Accounting Standards for financial reporting by Islamic financial institutions have to be developed because in some cases Islamic financial institutions encounter accounting problems due to existing accounting standards such as IFRSs or local GAAP being developed based on conventional institutions, conventional product structures or practices, and may be perceived to be insufficient to account for and report Islamic financial transactions.
Sharia'a compliant transactions that observe the prohibition on charging interest may not have parallels in conventional financing and therefore, there may be significant accounting implications. Likewise, the Islamic finance industry is under considerable pressure to enhance practice and improve risk management systems and protect investors.
On this page, we maintain a history of recent developments in Islamic accounting requirements and practices.
Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI)
The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is an Islamic international autonomous non-for-profit corporate body that prepares accounting, auditing, governance, ethics and Sharia'a standards for Islamic financial institutions and the industry. It was founded in 1991 and has so far issued a total of 42 standards covering the areas of accounting, auditing, ethics, and governance for Islamic financial institutions.
The AAOIFI website can be accessed at http://www.aaoifi.com/aaoifi/.
Deloitte Islamic Finance Knowledge Center
Deloitte maintains an Islamic Finance Knowledge Center (IFKC). The IFKC is active on a number of levels in its aim to set the standards of thought leadership in Islamic Finance, including:
- Compiling a library of reference books, standards and industry reports
- Issuing IKFC research and reports to industry stakeholders
- Conducting surveys of Islamic Finance leaders
- Sharing webcasts featuring discussions with experts and policy-makers
- Publishing an e-magazine to share thought leadership with clients and markets
Click for access to the Deloitte Islamic Finance Knowledge Center.
We also offer resources at www.islamicfinance.deloitte.com. Working in conjunction with our full time Sharia'a Scholar, Mufti Hassaan Kaleem, our Islamic Finance specialists have produced the "Understanding Islamic Finance" series, which aims to provide an insight into the basic principles of Islamic Finance and explains for example Musharakah, Mudarabah, Murabaha, Ijarah, Salam, Istisna', and Sukuk.
The IASB has noted Islamic accounting as one of the possible issues for the IASB's agenda post-2011.
The Asian-Oceanian Standard Setters Group (AOSSG) has an Islamic Finance Working Group with the objective to facilitate AOSSG members providing input and feedback to the IASB on the adequacy and appropriateness of proposed and existing International Financial Reporting Standards (IFRSs) to Islamic financial transactions and events. The Working Group is chaired by Malaysia; Working Group members are Australia, China, Dubai, Indonesia, Korea, Pakistan, and Saudi Arabia. The AOSSG Working Group website can be accessed at http://www.aossg.org/working-groups/financial-reporting-relating-to-islamic-finance.