INTERNATIONAL CENTRE FOR EDUCATION IN ISLAMIC FINANCE

1. 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 30 marks • Tutorial Presentation: 5 marks (10 report and 5 for presentation) • Final Examination 50 marks • Total 100 marks

6. Facilitator • Barjoyai bin Bardai • drbarjoyai@gmail.com • 012 273 8414

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 (AAOIFI 2005) • 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 QardulHasan • 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 • Musharakamutanaqqisa (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, IjarahMuntahiaBittamleek 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 aaoifistandardsforislamic 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.