• Explore the financial reporting issues facing Islamic banks under IAS
• Address the Shariah implications for financial reporting in Islamic banks
• Discuss AAOIFI accounting standards and compare them with IAS and Malaysian accounting standards for Islamic banks where relevant
• Examine a set of financial statements for Islamic banks and tackle financial reporting issues

On completion of this course, participants will be able to:

• Understand the basic Shariah principles underlying Islamic finance and banking
• Understand the features of Islamic financial products structured in conformity with the accepted Shariah principles
• Discuss and understand some accounting issues facing Islamic banking
• Understand the similarities and differences between IAS, AAOIFI accounting standards and Malaysian accounting standards for Islamic banks

Participants will also acquire the following performance related skills:

• Appropriate recording of Shariah compliant transactions in the books of accounts
• Identification of appropriate charts of accounts for Islamic banks
• Accounting for specific Islamic banking transactions such as Murabahah (Bai Bithaman Ajil), Mudarabah Musharakah, Ijarah, Istisnah, Salam and unrestricted investment accounts (profit distribution)
• Accounting for provisions and reserves and accounting for Zakat
• Preparation of the appropriate financial statements for Islamic banks and Islamic mutual funds
• Provisions for appropriate disclosure in the financial statements for Islamic banking
  

Course Methodology

The training course will be conducted using PowerPoint presentations, group discussions and real-life cases drawn from Islamic banking practices in the Middle East and Southeast Asia. We have also prepared comprehensive documentation including texts for some of AAOIFI’s standards, some Shariah guidelines and rules supporting the standards in addition to the case studies and suggested solutions.

[Back to Top]

Who Should Attend

• slamic banking and finance practitioners, particularly those involved in the accounting, financial reporting and auditing functions.
• Audit professionals who are involved in the external audit of Islamic banks.
• Regulators who supervise and inspect Islamic banks, Islamic funds and the securities industry.

COURSE AGENDA

Day One

The following session will run on Day One between 9am and 5pm

1. An Overview of Islamic Finance Principles and Products

a. General Shariah framework governing Islamic finance and the concepts of riba, gharar and jahala

b. Funds mobilization:

• Unrestricted Mudarabah by Islamic banks to mobilize
  funds on balance sheet
• Wakalah to raise off-balance sheet funds
• Reverse Murabahah to raise secured fixed rate
  deposits.

c. Generating earning assets:

• Use of Murabahah (Bai Bithaman Ajil) — consumer/trade finance
• Ijarah and Ijarah Muntahia Bittamleek — mortgages and corporate finance
• Musharakah — in corporate finance and Sukuk
• Salam and Istisnah — project finance
• Investment products and funds

d. Formation and role of a Shariah supervisory board and its duties

Day Two

The following session will run on Day Two between 9am and 5pm

2. IAS and Islamic Banking Operations — The issues

• The partial relevance of IAS to the operations of Islamic banking
• Where are IAS standards irrelevant, and what are the drawbacks of financial reporting in Islamic banks?
• Financial statements of an Islamic bank following IAS

3. Establishment of AAOIFI and the Objectives and Concepts of Financial Reporting for Islamic Banks

• Establishment and objectives of AAOIFI
• Conceptual framework: objectives and concepts of financial accounting as stated by AAOIFI
• Comparative analysis of Islamic and conventional conceptual frameworks

4. Financial Accounting Standard No 1: General Presentation and Disclosure in the Financial Statements for Islamic Banks

Statement of financial position

• Presentation of unrestricted investment accounts
• Presentation of receivables, financing and investments
• Presentation of restricted investment accounts off-balance sheet
• Disclosure in the statement of financial position

Income statement

• Presentation of income generated by Mudarabah
• Allocation of the Mudarib share of profits
• Presentation and disclosure of provisions and reserves

Statement of changes in restricted investments

• What are restricted investments?
• Valuation and presentation of restricted investments for the period
• Distribution of profits between the bank as Mudarib and investment account holders (depositors)

Statement of sources and uses of Zakat funds

Statement of sources and uses of Qard

Case study: Shamil Bank set of financial statements

5. Asset Valuation and Income Recognition

• Cash versus accrual accounting and implications for Islamic banking
• Shariah principle of Tandeed Alhukmi and implication for accounting
• Income recognition principles for Islamic sale transactions — Murabahah (Bai Bithaman Ajil), Istisnah, Salam and Ijarah
• Income recognition principles for profit-sharing instruments — Mudarabah and Musharakah
• Valuation of assets in the statement of financial position of an Islamic bank

6. Financial Accounting Standard No 2: Murabahah

• Valuation of Murabahah assets
• Accounting treatment of Murabahah receivables
• Income recognition of Murabahah transactions
• Accounting treatment of late payment, early settlement, Arbun and Hamish — Geddyah
• Murabahah accounting compared to IFRS No 14 installment sale

Case study: Shamil retail Murabahah transaction

7. Financial Accounting Standard No 6: Equity of Investment Accounts

• Recognition and measurement of investment accounts
• Presentation of investment accounts in the statement of financial position
• Disclosure relating to investment accounts

8. Accounting for Profit Allocation between Investment Account Holders and Bank Shareholders and FAS 5

• Investment accounts and Mudarabah
• Profit-sharing rates
• Investment strategies — pooling or separation of funds
• Treatment of expenses for profit-sharing
• Treatment of provisions

Case study: alBaraka Islamic Bank of Bahrain

9. Accounting for Musharakah and Mudarabah Asset Transactions

• Recognition and measurement
• Presentation in the financial statements
• Disclosure requirements

Case study: Tadamon Musharakah transaction

Day Three

The following session will run on Day Three between 9am and 5pm

10. Financial Accounting Standard No 8: Ijarah and Ijarah Muntahia Bittamleek

• Asset valuation and presentation
• Income recognition
• Treatment of maintenance and insurance costs
• Treatment of material impairment of value of Ijarah assets
• Forms of Ijarah Muntahia Bittamleek and their accounting treatment
• Ijarah accounting compared with IFRS No 17 leases

Case study: ABC Islamic Ijarah Transaction

11. Financial Accounting Standard No 11: Accounting for Provisions and Reserves in the Financial Statements of Islamic banks

• Role of provisions in banking practice
• Who accepts the risk of doubtful debts in Islamic banking?
• Where to deduct provisions in the income statement: before or after Mudarib share of profits?
• Necessary disclosure in the case of provisions
• Banking reserves in Islamic banking practice
• Accounting for investment risk reserve and income equalization reserve

Case study: XYZ bank profit distribution and reserves

12. Financial Accounting Standard No 14: Islamic Mutual Funds

• Financial statements of an Islamic mutual fund
• Presentation and disclosure in the financial statement of Islamic mutual funds

Case study: Al Rabih Equity fund

13. Malaysian Accounting Standards Board (MASB) Exposure Drafts for Islamic Accounting Standards

• General presentation and disclosure standard
• Ijarah standard
• Zakat standard

Course conclusion and wrap-up

[Back to Top]

EXPERT COURSE DIRECTOR

Dr Taha Eltayeb Ahmed is currently the vice-president and head of product structuring and Shariah documentation at Badr Al-Islami, the Islamic banking division of Mashreqbank in Dubai, UAE. He was the founder and head of the Islamic finance center at Bahrain Institute of Banking and Finance (BIBF) from 1997 to 2006. He held senior teaching positions at postgraduate and undergraduate levels at universities in Jordan and Sudan. He has written and published articles on Islamic finance and banking in a number of international journals and magazines. He has worked as a consultant to AAOIFI in Bahrain, and has developed four accounting standards for Islamic banks.

Dr Taha has spent over 30 years in consulting and research in Islamic finance and banking. He has designed and executed training programs for various Islamic financial institutions, central banks, Islamic insurance companies, investment houses, training institutes and universities in Southeast Asia and the Middle East. He is a regular speaker at well-known Islamic banking conferences in Bahrain, Malaysia, the UAE, Saudi Arabia, Sudan, Jordan and Europe. He has provided Islamic finance consulting services to Islamic Development Bank, ABC Islamic Bank, Sudanese banks, the World Bank, AlBaraka Group, Shamil Bank, Gulf Finance House, Arcapita, Bahrain Central Bank, Qatar Central Bank, Bank Indonesia, Arab Organization for Agricultural Development and the Sudanese Ministry of Agriculture.

He obtained a PhD in Islamic finance and banking from University of Bath, UK, in 1987. He has a Masters in Business Management (1982) and a Bachelor of Accounting (1975) from University of Khartoum, Sudan. He received advanced training from IMEDE, Switzerland, and post-doctoral education at Harvard Law School (Center for International Development), Cambridge, USA (1991).

[Back to Top]

DATES & PRICE

Discounts

• Why not take advantage of our special group booking incentive and train a number of your team members at once?  Send 3 delegates to any one course and receive a fourth place completely free of charge.  Further incentives are also available for higher delegate numbers – please contact us directly for more details.

[Back to Top]