Accounting for Islamic financial transactions: a case study on financial reporting practices
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This hypothetical case study was developed based on the financial statements of Bahrain Islamic Bank and Bank Islam Malaysia Berhad. The banks were registered in two different countries namely Bahrain and Malaysia that adopted Financial Accounting Standards (FAS) issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and International Financial Reporting Standards (IFRS) (the standards are locally adopted and named as Malaysian Financial Reporting Standards (MFRS)) issued by International Accounting Standards Board (IASB) respectively. The key issues explored in this case are: the motivation for recording and reporting Islamic financial transactions; types and purposes of financial statements prepared by Islamic financial institutions (IFIS) in the two different financial reporting regimes; Shari'ah perspectives of key accounting assumptions such as substance over form, time value of money, fair value and principles of probability. Understanding the Shari'ah perspective of key accounting assumptions would help preparers and users of financial statements to appreciate the effect of accounting policy adopted for financial reporting.
IFRS/MFRS , AAOIFI , Financial Statements, Substance over form , Time value of money
Muhamad Sori, Zulkarnain. (2018). Accounting for Islamic financial transactions: a case study on financial reporting practices. In Ahmed Ali Siddiqui, Sarwat Ahson & Shazia Farooq. (Eds.), Case studies in Islamic finance and Shari'ah compliance (pp. 8-40). Karachi, Pakistan: IBA Press.