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18 July 2024
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NEWS

ICAP DRAFT

ICAP issues exposure draft on Accounting Standard ‘Financial Statements Disclosures of Zakat received by an entity’

The Accounting Standards Board (ASB) has issued the Exposure Draft (ED) of Accounting Standard “Financial Statements Disclosures of Zakat Received by an Entity”. along with its Basis for Conclusions, for comments and feedback to be submitted by 15 February 2023, by emailing them to dtscomments@icap.org.pk
ASB, in consideration of the following aspects, noted the need for developing an Accounting Standard outlining specific disclosures in the financial statements to improve the transparency and accountability of the entity’s receipt and utilization of zakat:
  • Significant amounts of zakat are received and utilized by Not-for-Profit Organizations in Pakistan;
  • The contribution of zakat includes many contributors/donors;
  • The utilization of zakat involves various activities and beneficiaries; and
  • The financial reporting standards as applicable in Pakistan (including Accounting Standard for Not-for-Profit Organizations) do not provide specific disclosures for zakat received and utilized by an entity.

Key aspects of the draft Accounting Standard

The objective of the draft Accounting Standard is to require an entity to provide disclosures in the financial statements that enable users to evaluate the significance, nature, and the financial effects of zakat received and utilized during the period. The draft Accounting Standard sets out following specific disclosures for the zakat received and utilized by an entity:

a) The accounting policy adopted for the utilization of zakat, stating the basis on which zakat utilized by the entity is recognized in the financial statements.

b) The disclosures in the notes to the financial statements about:
  • Movement in the zakat fund/balance during the reporting period – Reconciling the opening and closing balances of zakat.
  • Zakat utilized during the period – Disclosure of amounts and nature of costs/expenditures on which zakat is during the year.
  • Closing zakat balance-Disclosure of the amount of closing balance of zakat fund and its representation by the net assets.

The effective date of the Accounting Standard is proposed to be for the financial statements for the periods ending on or after 30 June 2023.

 

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