1. INTERNATIONAL CENTRE FOR EDUCATION IN ISLAMIC FINANCE
FN 6103
Accounting for Islamic Financial Transactions
INTERNATIONAL CENTRE FOR EDUCATION IN ISLAMIC FINANCE

2. Course objectives
To develop an understanding of the accounting issues in Islamic Finance in the framework of Islamic accounting concepts and the tension between Islamic accounting theory and international financial reporting practices

3. Learning outcome
At the end of the course, the candidates will inshaAllah be able to:
Understand Islamic accounting theoretical concepts
Apply fiqh rules to record Islamic financial transactions
Apply AAOIFI and Malaysian Islamic accounting standards
Read, understand and interpret Financial statements of Islamic Financial Institutions
Discuss the tensions between International Financial Reporting Standards and AAOIFI/MASB/BNM standards
Understanding the effect of proposed and existing products on the income statement and balance sheet
Critically appraise extant Islamic accounting and auditing standards and contribute to the development of better standards.
Conduct financial and nonfinancial performance analysis of Islamic financial institutions
Contribute to the evolving debate and practice of accounting and auditing from the shariah perspective
Be aware of current developments in Islamic finance and their impact on market, shariah acceptability and accounting impact

4. Teaching-Learning Method
Lectures,
News Report Presentation and Discussion
Tutorial Presentation and Discussion
Preparation of an academic term paper.
Presentation, argumentation and discussion skills,
Report writing skills, analytical skills

5. Assessment News Report 5 marks Term Paper: Presentation 10 marks
Written Paper marks
Tutorial Presentation: marks
(10 report and 5 for presentation)
Final Examination marks
Total marks

6. Facilitator
Barjoyai bin Bardai

7. Topic 1: Islamic Accounting Theory and Concepts
Qur’anic foundations of Islamic Accounting
The need for Islamic accounting in relation to the objective and operations of Islamic Financial Institutions and socio-economic implications of Islamic Institutions
Push factors – limitations of conventional accounting
Pull factors – the emergence of Islamic institutions and Islamic financial system

8. Topic 2: Introduction to the financial statements of financial institutions: a comparison between Islamic and conventional financial institutions
A quick look at the financial statements of Islamic and conventional financial statements
Objectives of financial accounting for Islamic financial institutions
SFA 1 objectives of financial accounting for IFIs
(AAOIFI 2005)
SFA2 concepts and financial accounting for IFI
Presentation and Disclosure in Financial Statements of Islamic Financial Institutions
Presentation of financial statements (AAOIFI 2005)
MASB FRSi-1

9. Topic 3: Islamic financial transactions
An introduction to Islamic financial contracts and how they are applied in Islamic banking

10. Topic 4: Accounting for Islamic Deposits and Mudaraba
Al Wadi’ah and Mudaraba and Qardul Hasan
Accounting Recognition of Islamic Deposit
Profit sharing and loss bearing
Profit allocation
Provisions and Reserves
Accounting for Mudaraba Financing
Capital recognition
Profit recognition and allocation
Loss bearing

11. Topic 5: Accounting for Musharaka Financing
Capital recognition
Profit recognition and allocation
Profit and loss sharing
Musharaka mutanaqqisa (diminishing musharaka)
Early redemption

12. Topic 6: Murabaha and Murabaha to the Purchase orderer and BBA
Fiqh and accounting issues
Urboun and Hamish Gidyah (deposits)
Controversies of BBA

13. Topic 7: Accounting for Ijarah, Ijarah Muntahia Bittamleek and AITAB
Fiqh rules on ijara and comparison with operating and financial lease
Accounting recognition and measurement of ijarah as lessor and lessee.
Various types of IMBT
AITAB differences between AITAB and IMBT and MASB

14. Topic 8: Accounting for salam and Istisna’a
Fiqh rules of salam and istisna
Quality and quantity and time of delivery
Payment mode
Gurantees and penalties
Accounting recognition and measurement

15. Topic 9: Accounting for Investments including sukuk
Shares and sukuk
held for trading,
available for sale
and held to maturity
Real estate investments

16. Topic 10: Accounting for Takaful
Differences between the objectives, operations and accounting for conventional insurance and takaful
Business Models
Presentation and Disclosure
Treatment of premiums and contributions
Provisions and Reserves
Treatment of surpluses

17. Topic 11: Shari’a Auditing
Role and Influence of Shari’a Supervisory Institutions.
Importance of Shari’a and Corporate Governance of Islamic Institutions.
Extending Shari’a Auditing

18. Topic 12: Performance Measurement of Islamic Financial Institutions
Performance in relation to the socio economic objectives of Islamic Financial Institutions
Financial measurements
Non- Financial Measurements
Shariah ratings

19. Seminar: Presentation of Term papers
Possible topics (no two groups can present the same topic): selected papers will be sent for publication
Compare IFRS4 and the aaoifi standardsfor islamic insurance and argue that IFRS 4 cannot be used for takaful companies
Islamic accounting and the cash waqf.
Shariah auditing – how Malaysia can generate future cash flow by inventing the profession.
A critique of shariah reports of Islamic banks
Takafaful models in Malaysian Industry practice- a holistic shariah ranking
Measuring the performance of Takaful companies; a participant perspective
A review of non financial performance of Islamic banks in Malaysia.
A review of financial performance of Islamic banks in Malaysia – a depositors perspective.
MASB Islamic standards – reasons for lack luster performance and what are the future options
Ijarah accounting headaches for the auditor in AAOIFI jurisdiction– IFRS vs AAOIFI.
An assessment of the CIPA qualifications of AAOIFI
The role of a new breed of Islamic accountants in relation to Islamic institutions.