Accounting and reporting

Takaful accounting

Accounting for takaful contracts and funds, which keeps the participants' funds and the operator's own accounts distinct.

Takaful accounting covers how takaful institutions recognise and measure contributions, claims, surplus or deficit, and the operator's fees or profit shares. AAOIFI's standard on accounting for takaful, recognition and measurement, together with its standard on presentation and disclosures for takaful institutions, requires the participants' funds and the operator's own accounts to be reported in a way that keeps them distinct. This mirrors the segregation at the heart of the takaful model.

Sources

AAOIFI, Financial Accounting Standards (issued standards list): FAS 43 Accounting for Takaful: Recognition and Measurement

This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.

Related terms

TakafulMutual cover: participants contribute to a common fund, as donations, to help one another against specified losses.Shareholders' fund (takaful)The takaful operator's own fund: its capital, fees and expenses, kept apart from the participants' funds.Underwriting surplusWhat remains in the participants' risk fund after claims, expenses and reserves, plus attributed investment returns.AAOIFI Financial Accounting Standards (FAS)The accounting standards AAOIFI issues for Islamic financial institutions, covering contract types and Islamic-specific reporting.