Circular 2010/08

Dear Member

EXPOSURE DRAFT OF ISLAMIC FINANCIAL ACCOUNTING STANDARD (IFAS) ON PROFIT AND LOSS SHARING ON DEPOSITS

The Committee on Accounting and Auditing Standards for Interest Free Modes of Financing and Investments of the Institute has developed an Exposure Draft of Islamic Financial Accounting Standard (IFAS) on Profit and Loss Sharing on Deposits.

Background

In the Forty-ninth meeting of the Committee on Accounting and Auditing Standards for Interest Free Modes of Financing and Investments, a Sub-committee was constituted to develop a Standard on ‘Profit and Loss Sharing on Deposits’.

The draft is mainly based on the following standards issued by AAOIFI:

  • Financial Accounting Standard No.5 Disclosure of Bases for Profit Allocation between Owners’ Equity and Investment Account Holders ( FAS – 5 )
  • Financial Accounting Standard No.6 Equity of investment Account Holders and Their Equivalent ( FAS – 6 )

However relevant paragraphs of the following standard/statement have also been included in the draft:

  • Financial Accounting Standard No.1 General Presentation and Disclosure in the Financial Statements of Islamic Banks and Financial Institutions ( FAS – 1 )
  • Statement of Financial Accounting No. 2 Concepts of Financial Accounting for Islamic Banks and Financial Institutions ( SFA – 2 )

The Sub-committee held several meetings to deliberate and discuss the draft Standard Para by Para, before presenting the same in the main Committee.

The main Committee consisting of various stakeholders, regulators, scholars and practioners deliberated the draft in detail keeping in view the local scenario and market practice. After detailed consideration the Committee is pleased to expose the draft standard ‘Profit and Loss Sharing on Deposits’ for comments.

You are invited to offer your comments, if any, on the Exposure Draft. Comments would be more helpful if they indicate the specific paragraph or group of paragraphs to which they relate, clearly explaining the issue(s), and providing a suggestion for alternative text or solution preferably giving rationale for the suggested change.

The full text of the draft standard can be downloaded from the Institute’s website.

You are requested to send your valued comments to the Directorate of Technical Services at dtscomments@icap.org.pk latest by August 8, 2010.