Determination of Profits and Losses.
Section 35
SEC. 35. Determination of Profits and Losses.—At the close of each financial year, the Islamic Bank shall determine the results of its operation, in the determination of which the portion of profits due to the Islamic Bank and the investors shall be allocated pursuant to the provisions of this Act. The Board of Directors shall, after deducting the general and administrative expenses of the Bank and all its operating expenses including remunerations of the Board of Directors and the Shari'a Advisory Council, determine annually what part of the income shall be appropriated to reserves, investors and shareholders. All accounts relating to financing and joint investment operations shall be kept separately from the accounts from that of the other banking activities and services offered by the Islamic Bank. The same rule in respect to the accounts of specific investments shall apply where such specific projects may have a separate account. Allocation of joint investment profits shall be made after deducting an amount equal to ten per centum (10%) of the profits realized from various operations during the financial year to be transferred to a reserve account known as Investment Risk Fund for the purpose of meeting any losses exceeding the total profits derived from investments of that year: Provided, however, That should the accumulated reserves equal the authorized capital of the Islamic Bank, the Board of Directors may reduce the amount of the annual deduction to a minimal percentage until the aggregate reserves become double the amount of the capital after which the herein authorized deduction shall cease to accrue to the reserve account. Losses incurred, if any, shall be deducted from the total profits realized for the financial year in which such losses are incurred but any excess of losses over the profits which have been actually realized during that year may be deducted from the Investment Risk Fund opened for covering the risks of investment: Provided, That should the total profits realized in the year together with the reserves accumulated from previous years be insufficient to cover the losses incurred, the Islamic Bank shall carry out a comprehensive assessment to arrive at estimated profit and loss based on market rates, from operations which are financed by mudarabah funds and which have not reached the stage of final settlement by the end of the financial year.