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ISLAMIC ACCOUNTING
Learning Objectives:
Need for Islamic Accounting Islamic Values and Implications for Islamic Economics Conventional Accounting and Mainstream Economics Islamic Economics and Implications for Islamic Economics Compatibility of Accounting Concepts
TOPIC9-ISLAMIC ACCOUNTING
It embraces fundamental values and principles w ic are in conflict wit its values !Ali" #$$%& ' an #$$().
Adopting or modifying conventional accounting concepts is deemed insufficient to develop an accounting system w ic consistent wit Islamic norms towards Islamic ob*ectives
+rowing of t e Islamic ban,ing industry in t e global economics !'arim" #$$- and Roy #$$#).
.ameed et al. !#$$/) 0 many organi1ations are see,ing funding from Islamic ban,s operated in line wit t e 2 ari3a .
Establis ment of Islamic organi1ations in many Muslim countries wit Islamic ob*ectives reinforces t e need for Islamic accounting.
In Malaysia" t e establis ment of 4an, Islam Malaysia 4er ad !4IM4) led to rapid growt in Islamic ban,ing operations 5 introduction a structural framewor, 5 Islamic ban,ing financial reporting practices ave been regulated by t e 4NM" t e 4an,ing and 6inancial Institutions Act !4A6IA). t e Islamic 4an,ing Act #$7/" Companies Act #$89 and applicable MA24 2tandards.
TOPIC9-ISLAMIC ACCOUNTING
Users -ec!gniti!n
2ocio0economic events" Monetarily measurable Internal include e=ternalities" e=clude economic events s aria pro ibition Monetary .istoric cost
Meas$re#ent Monetary @ Non0monetary 4alanced score card Current valuation .isc"!s$re 2 aria compliance 2ocio0economic
TOPIC9-ISLAMIC ACCOUNTING
It could be argued t at until t ere is a c ange in t e fundamental level in w ic businesses operate" t e issue of w et er Islamic accounting is relevant and necessary remains to be seen.
TOPIC9-ISLAMIC ACCOUNTING
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4usiness is accountable for its actions bot wit in and outside !umma ).
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Islam provides general approval and guidelines for t e recording ad reporting transactions. In business affairs and trading" all parties3 rig ts and obligations are to be fully documented for verification and e=ploration. 6or instance: Recording material credit loans and transactions !<ewis" ;--#)
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Matc ing
Recogni1ing e=penses in t e same period as associated revenues
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Mudaraba principle
2 afii legal doctrine" profit distribution as to be treated as refund of capital
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Accountability
:o Alla and Hmma
TOPIC9-ISLAMIC ACCOUNTING
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-!"es ! MAS'
MA243s efforts in formulating Islamic accounting standards. MA2432 efforts currently may be significantly diverted to maintaining congruency wit t e IA24 framewor, for conventional accounting. Maintaining dual accounting conceptual framewor, may be a c allenge for t e national standard setter.
TOPIC9-ISLAMIC ACCOUNTING
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MAC4013 ACCOUNTING FRAMEWORK