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Islamic Accounting

The document discusses the effect of Shariah principles on accounting methods for Islamic banks. It begins by noting the rapid acceptance of Islamic finance globally due to increasing market demand, government support, and other factors. It then outlines the fundamental principles of Islamic finance, including prohibiting interest and ensuring transactions are asset-backed and involve risk/profit sharing. The document identifies key issues for Islamic accounting and supporting infrastructures, such as how to treat substance vs form, ownership in sukuk, and harmonizing standards. It discusses perceived gaps like a shortage of literature and Islamic accounting experts. It proposes solutions such as international cooperation to develop standards, exemptions or convergence with IFRS, and increasing education and training in Islamic

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Mohamed Qubati
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381 views

Islamic Accounting

The document discusses the effect of Shariah principles on accounting methods for Islamic banks. It begins by noting the rapid acceptance of Islamic finance globally due to increasing market demand, government support, and other factors. It then outlines the fundamental principles of Islamic finance, including prohibiting interest and ensuring transactions are asset-backed and involve risk/profit sharing. The document identifies key issues for Islamic accounting and supporting infrastructures, such as how to treat substance vs form, ownership in sukuk, and harmonizing standards. It discusses perceived gaps like a shortage of literature and Islamic accounting experts. It proposes solutions such as international cooperation to develop standards, exemptions or convergence with IFRS, and increasing education and training in Islamic

Uploaded by

Mohamed Qubati
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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The Effect Of Shariah Principles on Accounting Methods for Islamic Banks

10 November 2010

Daud Vicary Abdullah, CIFP Global Islamic Finance Leader, Deloitte.


1

Agenda

Rapid Acceptance of Islamic Finance

The fundamental principles of Islamic Finance

Issues & Supporting Infrastructures In Islamic Accounting

Perceived Gaps & Possible Solutions

Rapid Acceptance of Islamic Finance


Increasing pressure to have global standards

Global Crisis

Product Development & Innovation

Increasing Market demand

Islamic Finance Opportunities

Access to Liquidity

Increasing Muslim Population

Government & Infrastructure Support

The Fundamental Principles of Islamic Finance


An overview

No conflict with Principle of Islam & Assertion of Religious Law

Risk & profit sharing

Real Economic Transactions & Asset Backed

Ethical Value & Social Justice (Maqasid AlShariah)

Prohibited Activities & Elements

Islamic Finance

Islamic Finance : Issues & Supporting Infrastructures


Key issues & who is responsible for what
Substance Vs. Form Liability & equity Interest & dividend Ownership in Sukuk & Sukuk Default

Accounting

AAOIFI IFRS Local Shariah Board & Local Regulators.

Financial Reporting

Harmonisation of accounting standards Flexibility and transformation with the development of Islamic financial innovations Building consumers confidence and trust

AAOIFI IFSB IFRS

Auditing

Ex-Ante compliance & Ex-post compliance Lack of expertise & human capital

AAOIFI IFRS Local Shariah Board & Local Regulators.

Governance Framework

Ensure consistency in requirements and policies concerning reporting practices Roles & duties between Shariah Advisors and Auditors

AAOIFI IFSB IIFM Local Shariah Board 5 & Local Regulators.

Islamic Finance : Issues in Islamic Accounting


The possible roadmap

Live side by side with its conventional counterpart

Exclusivity
All Islamic financial institution transactions will be recorded by way of Islamic Accounting

3 options

International Financial Reporting Standards (IFRS) are fine tuned

Harmonisation
The certain exemptions are allowed/disallowed.

Convergence

Applying IFRS in every aspect

Perceived Gaps & Possible Solutions


The way moving forward
Having the right perception

Misperception & Unanimity in understanding Shariah law

Research & development

Shortage of literature & research on Islamic accounting

Perceived gaps & Possible Solutions

Shortage of Islamic accounting expert & human capital

Education & Training

Lack of understanding of Islamic finance opportunities

Perceived gaps Possible Solutions

Articulating value proposition

Any Questions?

Daud Vicary Abdullah, CIFP Global Islamic Finance Leader Deloitte Email : [email protected] Tel : +603 77236500, 77261833 Website : www.islamicfinance.deloitte.com

THANK YOU!
10 November 2010

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