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Classification of profit-sharing investment accounts: A survey of financial statements of Islamic banks in Asia

Aprilia Beta Suandi (Faculty of Economics and Business, Universitas Gadjah Mada, Indonesia and Graduate School of Commerce, Waseda University, Japan)

International Journal of Islamic and Middle Eastern Finance and Management

ISSN: 1753-8394

Article publication date: 21 August 2017

1138

Abstract

Purpose

The purpose of this paper is to examine the classification of profit-sharing investment accounts (PSIAs) under various accounting standards, and determine whether Islamic banks maintain uniform practices when the same accounting standards are applied. It also aims to determine whether Islamic banks consider investment account holders (IAHs) important financial statement users by disclosing necessary information pertaining to PSIAs.

Design/methodology/approach

A sample composed of financial statements from 63 Islamic banks from 15 countries is compared with respect to the information related to PSIAs.

Findings

The results show heterogeneity of classification for PSIAs. Applying the same standards does not lead to the uniform classification of PSIAs when banks apply International Financial Reporting Standards, while financial statements applying Financial Accounting Standards by the Accounting and Auditing Organization for Islamic Financial Institutions are more similar. The perplexity in classifying PSIAs brings obscurity on the treatment for PSIA-related accounts, particularly returns attributable to IAHs. The fact of fewer disclosures pertaining to PSIAs in Islamic banks – which apply accounting standards not specifically tailored to Islamic finance – suggests that IAHs receive less attention under those accounting standards.

Research limitations/implications

The main limitation relates to the lack of financial statements available online and the possibility of sample selection bias toward larger Islamic banks.

Originality/value

This research contributes to the limited literature on accounting for PSIAs, and reveals the diversity of reporting methods for unique transactions in Islamic banks and the insufficiency of current accounting standards to guide them, which create possible challenges of comparability.

Keywords

Acknowledgements

The author would like to express gratitude to Prof Eiko Tsujiyama and Prof Kenichi Akiba for their help in improving the early version of this manuscript and to anonymous reviewers for their constructive comments.

Citation

Suandi, A.B. (2017), "Classification of profit-sharing investment accounts: A survey of financial statements of Islamic banks in Asia", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 10 No. 3, pp. 351-370. https://doi.org/10.1108/IMEFM-05-2015-0067

Publisher

:

Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

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