MANAMA: The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is actively looking at revision of existing standards and to introduce new ones to keep abreast of the challenging requirements of industry in financial reporting.
"In 2012, AAOIFI issued a new standard for investment in real estate which will be effective from January 1," KPMG Islamic Financial Services partner Mahesh Balasubramanian told delegates on the second day of the organisation's conference at the Diplomat Radisson Blu Hotel, Residence and Spa yesterday.
"This standard provides more detailed guidelines on how real estate investments are accounted," he said.
"The standard also provides enhanced disclosure requirements for transparent and consistent disclosure across financial statements.
"The standard has been largely aligned with the International Accounting Principles.
"However, there are certain conscious divergences in accounting methods, keeping in mind the Sharia requirements," he added.
"The main difference is recognition of fair value gain from investment in real estate which is recognised in equity under AAOIFI standards rather than the income statement as per International Financial Reporting Standards.
"This treatment is going to be a major shift in the way these investments were recognised earlier," Mr Balasubramanian said.
While Islamic finance is developing at a rapid pace, the efforts of different global bodies to create an acceptable code of standards for the industry is not encouraging, according to a World Bank official.
"Such a move by the regulatory bodies can help in creating a sustainable Islamic finance global industry with even brighter prospects of growth," Abayomi Alwode from Financial and Private Sector Development Network at the World Bank, told the conference during the opening session.
In his speech he highlighted the important role being played by AAOIFI and Islamic Financial Service Board in providing standards.
"We have been hearing and talking about the different Sharia standards which need a more global approach and level collective acceptability among Islamic banks and financial institutions," he added.