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IASB and FASB to assess Shariah compliant leases

The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) will examine Shariah compliant leases to assess their compatibility and application using IFRS.

In a report the IASB said a stand-alone Shariah compliant lease, known as Ijarah, would probably meet the conditions for an operating lease under existing IFRSs but the boards plan to further discuss Islamic financial transactions and IFRS at their meeting in May.

The report cites documents produced by the Malaysian Central Bank which explains the arrangement under which the lessor leases equipment, building or other facilities to a client at an agreed rental price.

Ijarah is a popular technique used in the current generation of Sukuk or Shariah-compliant securities, a growing market in Islamic countries.

In 2010, the Asian Oceanian Standard Setters Group compiled a report to help the IASB’s examination of applying IFRS to Islamic financial transactions.

Financial reporting issues relating to Islamic Finance contains an overview of contemporary Islamic finance and examines two contrasting views on how to account for Islamic financial transactions: whether a separate set of Islamic accounting standards is required; and how IFRS can be applied to Islamic financial transactions.

 

 

 

 

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