AAOIFI Accounting Board approves FAS 54 “Direct Costs: Determination, Attribution and Reimbursement” in its 46th meeting

PR/02/2026

11 June 2026

Accounting and Auditing Organization for Islamic Financial Institutions' (AAOIFI's) Accounting Board (AAB / the board) held its 46^th meeting on 10 June 2026, at AAOIFI's head office, in the Kingdom of Bahrain (and through video conferencing).

The board was presented an update on standard development and it was noted to be in line with the overall plan for the year 2026.

The board deliberated on the challenges being faced in implementation of AAOIFI Financial Accounting Standard (FAS) 40 "Financial Reporting for Islamic Finance Windows" by certain institutions in some jurisdictions. The board taking cognizance of the same, decided to provide exemption to certain institutions through issuance of "AAOIFI AAB Statement 1/2026 "FAS 40 "Financial Reporting for Islamic Finance Windows": Scope Clarification".

The board completed its due process of reviewing comments received through public consultation on the exposure draft and approved in principle FAS 54 "Direct Costs: Determination, Attribution and Reimbursement". The standard sets out the accounting and financial reporting principles for the determination, attribution and reimbursement of direct costs incurred by Islamic financial institutions with regard to the Shari'ah-compliant contracts and arrangements (and to other institution in connection with their respective Islamic finance transactions). The standard is expected to be issued within this year, after completion of the due process.

Further, the board deliberated on the approach for alignment of FAS 1 "General Presentation and Disclosure in the Financial Statements" with the recent developments in the generally accepted accounting principles (most importantly, International Financial Reporting Standard (IFRS) 18 "Presentation and Disclosure in Financial Statements"). The board decided that it shall aim for a short timeline for the project, mainly targeting minor amendments to FAS 1 and related illustrative financial statements considering the impending effective date of the above referred developments.

Mr. Hamad Al Oqab, Chairman of the AAB, at this occasion stated: "The focus of the board has been to facilitate the Islamic financial institutions in implementation of consistent accounting practices with more transparency, in line with Shari'ah principles and rules. I believe that FAS 54 will bring greater harmony in financial reporting practices and, additionally, will help improving the level of compliance with Shari'ah principles and rules across the industry".