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Malaysian Accounting Standards Board releases discussion papers on Islamic finance transactions

19 Dec 2011

The Malaysian Accounting Standards Board (MASB) has published three discussion papers exploring the accounting treatment of a number of Islamic financial transactions.

The three papers are:

  • DP i-1 Takaful. In many material respects, takaful can be likened to conventional insurance, but has a number of distinct features and the paper notes "little has been written about accounting for takaful under International Financial Reporting Standards (IFRS)". The paper explores issues such as:
    • whether takaful meets the definition of an insurance contract in IFRS 4 Insurance Contracts
    • whether a takaful operator should prepare consolidated financial statements
    • accounting for any qard, an interest-free loan extended to a participant's fund that is in deficit
    • retakaful, participating contracts, revenue recognition, and additional disclosures
  • DP i-2 Sukuk. Sukuk is commonplace in the Malaysian capital market and can be compared to a conventional bond. Issues discussed include the classification of sukuk by the issuer and investor in the statement of financial position, fair value measurement, impairment, derivatives, guarantees and related party disclosures.
  • DP i-3 Shariah Compliant Profit-sharing Contracts. These contracts are similar to conventional profit-sharing or partnership contracts but raise questions of the classification of items in the statement of financial position, accounting implications of smoothing techniques to stabilise returns on capital, and consolidation, joint ventures and investments in associates.

The discussion papers do not seek to provide prescriptions for the accounting questions raised but instead put forward the MASB's understanding of the issues and alternate solutions to solicit public views on preferred solutions.

The MASB has requested comments on the discussion papers by 16 March 2012. Click for press release (link to MASB website).

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