AAOIFI - Accounting and Auditing Organization for Islamic Financial Institutions

10/27/2025 | Press release | Distributed by Public on 10/27/2025 00:25

AAOIFI Accounting Board holds its 44th meeting; deliberates on draft FAS “Direct Costs: Determination, Attribution and Reimbursement”


AAOIFI Accounting Board holds its 44th meeting; deliberates on draft FAS__ "Direct Costs: Determination, Attribution and Reimbursement"

PR/10/2025

26 October 2025

The Accounting Board (AAB / the board) of Accounting and Auditing Organization for Islamic Financial Institutions' (AAOIFI's) held its 44th meeting on 22 October 2025, at AAOIFI's head office, in the Kingdom of Bahrain. The board deliberated on the draft financial accounting standard (FAS) "Direct Costs: Determination, Attribution and Reimbursement". It was noted by the board that this is a very important area in which guidance is needed for consistency in practice across the industry and to ensure Shari'ah compliance in letter and spirit. The standard outlines the core principles for allocation of directs costs and expenditures in line with Shari'ah principles and rules for service based contracts, trade-based contracts, participatory ventures and Wakala ventures and Ijarah / lease-based contracts respectively. The exposure draft will be issued for public consultation after completion of the due process, shortly.

The board members discussed the comments of the focus group on the AAB Statement 1/2025 "Withdrawal of FAS 26 "Investment in Real Estate" and Related Transitional Provisions". There was in depth discussion on whether changing from fair value model to cost model should be allowed. It was decided to have further consultation with practitioners and experts on this option.

Further, the board concurred with the AAOIFI Governance and Ethics Board's approval for issuing the AAOIFI Standard on Auditing and Assurance (SOAA) 1 "Auditing Framework" and SOAA 4 "Auditing Requirements for Assessing Compliance with Shari'ah Principles and Rules".

Mr. Syed Najmul Hussain, deputy chairman of the AAB, stated on the occasion: "The board wants to promote best practices in financial reporting along with ensuring compliance with Shari'ah principles and rules in Islamic financial institutions. Accordingly, we believe that our ongoing projects, particularly the proposed exposure draft on direct costs is aimed towards significant improvements in the market practices."

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