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Shareholders
Regulatory Authorities
Governance Committee
IFSB
Other Shareholders
Prudential Guidelines/Standards Sharia Audit and governance will not complete without relevant prudential standards that address unique risk features and exposures of IFI
Establishment of AAOIFI
The Accounting and Auditing Organization for Islamic Financial Institutions is an Islamic international autonomous non-profit making corporate body that prepares accounting, auditing, governance, ethics and Shari'a standards for IFI. AAOIFI was established on 11 Ramadan 1411 corresponding to 27 March, 1991 in Bahrain.
Reporting
Accountability
Equitable Distribution
reasonable rates of returns to shareholders and depositors
User Groups
Shari Principles
Others
Any party that directly or indirectly make reference to the financial statement of IFI
Lawful (Recognition)
The recognition process would also take into consideration the lawfulness of economic activities. Thus revenue is not recognized if the activity is unlawful.
Financial Institution
Profit rate
(income)
Income Statement
Musharaka Income XX
Payment
Cash Payment/ Deferred Payment (Muajjal)
Delivery
Immediate delivery/Deferred delivery (Salam) /Piecemeal Delivery (Istisnaa)
Murabaha Financing
Mark-up
SELLER
BUYER
PRICE = COST + PRE-DETERMINED MARK-UP US$ 150,000 = US$ 100,000 + US$ 50,000
CASH PRICE
SUPPLIER/ DEVELOPER
S& P AGREEMENT
Types of Ijara
Operating Ijara
Ijara where the title of assets are not transferred to the lessee.
Gift
Ijara
Gift
Ijara
Sale
Ijara
Sale
Ijara
Sale
Duties of Lessor/Lessee
Lessors Obligations
Making the leased asset available Maintenance of the Leased Asset
Lessees obligations
Utilization of leased asset according to contractual conditions Rental payment and safeguard asset
Ijara Muntahia Biltamleek IMB Asset reported in the lessors books & depreciated Maintenance costs borne by the lessor Ijara Revenue is not divisible Fair rental amount is considered if transfer is not effected Ijarah rate is reflective of the market rental rate
Finance Lease Finance lease is reported as receivable No depreciation & maintenance costs is borne by the lessee. Interest income accrues and accounted for separately Cost of Financing is not related to rental rates
Parallel Salam
Al Muslam
seller 1 2 IFI
EXPORTER
IMPORTER
Al Muslam
seller
Salam Contract
Immediate Deferred
Accounting treatment of Salam financing and Parallel Salam transactions Recognise Salam financing capital when it is paid or made available (as a facility).
Parallel Salam transaction is recognized when the Islamic bank receives the capital of Salam (cash, kind or benefit).
Salam Financing transaction shall be presented as assets in the financial statement as Salam Financing. Salam Deposits from Customers based on parallel Salam transactions are presented as Parallel Salam.
Asset reported at historical cost/ face value Asset reported at lower of cost or market value Asset reported at historical cost Asset to be reported as receivable
Salam
The commodity
Istinaa
Al Masnoo
Paid at time Payment: More flexible mode of of contracting Time of payments contracting Deferred Installment Binding Binding Istisnaa is binding based on the views of fuqaha (Maslaha) Parallel Parallel Valid contracts if these are Salam Istisnaa legally separated
SHARIA
COMPLIANCE
AUDIT
Prudential guidelines & standards promulgated by IFSB to ensure risk management & disclosure framework related to capital adequacy, corporate governance & market discipline