Tuesday, June 23, 2009

MASB faces uphill task in getting feedback on draft

By Habhajan Singh
THE Malaysian Accounting Standards Board (MASB) is facing an uphill task in its attempts to get feedback for a draft of its exposure on financial reporting for the growing Islamic finance fraternity. Earlier attempts to receive feedback for the 'Financial Reporting from an Islamic Perspective' exposure draft, whose lifespan for comments ended on April 3, proved futile.
It is understood that the regulatory body did not get much feedback from industry practitioners as well as from the academic circles on the 95-page document containing the draft statement with five key appendices.
With so little feedback, the regulatory body decided to take the exposure draft directly to the floor for a discussion, hoping that would generate enough relevant and pertinent feedback before the exposure draft is moved up a notch in becoming a policy statement.
On Thursday, MASB is organising a forum for this very purpose.
"The forum is part of the due process in engaging the public. If some people have violent objections, they need to be heard," said MASB executive director Dr Susela Devi.
The draft statement is designed to underscore financial reporting for Islamic financial institutions, which among others, affirms that MASB-approved accounting standards shall apply in relation to Shariah compliant financial transactions and events, unless there is a Shariah prohibition.
A key statement in the draft is the pronouncement that financial reporting from an Islamic perspective may not necessarily be issued in the form of an approved accounting standard but may be issued via other technical pronouncements.
As a banker told The Malaysian Reserve in an earlier report, the statement is "akin to AAOIFI's statement. Once converted into a policy statement, it would underlie future MASB pronouncements on financial reporting from an Islamic perspective."
AAOIFI, or the Accounting and Auditing Organisation for Islamic Financial Institutions, is a Bahrain based standard setting body which is active in developing and promoting Islamic accounting, auditing, and Shariah standards.
To date, MASB has only released one set of accounting standards for Islamic financial institutions (IFIs), with a number of other standards still being drafted.
As the name suggests, the maiden 'MASB Standard i-1: Presentation of financial statements of Islamic financial institutions', lays the foundation for the presentation and disclosure of financial stataments of IFIs.
In addition, it provides guidelines for the structure, and a basis of contents of the financial statements to ensure conformity with Shariah requirements. In its introduction, the exposure draft notes that the existing Financial Reporting Standards, which have been developed in harmony with the International Accounting Standards (IASs), have not been able to address accounting issues within Islamic banking operations adequately.
"Fundamental differences within the underlying principles, along with the distinctive nature of Islamic financial practices, have rendered many facets of conventional accounting standards irrelevant to Islamic banking.
"Hence, the existing Financial Reporting Standards and prevailing IASs are useful in providing a structural framework for reporting, but these standards are inadequate to accommodate Shariah precepts, which form the basis of all Islamic transactions," it said.

(This story appeared in The Malaysian Reserve on June 22, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)