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

Nor Farizal Mohammed (Accounting Research Institute and Faculty of Accountancy, Universiti Teknologi MARA, Malaysia)
Fadzlina Mohd Fahmi (Faculty of Accountancy, Universiti Teknologi MARA, Malaysia)
Asyaari Elmiza Ahmad (Faculty of Accountancy, Universiti Teknologi MARA, Malaysia)

Journal of Islamic Accounting and Business Research

ISSN: 1759-0817

Article publication date: 7 January 2019

2766

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.

Keywords

Acknowledgements

The authors acknowledge financial assistance from the Accounting Research Institute, Universiti Teknologi MARA, Malaysia.

Citation

Mohammed, N.F., Mohd Fahmi, F. and Ahmad, A.E. (2019), "The need for Islamic accounting standards: the Malaysian Islamic financial institutions experience", Journal of Islamic Accounting and Business Research, Vol. 10 No. 1, pp. 115-133. https://doi.org/10.1108/JIABR-12-2015-0059

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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