(Sukuk.net - Bahrain Tribune) Global law making body for Islamic financial institutions, the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) was in the middle of a major modification exercise, reworking its entire framework to make Islamic accounting standards more sound.

The new framework is likely to be readied in three to six months. The Kingdom-based institution is in the forefront of Islamic financial institutions' ability to manage, monitor and control their risks and the principles and standards developed by AAOIFI provide Islamic financial institutions with a strong basis to manage their activities across the globe.

"The Islamic finance industry is growing at a rapid pace, but accounting standards governing it were devised almost 15 years back. Global standards of conventional banks have outpaced existing Islamic standards and we need to speed up to meet the growing demands of our customers," said Fawad Laique, Chairman of AAOIFI's accounting committee and partner in global consultancy, Ernst & Young's Bahrain operations.

Speaking to Bahrain Tribune on the sidelines of the AAOIFI-World Bank annual conference for Islamic banking and finance here yesterday, he said AAOIFI had appointed a consultant to look into the key changes that were required in the original framework. The consultant suggested major revisions in the existing standards and the AAOIFI's all-important accounting committee had whetted the consultant's findings.

"The focus now shifts to the Shariah board, which will go through the proposed changes in the framework, followed by a public consultation. We want to implement the new framework in three to six months from now," Laique said.

"This is an integral part of AAOIFI's efforts to work closely with major stakeholders of the industry and come out with timely reactions to market development making Islamic financial institutions more secure from the challenging operating conditions. We will continue to review our standards to ensure that they remain supportive of the industry without compromising the overriding principles of accounting and Shari'a," its Secretary General, Dr. Mohamad Nedal Alchaar said.

AAOIFI has so far issued 68 standards covering the entire gamut of Islamic finance practices, including accounting, auditing, ethics and governance, which were accepted globally.

The standards were being used in all the leading jurisdictions that offer Islamic finance, including Bahrain, Dubai International Finance Centre, Kuwait, Lebanon, Malaysia, Pakistan, Qatar, Saudi Arabia, Sudan, Syria, and United Arab Emirates.

AAOIFI is supported by over 190 institutional members comprising central banks and monetary authorities, financial institutions, accounting and auditing firms and other Islamic finance service providers, from over 40 countries. It recently introduced a new accounting standard for Islamic financial institutions, enabling them present their unrealised losses resulting from remeasurement at fair value of investments in sukuk and shares available-for-sale in their financial statement under 'Investments fair value reserve' head.
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