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Home / Accountant Library / Glossary / Islamic finance

Accounting and Auditing Organization for Islamic Financial Institutions

AAOIFI

In one sentenceAn international organization based in Bahrain that issues accounting, auditing and governance standards and Sharia standards for Islamic financial institutions.

Simply put

It is known by the abbreviation AAOIFI. It issues two main types: Sharia standards that explain the rules of each contract (Murabaha, Ijara, sukuk…), and accounting standards that show how these contracts are recorded and presented.

Application of its accounting standards varies from country to country depending on what the regulator requires. In the Kingdom, businesses generally apply IFRS as endorsed by the Saudi Organization for Chartered and Professional Accountants (SOCPA), and may refer to the Sharia standards for contract rules.

Example

An accountant at a finance company wants to know the Sharia conditions for an Ijara Muntahia Bittamleek contract, and finds them detailed in AAOIFI's Sharia standard on Ijara, while the contract is recorded in the accounts under the standards his company applies.

Don't confuse it with

International Financial Reporting StandardsIFRS are general accounting standards for all businesses, while AAOIFI standards are specific to the contracts of Islamic financial institutions and include Sharia standards.