Whisk together flour, sugar and salt in a large bowl; with a pastry cutter, chop in the butter until the mixture resembles coarse crumbs. Stir the rum extract and almond extract into the water in a small bowl. Mix into the dry ingredients, a little bit at a time, until the mixture holds together in a ball when you squeeze it.
Place the dough onto a floured work surface and sprinkle with flour; roll out into a sheet 6mm thick. Cut into shapes with floured biscuit cutters and place 2 1/2cm apart on ungreased baking sheets. Cover with a layer of plastic wrap and refrigerate for 30 minutes.
Preheat oven to 170 degrees C.
Bake the biscuits just until the edges are lightly browned, 15 to 18 minutes. Allow to cool on sheets for 2 minutes before removing to wire racks to finish cooling. Cool completely before decorating.
For icing, whisk the icing sugar and milk in a bowl until smooth. If desired, divide icing into small bowls and tint each bowl a desired shade with food coloring. Ice fully cooled biscuits and scatter with sprinkles before the icing sets.