Divergence within IFRS adoption: the case of depreciation practices of listed banks in Bangladesh

Comparability is one of the qualitative characteristics of financial statements that are prepared in compliance with the International Financial Reporting Standards (IFRS). The objective of this research is to identify whether this qualitative characteristic can be negated even when entities apply IFRS. In achieving the research objective, the depreciation policies adopted by the listed banks in Bangladesh are identified and compared with each other. This research finds that despite increasing effort by accounting standard setters and pressure groups to achieve IFRS-compliance and harmonization in accounting practices, non-compliance and divergence still exists. This research also finds that the divergence in depreciation practices can be of enough significance to negate comparability. The findings of this research expected to assist the international and national standard setters as well as the regulators in understanding the practical issues in implementing accounting standards and developing clearer IFRS implementation guidelines

Accounting for Islamic finance

This book is an effort to document the application of the Malaysian Financial Reporting Standards (MFRS) on Islamic finance transactions in Islamic banking, takaful entities and Islamic asset management in Malaysia. There are 15 chapters in this book which are divided into four parts. Part I, which covers Chapters 1 to 3, provides a background on Islamic finance development in Malaysia and sets the scene to the rest of the chapters in this book. Chapter 1 discusses the differences between Islamic and conventional financial institutions which comprise banking, takaful and asset management companies. Chapter 2 explains Malaysia’s journey on Islamic banking where, among others, it entails discussion on development of regulatory requirements on Islamic finance since 1983 and using accrual accounting for Islamic finance transactions. While Chapter 3 focuses on the adoption of accounting standards by the Islamic financial institutions and its implications on Islamic finance. Parts II to IV that cover 12 chapters, discuss the application of MFRSs on assets, liabilities, income, expenses and equity of Islamic banks, takaful entities and Islamic asset management companies. The discussion on assets, liabilities and equity look at definition/nature, recognition, measurement as well as presentation and disclosure of the items in the financial statements of these entities. Parts II and III that cover Islamic banking and takaful entities respectively, also include an introduction chapter on understanding of Islamic banks’ and takaful entities’ financial statements as well as a brief discussion on future consideration of accounting standards for those entities, given the continuous development of the accounting standards affecting them. It is our hope that this book would instil the knowledge of applying MFRSs on Islamic finance transactions among the students of universities and institute of higher learning as well as provide useful reference materials in teaching the application of MFRS on Islamic finance transactions. In addition, this book could be a point of reference that explains and clarifies the rationale behind current applications of MFRS for Islamic finance either for Islamic financial institutions or other industries

Preference shares: analysis of Sharīʿah issues

Purpose - The purpose of this paper is to analyze the different features of preference shares from accounting and Sharīʿah perspectives. It also aims to study Sharīʿah issues arising from preference shares and to subsequently propose solutions for identified issues that will help in structuring Islamic preference shares. Design/methodology/approach - The paper uses a qualitative method by analyzing relevant documents and literature to understand the subject matter and Sharīʿah-related issues. Findings - The paper finds that several features of conventional preference shares, such as capital guarantee, loss sharing disproportionate to capital contribution, fixed profit, profit guarantee and waiver of rights before realization of profit, make them a Sharīʿah non-compliant instrument. Research limitations/implications - The paper is conceptual in nature; however, it provides directions for future empirical research. Originality/value - The paper provides a practicable solution to structure Sharīʿah-compliant preference shares

Financial reporting dimensions of intangibles in the context of Islamic finance

Prior studies have identified that not all “intangibles” are reported as “intangible assets” in the statement of financial position. This particularly concerns the Islamic finance industry where intangibles are often used as underlying assets in structuring products. Accordingly, this research examines the unique Shari’ah requirements and the dichotomous views on the validity and permissibility of intangibles to be recognized as assets. As a result of an apparent need to re-examine the sufficiency of international financial reporting standards (IFRS/IAS) and the views of Shari’ah scholars on financial assets, the research is designed to analyse the sufficiency of IAS 38 Intangible Assets with reference to The Conceptual Framework for Financial Reporting of International Accounting Standards Board (IASB). For this purpose, an in-depth interview, two focus group discussions and a survey of target respondents from both academia and industry directly involved in reporting of Islamic financial servicesare carried out. From the engagement session with the Shari’ah scholars, the research has identified an alternative view of concern with reference to appropriate Shari’ah rulings to determine the permissibility and validity of intangible assets and its reporting implications. Whereas, a mixed response is observed in the survey in terms of clarity on accounting policy, treatment and disclosures with reference to the technicality of the standards as well as the peculiarity of the context in Islamic finance industr

Financial reporting of intangible assets in Islamic finance

Purpose – This paper aims to address the financial reporting dimensions of intangible assets with specific reference to International Accounting Standards (IAS) 38 as well as relevant International Financial Reporting Standards (IAS 38 exclusion) that are embedded within intangible assets. These have implications for Islamic financial assets with identifiable and measurable intangible components. Design/methodology/approach – The study uses the qualitative research method by way of interviews followed by focus group discussions with professional accountants/accounting academics and Sharīʿah scholars/advisors from academia, the industry and regulatory bodies. Analysis of relevant literature is made to understand the subject matter and Sharīʿah-related issues. Findings – The study observes that the accounting dimensions of tangible assets are generally consistent with Sharīʿah requirements. However, significant variation arises when the dimensions of intangible assets are represented in financial assets. Research limitations/implications – The paper presents an exploratory in-depth analysis within the context of intangible assets as specified in IAS 38. Originality/value – The paper elucidates the comparative accounting dimensions and Sharīʿah requirements in reporting financial assets