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Islamic regulator AAOIFI to pick new head before end-2011

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) expects to name its new secretary general by the end of the year, the regulatory body's deputy secretary general said on Monday.

November 21, 2011 1:37 by

Khairul Nizam said the board of trustees has completed its due diligence of candidates and will name a successor to former secretary general Mohamad Nedal Alchaar, who left the organisation earlier this year to become Syria’s economy and trade minister.

“The board of trustees hopes to announce an appointment in the coming weeks,” Nizam told Reuters on the sidelines of an industry conference in Manama.

Nizam said AAOIFI is also in the process of revising some of its accounting standards and expects to issue an exposure draft on its new guidelines for accounting for real estate investment by the end of the year.

The new accounting guidelines will address concerns over how to account for the value of a real estate investment during its various stages of development, he said.

Concerns were raised following Dubai World’s property arm Nakheel’s decision to use seabed as an underlying asset for its recent Islamic bond, or sukuk, to trade creditors.

Critics raised issues over the difficulty in valuing an undeveloped seabed as an underlying asset for the sukuk.

AAOIFI will also issue an exposure draft by the end of the year for guidelines related to governance among sharia boards.

A handful of Islamic scholars currently serve on the majority of sharia boards, raising concerns over conflict of interest as well as scholars being overstretched in their capabilities to perform their duties.

“We’ve had meaningful conversations with scholars over the issue of governance,” Nizam said. “The guidelines would help banks make sure that the work they have for their sharia boards can be supported by the scholars they have.”

The possibility of a Gulf-wide sharia council has also been floated but Nizam said AAOIFI has not seen any major movement in that direction yet.

He added the organisation will look to revise takaful guidelines and accounting for investment accounts in 2012. (Reporting by Shaheen Pasha; Editing by Sami Aboudi)

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