Page 141 - ICD-AR22-English

Notes to the Separate Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2022
AAOIFI Financial Accounting Standard 43 – “Accounting for Takaful: Recognition and Measurement”
This standard sets out the principles for the recognition, measurement and reporting of Takaful arrangements and ancillary transactions for the Takaful institutions. It aims to ensure that the Takaful institutions faithfully present the information related to these arrangements to the relevant stakeholders as per the contractual relationship between the parties and the business model of the Takaful business in line with the Shari’ah principles and rules. The requirements of this standard are duly aligned with the international best practices of financial reporting for the insurance business. This standard shall be effective on the financial statements of the institutions beginning on or after 1 January 2025 with early adoption permitted. FAS 43 shall not impact the financial statements as the Corporation is not a takaful entity.
36 LIBORTRANSITION
The Islamic Corporation for the Development of the Private Sector (ICD) has certain contracts outstanding at the end of 2022 which will mature after June 30, 2023. All the projects on the asset side have robust reference rate non-availability clauses (in favour of ICD). The timely transition to Term-SOFR as the reference rate for all USD floating rate facilities is very much underway. ICD management believes there is no financial impact and changing to a new benchmark has no Sharia implications that have to be cleared by the Sharia Committee.
The Corporation already advanced in the process towards a steady transition to Term-SOFR as the new reference rate. The facilities both financing and funding linked to LIBOR which will mature after June 30, 2023 have been identified. In addition, ICD management has established a working group made up of representatives from the different units of the Corporation, which was tasked with the responsibility of:
• Establishing a LIBOR transition plan with clear timeline and milestones
• Reviewing the identified existing assets and liabilities that are LIBOR based and maturing after June 30, 2023
• Ensuring that fallback clauses are included in those that do not have by engaging a law firm to help in this process
• Communicating the need for change and negotiating with clients on adjusted rates
• Advising management about the impact of the proposed change
• Revising the investment and treasury guidelines where appropriate
• Operationalizing the fallback clause and issuing alternate benchmark rates
• Monitor the implementation of the changeover to ensure that everything is according to plan.
The management expects that all the relevant existing financing agreements will be successfully amended to incorporate Term-SOFR as the new reference rate within the first half of 2023. On the other hand, since the beginning of 2022, ICD has been using Term SOFR as the reference rate for all newly approved USD floating rate facilities.
REINVIGORATING THE PRIVATE SECTOR TO SHAPE A BETTER FUTURE 139