United Kingdom

Details

  • Industry: Financial Services
  • Type: Press release
  • Date: 28/11/2012

KPMG and ACCA call for harmonisation of Islamic financial reporting 

 

The rapid global growth in Islamic finance means that action must be taken to ensure that the way in which it is reported financially is harmonised and made more consistent, a report, based on a series of high level international roundtables, by KPMG and ACCA (the Association of Chartered Certified Accountants) has concluded.

 

The report calls on the International Accounting Standards Board (IASB) and the Islamic Finance industry to work together to develop guidance, standards and educate the investor community on key issues.

 

The roundtables in Kuala Lumpur, Dubai and London, which brought together experts in Islamic Finance, bankers and finance professionals working in the sector, along with regulatory authorities, academics and ratings agencies, made a number of recommendations to both the IASB and Islamic Finance Institutes (IFIs), which are highlighted in the new report published by KPMG and ACCA.

 

  • The IASB should consider issuing guidance on the application of International Financial Reporting Standards (IFRS) when accounting for certain Islamic financial products which are offered by Islamic financial institutions and conventional banks.  

 

  • It should also consider issuing guidance on additional disclosures that could be made for stakeholders who are seeking information on the entity’s Sharia-compliant operations.

 

  • The IASB should work with the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and other leading Islamic finance standard setters and regulators globally to establish the gaps between IFRS and Islamic accounting standards and to review the needs of users. This should also include a review of terminology used in IFRS, and consider whether such sensitive terms as ‘interest’ – forbidden in all forms in Islamic banking- can be amended or added to.

 

  • If Islamic finance is to be part of the IASB agenda, the IFIs should support IASB by forming an expert advisory group, including Islamic scholars from various jurisdictions, which could contribute to the development of new standards and help with the overall review or provide advice on an ad hoc basis.

 

  • The IFIs need to conduct further outreach and education, particularly with the investor community, while providers of professional qualifications should look into the relevance of Islamic Finance to their syllabuses and the members.

 

  • The industry needs to engage more with local regulators to understand their expectations of financial reporting and the disclosure of Islamic financial instruments.

 

Samer Hijazi, a director in KPMG’s Financial Services Audit practice, and co-author of the report, said: “The Islamic finance industry has reached a new stage of maturity. It has a wider variety of customers and stakeholders and a presence in more countries around the world than ever before. As the IASB seeks to establish IFRS as a single high quality set of global financial reporting standards now is the right time to consider how Islamic finance fits into this global framework. Greater comparability and consistency in financial reporting will benefit not only the IFIs but also the international banks which offer Islamic financial services around the world.”

 

Aziz Tayyebi, head of international development at ACCA and its expert in Islamic Finance, and report co-author said: “ One of the key challenges facing Islamic finance and global standards setters is how to resolve the fact that IFIs in different countries  can report transactions in different ways, which creates uncertainty for organisations which are trying to assess and compare them not only with each other, but with conventional counterparts. If they are to remain competitive with conventional counterparts, their financial reports need to be comparable. This will involve a great deal of work and education, but should be beneficial for IFIs and those who rely on their reports.”  

 

 

 

Ends

 

Note to editors

 

For further information, please contact


Gavin Houlgate
EMA Director of Communications
KPMG
gavin.houlgate@kpmg.co.uk
Tel: (0044) 207 694 3902
Mobile: (0044) 7795 290855

Colin Davis
Head of International Communications
ACCA 
colin.davis@accaglobal.com
Tel: (0044) 207 059 5738
Mobile: (0044) 7720 347713

 

 

About KPMG


KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 11,000 partners and staff.  The UK firm recorded a turnover of £1.7 billion in the year ended September 2011. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 152 countries and have 145,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  KPMG International provides no client services.

 

 

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