Comparative study between IFRS and AAOIFI disclosure compliance: Evidence from Islamic banks in Gulf Co-operation Council countries

Abstract

Purpose

This study measures and compares the level of compliance with the disclosure requirements provided by the International Financial Reporting Standards (IFRS) and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). This study also aims to investigate the factors associated with this compliance in a sample of Islamic banks (IBs) in Gulf Cooperation Council member states.

Design/methodology/approach

The sample consists of 39 IBs between 2010 and 2014. Among the selected IBs, 23 banks were complying with the AAOIFI standards and 16 banks were complying with the IFRS standards. An unweighted disclosure index was used to measure the level of compliance with IFRS/AAOIFI disclosure requirements.

Findings

It was found that the level of compliance with IFRS is higher than that of compliance with AAOIFI. In addition, the results reveal that compliance with IFRS/AAOIFI disclosure requirements is higher for larger and older IBs. Finally, it was observed that compliance was more noticeable for IBs having a higher leverage and multinational subsidiaries.

Originality value

These findings would be of great help to regulators and policymakers to better understand the accounting disclosure practices of IBs.

Citation

Ajili, H. and Bouri, A. (2017), "Comparative study between IFRS and AAOIFI disclosure compliance: Evidence from Islamic banks in Gulf Co-operation Council countries", Journal of Financial Reporting and Accounting, Vol. 15 No. 3, pp. 269-292. https://doi.org/10.1108/JFRA-03-2016-0023