Islamic finance body looks to finalise new standards by year-end

Reuters

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) plans to finalize several new standards by the end of the year, as the standard-setting body works through a revamp of its guidance for the $2 trillion industry.
Bahrain-based AAOIFI has published a draft sharia standard for gold-based products with a one month consultation period ending Nov. 9, the industry body said in a statement. The project was started last year by the World Gold Council, a London-based market development body.
AAOIFI issues guidelines that are followed wholly or in part by Islamic financial institutions globally, a sector that has grown fast but remains fragmented across its core centers in the Middle East and Southeast Asia.
This could bring the number of published AAOIFI sharia standards to 57 from the current 54. AAOIFI has also published 26 accounting standards, 5 auditing standards, 7 governance standards and 2 codes of ethics. A draft accounting standard on murabaha is also slated for the end of 2016, a cost-plus-profit arrangement which is the workhorse of Islamic banks’ financing.
Preliminary studies on standards for sukuk (Islamic bonds) and ijara (Islamic leasing) are also underway
with a working group expected to finalize the two by the end of the year, AAOIFI said. A revision of AAOIFI’s existing standard on sukuk, which is 14 years old, will cover issues including the asset-backed and asset-based nature of sukuk, capital boosting instruments, beneficial ownership and non-viability clauses.