A roundtable meeting of senior bank officials and finance professionals held in Dubai has come up with a number of recommendations on how to strengthen financial reporting by Islamic financial institutions (IFI).
The meeting, one of a series organised by Big Four accounting firm KPMG and ACCA (the Association of Chartered Certified Accountants), was intended to develop recommendations that can be presented to the International Accounting Standards Board (IASB) on whether to develop specific guidance or a separate financial reporting standard for Islamic financial institutions.
Founded in 1904, ACCA is the global body for professional accountants. It supports its 147,000 members and 424,000 students in 170 countries, helping them to develop successful careers in accounting and business, with the skills required by employers.
KPMG, whose history spans three centuries, is one of the best-known names in business. Its global network of member firms provides audit, tax, and advisory services to local, national and multinational organisations.
Senior representatives from HSBC Bank Middle East Ltd, Noor Islamic Bank, Al Hilal Bank, the Central Bank of Qatar, Dubai Islamic Bank, Islamic Development Bank, Moody's and the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) joined ACCA and KPMG in the meeting. Following a wide-ranging discussion, participants generally agreed that given the growing importance of IFRS regionally, the ideal solution would be through the internationally accepted IFRS framework.
However, it was also made clear that the IASB needed to engage directly with the likes of AAOIFI and international industry stakeholders, perhaps through an appropriate advisory group, to ensure their standards are relevant for meeting the needs of users of IFI financial statements.
In marked differences with the general conclusions from the roundtable held in Malaysia in October 2010, some participants raised concerns about the existing framework provided by IFRS being entirely applicable to Islamic finance, suggesting that further guidance, especially in relation to disclosure, or even a separate standard might be needed to cover specific topics where there are significant differences between Islamic finance principles and conventional banking.
Aziz Tayyebi, ACCA's Head of International Development, who has led this project with KPMG, commented on the very lively debate in Dubai: "With such a vast array of experience and knowledge around the table in Dubai, the conclusions from the discussions will certainly assist in developing practicable recommendations to International standard setters such as the IASB."
"Panelists emphasised the need for greater consistency internationally regarding the reporting of Islamic finance and with conventional finance. At the same time there was a consensus in stressing the importance of recognising the principles of Islamic finance in order to provide a faithful representation for users of financial reports, but preferably within an internationally recognised financial reporting framework," he said.
"The ideal solution may be for the IASB to work closely with standard setters for Islamic finance, such as AAOIFI, and together with the recommendations from this ACCA/KPMG project, to arrive at scoped guidance for Islamic finance institutions as well as continuing to engage with such groups on relevant issues when new standards are developed," said Tayyebi.
Muhammad Tariq, Head of Islamic Finance at KPMG UAE, said: "Through this event KPMG has clearly expressed its serious desire to participate in the growth and development of the industry. We hope to work with standard setting bodies to find the right balance of financial reporting disclosures for Islamic finance institutions."
Source: Khaleej Times