AAOIFI Roundtable on planned revisions to its Financial Accounting Standard 1

The challenge of writing a monthly column for the magazine "Islamic Finance News" is that every month you have to find a topic to write about!

On 15 July 2021 I spent over three hours in a Zoom meeting discussing proposed revisions to a key accounting standard for Islamic financial institutions. I have to be honest and accept that only a small fraction of the human race would find that interesting!

Quite apart from the technical accounting issues, I realised afterwards that there were some important "take aways" from my participation. You can read them in my article below.

Reflections on an AAOIFI Roundtable

Last month, I was one of about 35 participants in a three-hour, invitation only, Experts Roundtable (using Zoom) convened by the Accounting and Auditing Organisation for Islamic Financial Institutions (“AAOIFI”).

By now, unless accounting for Islamic financial institutions is your speciality, your eyes may be glazing over! However, I realised afterwards that there were some important messages from the roundtable.

For international meetings, video is the new default

Multinational corporations, Big 4 accounting firms, and similar organisations have increasingly used videoconferencing since the mid-1990’s. Although smaller organisations and individuals have had facilities such as Skype, usage has been relatively low and mainly by technically literate “early adopters.”

However, the explosion of Zoom usage during the coronavirus pandemic has transformed the scene.

While in-person conferences will resume (I am looking forward to attending the IFN UK Forum in London on 7 September 2021) [Now rescheduled to 12 October 2021] I expect that discussions like July’s AAOIFI Roundtable will almost always be conducted online in future, even when there are no travel restrictions.

The “lingua franca” of Muslims is English

The workshop brought together people from the Gulf states, the UK, Pakistan, Malaysia and other locations. As readers would expect, it was conducted entirely in English, being the common language of the participants, just as “Islamic Finance News” has always been published in English.

Why not Arabic? After all, Arabic is the language of the Quran, of the Hadith collections, and of almost all Islamic intellectual writing for the first six or seven centuries of Islam.

However, the reality is that for non-Arabs the in-depth study of Arabic is only personally worthwhile for those seeking a career in academic Islamic studies. For everyone else, the career enhancing move is mastering English.

AAOIFI has decided to stop duplicating IFRS

Various comments from the AAOIFI participants left me with a clear, and very encouraging, personal impression. I stress that the opinion below is very much my own formed from attending the roundtable. It should not be attributed to AAOIFI.

I believe that AAOIFI has decided that where International Financial Reporting Standards (“IFRS”) cover something well, and there are no Shariah issues, AAOIFI does not need to issue different standards, but instead will simply follow IFRS, even to the extent of adopting the same language as IFRS uses.

Instead, AAOIFI will concentrate on accounting matters where Shariah issues give rise to specific guidance requirements. For example, the treatment of assets financed by different types of profit-sharing investment accounts.

My conclusion is that AAOIFI now has greater self-confidence than when it first started, and no longer feels the need to demonstrate that it is different from, and independent of, IFRS.

How to maximise your impact in an online meeting

While I was able to attend for the full duration of the meeting, the total attendance did decline as the roundtable progressed until there were only about 15 people. At one point, I noticed that I was the only non-AAOIFI participant who had his video camera on!

Mohammed Amin is an Islamic finance consultant and former tax partner at PwC in the UK.