CA-3.4.17
Past version: Effective from 01 Apr 2008 to 31 Mar 2011
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The limited and non-recourse Istisna'a financing structure is required to meet the characteristics as set out below in order to qualify for the treatment mentioned in paragraph CA-3.4.15 above:
(a)the segregation of the project's liabilities from the balance sheet of the Istisna'a ultimate buyer (or project sponsor) from a commercial and accounting perspective which is generally achieved by having the Istisna'a contract made with a special purpose entity set up to acquire and operate the asset/project concerned;
(b)The ultimate buyer is dependent on the income received from the assets acquired/ projects to pay the purchase price;
(c)The contractual obligations give the manufacturer/constructor/bank a substantial degree of control over the asset and the income it generates, for example under BOT (built, operate and transfer) arrangement where the manufacturer builds a highway and collects tolls for a specified period as a consideration for the selling price; and
(d)The primary source of repayment is the income generated by the asset/project rather than relying on the capacity of the buyer.
Apr 08