• 05 Oct

    PRESS RELEASE: 5th October 2017, Manama, Kingdom of Bahrain

    CIBAFI Submitted Comments to AAOIFI on Financial Accounting Standard No. 30 “Impairment and Credit Losses”

     

    5th October 2017, Manama, Kingdom of Bahrain | 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 to the Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI) on its Exposure Draft (ED) on Financial Accounting Standard (FAS) No. 30 Impairment and Credit Losses. 

    In its submission, CIBAFI thanked the AAOIFI for giving the opportunity to the Islamic financial services industry stakeholders to comment on its Financial Accounting Standard (FAS) No. 30 before its issuance and provided comments comprising key points as well as detailed analysis.

    CIBAFI notes that as FAS 30 covers some of the same topics as IFRS 9, it would be helpful if AAOIFI could provide more guidance and description of the principal similarities and differences between the two in the areas where they overlap. A number of CIBAFI members have to use IFRS for some or all of their financial statements, and are naturally concerned to understand where the differences lie. 

    CIBAFI welcomed, in principle, the application of an Expected Credit Loss (ECL) approach in Islamic finance, both on its merits and because of the closer alignment this will create between the Islamic and conventional standards, notably the relevant parts of IFRS 9. However, the proposed draft of FAS 30 appears to diverge from IFRS 9 in a number of ways that do not obviously derive from the specificities of Islamic finance. It would be helpful if the proposed  FAS 30 and IFRS 9 could be aligned as far as possible in order to facilitate parallel application of the two standards.

    A number of CIBAFI members have expressed concern at the exclusion of Mudaraba and Musharaka contracts from the ECL approach in respect of future cash flows. CIBAFI recommended the standard to provide more elaboration and explanations, especially with regards to details on specific characteristics of Islamic banking products and practices.  

    On the date of implementation, CIBAFI noted that it is desirable to  align the date of implementation of the standard with that of IFRS 9, which comes into effect for financial years beginning on or after 1 January 2018.  CIBAFI would like to underline the importance that our members attach to as nearly as possible simultaneous implementation of new AAOIFI standards and their IFRS counterparts. We therefore see completion of this standard as a matter of some urgency. 

    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 specialised research and publications, and comprehensive professional development programmes. 

     

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