AAOIFI Accounting Board issues AAOIFI Financial Accounting Standard (FAS) 53 “Istisna-Based Development Contracts”

Accounting and Auditing Organization for Islamic Financial Institutions' (AAOIFI's) Accounting Board (AAB / the board) has officially issued Financial Accounting Standard (FAS) 53 "Istisna-Based Development Contracts". The standard, along with FAS 52 "Deferred Delivery Sales: Salam and Istisna" issued earlier this year, supersedes FAS 10 "Istisna'a and Parallel Istisna'a" which was identified for revision and improvement as a result of the comprehensive AAOIFI FASs review and revision project initiated by the board.

FAS 53 "Istisna-Based Development Contracts" prescribes the accounting and financial reporting principles applicable to the developers and customers of Istisna-based development contracts. The standard improves on its predecessor in several aspects, inter alia, by way of aligning better with the newer standards and generally accepted accounting principles, by providing counter-party accounting in line with AAOIFI's revised standard-setting strategy and by simplifying the treatment of Istisna-based development contracts.

On this occasion, Mr. Hamad Al Oqab, Chairman of AAB, stated: "The continued growth and development of the Islamic finance industry requires accounting standards that remain responsive to evolving business models, transactions and market practices. The board being cognizant of the same has revised the standard for Istisna contracts to strengthen transparency and disclosure practice for the Islamic finance industry." He added, "The board greatly appreciates the valuable contribution of its members, the working group and the AAOIFI Secretariat in the development of robust accounting standards."

Mr. Omar Mustafa Ansari, Secretary General of AAOIFI, stated: "The issuance of this revised standard is an important milestone in AAOIFI's ongoing comprehensive review and revision of its FASs. It reflects our commitment to ensuring that AAOIFI's standards continue to serve the evolving needs of the Islamic finance industry while promoting greater consistency, transparency and comparability in financial reporting. We believe that the revised standard will contribute to enhancing the quality of accounting practices relating to Istisna-based development contracts and promote their usage by Islamic financial institutions globally."

The standard can be accessed on AAOIFI website: Link