IBANK 6.7.6 Treatment of Istisna with Parallel Istisna

(1) There is no capital charge for an istisna with parallel istisna contract if there is no provision in the parallel istisna contract that allows the seller to increase or vary the selling price. Also, there is no capital charge if there is a written undertaking given to the firm that the contractor's performance (including work-in-process) is the responsibility of the ultimate counterparty.
(2) However, there is a capital charge of 1.6% of the firm's unbilled work-in-process inventory if:
(a) there is a provision in the parallel istisna contract that allows the seller to increase or vary the selling price; or
(b) there is no written undertaking that the contractor's performance is the responsibility of the ultimate counterparty.
Derived from QFCRA RM/2015-2 (as from 1st January 2016).