistent practices. CIBAFI recommends that the standard shall provide more clarity and details on recognition & de-recognition of assets.
Thirdly, CIBAFI highlights that the proposed draft standard does not seem to cover in enough details all issues pertaining to Sukuk structures. For example, draft document prescribes criteria for Musharaka or Mudaraba Sukuk to be classified as either equity or quasi-equity, however draft document does not provide clarifications on how a Sukuk structured on one of those principles which does not meet the other criteria should be treated.
In its submission to the AAOIFI, CIBAFI expressed its appreciation of the work that the AAOIFI does to maintain sound practices of the IFSI.
Full comments to the AAOIFI are available on CIBAFI website http://www.cibafi.org
In addition to policy and regulatory advocacy, CIBAFI continues to support the IFSI through various activities and initiatives. These include providing industry stakeholders with a platform to discuss emerging issues, representing the industry at major global financial events, and sharing knowledge through specialized publications and comprehensive professional development programmes.