CM-8 CM-8 Islamic contracts
CM-8.1 CM-8.1 Overview
CM-8.1.1
The Agency recognises the unique risk characteristics of Islamic contracts, which may have implication on the asset quality of a bank.
CM-8.1.2
In order to monitor and identify any asset deterioration due to the Islamic contracts, the Agency requires additional disclosures (see Module BR) on the Islamic contracts undertaken by the bank during the period.
CM-8.1.3
Definitions, disclosure requirements and method(s) of accounting treatments for some of the Islamic contracts are outlined in the following sections of this chapter.
CM-8.2 CM-8.2 Murabaha
CM-8.2.1
Revenue for the purpose of Murabaha contracts must be recognised on an accrual basis.
CM-8.2.2
For a detailed definition, disclosure requirements and method(s) of accounting treatment, refer to AAOIFI's FAS 2: Murabaha and Murabaha to the Purchase Orderer.
CM-8.3 CM-8.3 Mudaraba
CM-8.3.1
Revenue on Mudaraba contracts may only be recognised to the extent it is being distributed.
CM-8.3.2
For a detailed definition, disclosure requirements and method(s) of accounting treatment, refer to AAOIFI's FAS 3: Mudaraba Financing.
CM-8.3.3
As part of its ongoing supervision of Islamic banks, the Agency has set out the type of terms and conditions (see Appendix BC 7) which it believes Islamic banks should include, as a minimum, in such contracts.
CM-8.4 CM-8.4 Musharaka
CM-8.4.1
Under a Musharaka contract, losses are shared in proportion to the contributed capital. It is not permissible to stipulate otherwise.
CM-8.4.2
For a detailed definition, disclosure requirements and method(s) of accounting treatment, refer to AAOIFI's FAS 4: Musharaka Financing.
CM-8.5 CM-8.5 Salam
CM-8.5.1
As a policy no Salam contracts should be entered into without covering the position through a Parallel Salam contract.
CM-8.5.2
Where the bank is not able to enter into a Parallel Salam contract it must agree a statement policy with the Agency.
CM-8.5.3
For a detailed definition, disclosure requirements and method(s) of accounting treatment, refer to AAOIFI's FAS 7: Salam and Parallel Salam.
CM-8.6 CM-8.6 Istisna'a
CM-8.6.1
As a policy no Istisna'a contracts should be entered without covering the position through a Parallel Istisna'a contract.
CM-8.6.2
In accordance with provisions contained in FAS 10: Istisna'a and Parallel Istisna'a, revenue and profit on such contracts should be recognised on a percentage of completion method.
CM-8.6.3
For a detailed definition, disclosure requirements and method(s) of accounting treatment, refer to AAOIFI's FAS 10: Istisna'a and Parallel Istisna'a.
CM-8.7 CM-8.7 Ijarah and Ijarah Muntahia Bittamleek
CM-8.7.1
For a detailed definition, disclosure requirements and method(s) of accounting treatment, refer to AAOIFI's FAS 8: Ijarah and Ijarah Muntahia Bittamleek.
