AAOIFI issues accounting standard on risk reserves
17 Aug 2018
The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) has issued a new accounting standard FAS 35 'risk reserves'.
The standard defines the accounting principles for risk reserves in line with the best practices of financial reporting and risk management. The standard encourages but does not require maintaining adequate risk reserves to safeguarding the interest of profit and loss stakeholders particularly against various risks including credit, market, equity investment risks, as well as, the rate of return risk. Together wih FAS 30 Impairment, Credit Losses and Onerous Commitments, FAS 35 supersedes the earlier FAS 11 Provisions and Reserves and is effective for the financial periods beginning on or after 1 January 2021 with earlier adoption permitted.
The new standard can be accessed through the press release on the AAOIFI website.