Professional Documents
Culture Documents
Date: April 08-10, 2012 Time: 8:30 AM- 1:30 PM Title Location: EIBFS AD Date 3rd Floor Classroom No.: 307
Lifetime Learning Building Success Towards Globalization
Course Objective: to familiarize the participants with broad framework of accounting and financial reporting issues in Islamic banks -to outline the Islamic Accounting Standards developed by the Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI) -to provide detail analysis of a number of Standards to explain how they have tackled the financial reporting issues in Islamic banks Contents: Objectives of Financial Accounting for Islamic bank -Financial Statement of an Islamic Bank -International Accounting Standards (IAS) and Islamic Banking Operations -The establishment of AAOIFI and the objectives and concepts of financial reporting for Islamic banks -General presentation and disclosure in the financial Statements of Islamic banks -Accounting Standards for Murabaha, ijarah, istisnaa, mudarabah, musharakah, and Investment Accounts Method: Lecture, presentation, discussion, exercises and case studies Pre Requisites: Bankers involved in the Accounting, Financial control and Auditing functions of Islamic banks. Audit firms professionals and regulators who supervise and inspect Islamic banks
Part 1
Development of Islamic Banking System
Definition of a Bank
Banking business means: (a) The business of; (i) Receiving deposits on current account, deposit account, savings account or other similar account; (ii) Paying and collecting cheques drawn by or paid in by customers; and, (iii) Provision of finance; or (b) Such other business as the bank (BNM), with the approval of the Minister may prescribe
PART 2
ACCOUNTING
A PROCESS OF
Recognising, recording, classifying and summarising business transaction Documents Vouchers Ledger Trial Balance Report (Mgmt)
Financial Statement Balance Sheet Income Statement Stmt of Changes In Equity Cash Flow Statement Notes to Accounts
STAKEHOLDERS 1. Management 2. Board of Directors 3. Shareholders 4. Investors 5. Creditors 6. Authorities BNM, Inland Revenue, Baitulmal 7. Staff 8. Public
PART 3
Accounting from an Islamic perspective
Islamic Accountability
Transcendental accountability to Allah SWT (Hablumminallah) Social accountability to the society (Hablumminannass) Individuals as trustees or khalifah Success in this world and in the hereafter (al-falah) Economic goals beyond purely wealth but include tazkiyah (purification of self and wealth)
Islamic
Fulfilment of Amanah Financial Trust and Obligation Cash Entrusted Wealth Entrusted
PART 4
Introduction to AAOIFI Accounting Standards and Objectives of Financial Accounting and Reporting
History: established in 1991 agreement of association by IFIs worldwide supported by IDB Head office is in Bahrain Organizational Structure Supervisory Committee; Financial Accounting Standard Board; Executive Committee; Shariah Committee Funded by founding members of IFIs, establishment of waqf etc.
PART 5
Accounting concepts from an Islamic perspective
Measurement Define the broad principles that determine the amount at which assets, liabilities, owners equity etc. are recognized
Definition of Assets
Capable of generating positive cash flows or other economic benefits in the future either by itself or in combination with other assets which the bank has acquired the right to hold (rightful ownership of maal), use of dispose (rights on manfaat) as a result of past transactions or events (AAOIFI)
4. Consistency Consistent in applying accounting measurement, valuation and disclosure methods from one period to another
6. Materiality Accounting information is regarded material if its omission, non-disclosure or misstatement results in distortion of the financial statements
Conclusions
Islamic accounting framework (objectives and concepts): 1. Compliance with syariah and, achievement of Islamic goals, on financial activities (financing schemes and financial instruments) 2. Equitable and fair recognition, measurement, valuation and disclosure of financial information 3. Achievement of both economic and spiritual well being of the society
4th Qtr
INSTITUTIONAL ASPECTS
1. Institutional Framework 2. Appropriate Legal Framework and Institutions 3. Islamic banking laws 4. Laws for non banking financial institutions 5. Supervisory Framework
SUPERVISORY FRAMEWORK
Supervisory Framework is required to increase:
Transparency Soundness and Prudence Shari'ah Compatibility A supervisory framework ensures confidence of the public in the banking system.
Accounting Standards
Accounting standards of conventional banks are rigorously defined and universally applied. Makes comparison and control easy. Not so with the Islamic banks. Accounting and Auditing Organization for Islamic Financial Organization (AAOIFI): Voluntary Organization