DISSERTATION PRESENTATION ON

LEVEL OF COMPLIANCE OF AAOIFI ACCOUNTING STANDARDS BY SELECTED ISLAMIC BANKS IN

BANGLADESH

Presented By

Nazmus Sakib

Metric No. B 101073

Bachelor of Business Administration

International Islamic University Chittagong

Introduction

What is AAOIFI? The Accounting and Auditing Organization for Islamic Financial Institutions(AAOIFI) is an Islamic international autonomous non-for-profit corporate body that prepares accounting, auditing, governance, ethics and Shari'a standards for Islamic financial institutions and the industry. Professional qualification programs are presented now by AAOIFI.

AAOIFI was registered on 27 March, 1991 in the State of Bahrain.

Standards: Shari’a. Accounting, Auditing, Governance, Ethics

The selected banks : IBBL, ICBIBL, AIBL, SHJIBL, SIBL, EXIM

Compliance of Islamic Banks of Bangladesh

Objectives

To find out the level of compliance of the International Accounting standards by selective Islamic Banks in case of Annual report disclosure.

  To match the compliance of the AAOIFI standards with the

disclosures of the selected banks

To find the problems and gaps in disclosure of information required by AAOIFI

To make suggestions on the whole findings

Methodology

Data Resource > The main source of information is the secondary data provided in the annual reports of the banks.> AAOIFI Accounting Standard from Central Shari’a board

Focusing PeriodI have collected information of the Year 2012 from the annual reports of all the selected Islamic Banks.

Tools of analysis The analysis of data output is done with the help of

Mean Standard Deviation Variance

Methodology (Continued)

Content Analysis

General Provisions General disclosures in the financial statements Statement of Financial position Income statement Statement of cash flows Statement of changes in Owner’s Equity Statement of changes in restricted investments Statement of sources and uses of funds in the Zakah and charty fund Statement of sources and uses of funds in the Qard fund Treatment of changes in accounting policies Treatment of changes in non-routine accounting estimates Format of Financial statements Notes to Financial statements

General Disclosure

General Provisions

Data Analysis

Data Analysis Cont.Disclosure in Statement of Financial Position

Disclosure in Income Statement

Data Analysis Cont.

Statement of Cash flow

Statement of Changes in Owner’s Equity

Data Analysis Cont.Format of Financial Statement

Notes to the Financial Statements

Findings

IBBL ICBIBL AIBL SHJIBL SIBL EXIM48

49

50

51

52

53

54

55

56

Percentage of com-pliance

Chart 1 shows the bar diagram display of the level of total disclosure compliance of the banks in percentage. Here, on the X axix, we take percentage and on Y axix, we take the sample banks.

Summery of the Study Islami Bank Bangladesh Limited is in a leading position in case of compliance level as it

complied the highest, 93 disclosures out of 167 provisions. The compliance level in percentage is 55.68 %.

Al Arafa Islamic Bank limited showed the lowest level of compliance with 85 disclosures out of 167 provisions. The compliance level in percentage is 50.89 %.

The average level of disclosure by the selected banks is 89.83 items out of 167.

The average level of disclosure compliance by the banks in percentage is 53.79%.

The standard deviation of the total disclosure of the banks is 2.794 and Variance is 7.805.

In case of disclosures in the Statement of Changes in Owner’s Equity, all the banks except for Shahjalal Islamic Bank limited, complied 100%.

In case of Format of Financial Statement, the compliance level of the banks is the lowest. An average of 28.57%.

In case of General Disclosure and Notes to financial statements, the banks vary the most. The standard deviation among the banks in these cases is 2.115 and 1.541 respectably.

Recommendations The Banks should start preparing the Statement of

changes in restricted investments, Statement of sources and uses of funds in the Zakah and charity fund, Statement of sources and uses of funds in the Qard fund, Treatment of changes in accounting policies and Treatment of changes in non-routine accounting estimates.

The banks should follow the guidelines of AAOIFI to prepare the format of the statement of financial position and the income statement.

Restricted and Unrestricted investment account should be opened and disclosed.

The banks should concentrate on AAOIFI guidelines more and take it seriously and act accordingly.

THANK YOU