The need for Islamic accounting standards: the Malaysian Islamic financial institutions experience

Nor Farizal Mohammed · Fadzlina Mohd Fahmi · Asyaari Elmiza Ahmad

33 citations0/0 files storedJournal of Islamic accounting and business research

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Islamic Finance and Banking Studies Accounting Theory and Financial Reporting Accounting and Financial Management

Abstract

Purpose The purpose of this paper is to examine views of financial statements preparers with regard to the practices in reporting Islamic Financial Institutions (IFIs), thereby contributing to answer whether there is indeed a need for a separate set of Islamic accounting standards for IFIs. Design/methodology/approach Drawing upon seven in-depth semi-structured interviews conducted with IFIs’ leading officers who are highly involved in preparing financial statements in Malaysia, the paper offers evidence on the current stance of reporting the operation of IFIs, the influence of AAOIFI accounting standards and the feasible application of IFRSs in reporting IFIs. Findings While it is shown that most of the interviewees admit the feasibility of IFRSs in reporting IFIs, many interviewees placed greater emphasis on the spirit of Islam based on Islamic contract. In that case, the findings show that to convince the public that they offer Shariah compliance products approved by Shariah Advisory Council, there is a need for specificity guidelines or standards for IFIs within the IFRS framework. The main concern raised in the paper is that separate Islamic accounting standard is not needed, instead the option needs to be within the IFRS framework with the collaboration work of Accounting and Auditing for Islamic Financial Institutions (AAOIFI) and the International Accounting Standard Board (IASB). Originality/value With the recent rapid growth of IFIs, this paper contributes regarding the inconclusive stance on the need for specificity accounting standards for IFIs such as the ones issued by AAOIFI. It adds to the current body of knowledge by highlighting the collaboration of the AAOIFI and the IASB for the intended specific guidelines for IFIs to be accepted globally.

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References

2008Islamic banking and finance: on its way to globalization 2001Islam and accounting 2001International accounting harmonization, banking regulation, and Islamic banks 2002Anthropological and accounting knowledge in Islamic banking and finance: rethinking critical accounts 2009Critical insights into contemporary Islamic accounting 1986ISLAM AND ‘SOCIAL ACCOUNTING’2009Defining Islamic accounting: current issues, past roots 2008Determinants of Islamic and conventional deposits in the Malaysian banking system

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