Financial Crime World

Afghanistan Central Bank Issues Guidelines for Islamic Banking Institutions’ Financial Reporting

Introduction

The Afghanistan Central Bank has recently issued guidelines for the financial reporting of Islamic banking institutions in the country. These guidelines aim to provide a framework for these institutions to prepare their financial statements and ensure transparency and consistency in their reporting.

Requirements for Financial Reports

According to the guidelines, Islamic banking institutions are required to provide comparative data for the previous financial year (2014) in their financial reports for 2015. This includes information on cash flows from investing activities, such as:

  • Dividends received
  • Proceeds from sale of investments
  • Changes in loans and advances

The guidelines also cover the valuation of assets and liabilities, including:

  • Financing, advances, and other loans
  • Securities
  • Property, plant, and equipment
  • Other types of financial assets and liabilities

Institutions are required to disclose their policies on:

Income Recognition and Provisioning

  • Income recognition policy for each major type of income
  • Provisioning policies for non-performing financing
  • Write-off and recovery policies for non-performing financing

Impaired Assets and Non-Performing Financing

The guidelines provide guidance on the reporting of impaired assets and non-performing financing, including:

  • Measurement of impairment losses
  • Writing-off of non-performing financing

Purpose of the Guidelines

These guidelines are designed to ensure that Islamic banking institutions in Afghanistan comply with international accounting standards and best practices. The purpose is to promote transparency, consistency, and comparability in financial reporting, which is essential for investors, regulators, and other stakeholders.

Key Highlights

  • Comparative data required for previous financial year (2014)
  • Cash flow information required from investing activities
  • Valuation policies for assets and liabilities required
  • Income recognition policy required for each major type of income
  • Provisioning policies for non-performing financing required
  • Write-off and recovery policies for non-performing financing required

Sources

  • Afghanistan Central Bank’s Guidelines for Islamic Banking Institutions’ Financial Reporting (2015)
  • International Accounting Standards Board (IASB) standards
  • Best practices in financial reporting for Islamic banking institutions.