Profit-sharing investment accounts in islamic banks or mutualization, accounting perspective

2016 ◽  
Vol 14 (1) ◽  
pp. 30-48 ◽  
Author(s):  
Wasim K. AlShattarat ◽  
Muhannad A. Atmeh
Keyword(s):  
Financial Reporting ◽  
Mutual Fund ◽  
Design Methodology ◽  
Profit Sharing ◽  
Islamic Banks ◽  
Content Type ◽  
Implementation Challenges ◽  
Total Profit ◽  
Practical Implications

Purpose Islamic banks use Mudarabah contract to replace the interest-bearing deposits with profit-sharing investment accounts. The purpose of this paper is to explore the challenges and problems associated with the employment of Mudarabah contract by Islamic banks. Design/methodology/approach The study critically analyzes the Mudarabah contract used by Islamic banks. It reviews the evolution of the contract from its traditional type to more complicated types such as compound, unrestricted, commingled and continuous Mudarabah. The paper investigates the problems that have emerged from implementing such types in current business settings. Findings The paper proves that implementing the Mudarabah contract by banks imposes several problems among which are the following: difficulty in the determination of total profit resulting from Mudarabah and in allocating this profit to the multiple parties involved in Mudarabah; usage of reserves to cater against future losses may undermine the concept of Mudarabah profit-loss sharing and lead to earnings management; corporate governance is also a major problem in Mudarabah contract, as the depositors are exposed to risks but have no governance rights; and Mudarabah may also lessen the fair presentation of financial reporting. Research limitations/implications The paper examines the evolving Mudarabah contract and its implementation challenges, based on available literature (no empirical analysis was conducted). Practical implications The implications are significant for the future development of Islamic contracts and Islamic accounting treatments. Originality/value Many studies explored the Mudarabah contract from a Shariah or law perspective. However, this paper investigates the Mudarabah contract with a focus on the implication on accounting and financial reporting because of the lack of studies in this area. Furthermore, it demonstrates the persistent flaws in the Mudarabah contract, and it proposes a new model for mobilizing funds, i.e. mutual fund.

Writing write-downs: the rhetoric of goodwill impairment

2017 ◽  
Vol 14 (1) ◽  
pp. 81-102
Author(s):  
Niklas Sandell ◽  
Peter Svensson
Keyword(s):  
Financial Reporting ◽  
Design Methodology ◽  
Annual Reports ◽  
Close Reading ◽  
Content Type ◽  
Goodwill Impairment ◽  
Financial Communication ◽  
Rhetorical Practice ◽  
Nasdaq Omx ◽  
Practical Implications

Purpose The aim of this paper is to study the rhetoric of goodwill impairment, more specifically rhetoric, as it is constructed in the form of accounts (i.e. statements that explain unanticipated or untoward behavior). The authors argue that goodwill impairment is not only a technical matter but also a rhetorical practice by means of which external scrutiny is responded to. Design/methodology/approach The data corpus consists of explanations provided by corporations regarding impairment of goodwill. Data were collected from annual reports from companies quoted on NASDAQ OMX Stockholm, Sweden. The impairment explanations were analyzed according to a taxonomy of account types. The explanations were subjected to close reading to discern the potential rhetorical functions of the different accounts. Findings Seven account types are identified and discussed, namely, excuse, justification, refocusing, concession, mystification, silence and wordification. Research limitations/implications There is a need for further research that explores the process of authorship (i.e. writing, editing, negotiating and revising) through which the texts of financial communication are produced. Practical implications The findings have implications for the future formulations of standards regarding qualitative explanations in financial reporting in general and explanations of goodwill impairment in particular. Originality/value The paper contributes to the knowledge about the use of natural language and rhetoric in financial communication.

Are Islamic banks different? The application of the Radical Affinity Index

2019 ◽  
Vol 12 (1) ◽  
pp. 2-29 ◽  
Author(s):  
Leire San-Jose ◽  
Jon Cuesta
Keyword(s):  
Great Britain ◽  
Design Methodology ◽  
Islamic Banking ◽  
Ethical Dimension ◽  
Islamic Banks ◽  
Ethical Perspective ◽  
Content Type ◽  
Social Commitment ◽  
Practical Implications ◽  
Ethical View

Purpose The purpose of this paper is to extend the literature on Islamic banking by examining their ethical dimension using transparency, placement of assets, guarantees and participation from Radical Affinity Index. Design/methodology/approach To this end, a sample of 20 Islamic banks from 13 countries (Bahrain, Saudi Arabia, Malaysia, Pakistan, Kuwait, Tanzania, Great Britain, Oman, Iraq, Egypt, Bangladesh and Qatar) was used. Findings The results are robust to ethical effects. The evidence suggests that among Islamic banks, at least some of them could improve their ethical requirements of the Sharia; they obtained lower scores than ethical banks in terms of RAI variables (transparency, placement of assets, guarantees and participation). Research limitations/implications It is used a random sample rather than population with the limitations that entails. The variables in the index are based on ethical perspective; then, the index is applied in Islamic banking but with the ethical view limitation. Practical implications The Islamic banks have the option to increase their transparency including further information regarding the beneficiaries of the benevolent funds; moreover, it would offer a clearer view about their ethical and social commitment towards society. Originality/value Additionally, this paper broadens the scope of the literature by analysing the determinants of Islamic banking around ethical dimensions of financial entities.

The IPSASB's recent strategies: opportunities for academics and standard-setters

2020 ◽  
Vol 32 (3) ◽  
pp. 315-319 ◽  
Author(s):  
Gwenda Jensen
Keyword(s):  
Public Sector ◽  
Financial Reporting ◽  
Design Methodology ◽  
Accounting Standards ◽  
Fitness For Purpose ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Public Sector Accounting ◽  
Ongoing Dialogue ◽  
Practical Implications

PurposeThe purpose of this article is to contribute to an ongoing dialogue between practitioners and academics. This article describes the International Public Sector Accounting Standards Board (IPSASB) recent strategies and highlights the IPSASB's increasing outreach to academics.Design/methodology/approachThis is a practitioner's viewpoint which reflects the IPSASB's publicly available documents, and the opinions of a practitioner directly involved in the IPSASB's work and International Public Sector Accounting Standards (IPSAS) development.FindingsThe findings are that the IPSASB has increased its outreach to academics and now academics have more opportunities to engage with the IPSASB and IPSAS developments. The IPSASB's strategy has remained relatively constant over time, focusing on IPSAS to address public sector-specific issues, alignment with the International Financial Reporting Standards (IFRS) and reduction of differences between IPSAS and Government Finance Statistics (GFS) reporting guidelines.Research limitations/implicationsThe limitations of this article (which are also its strength in terms of fitness for purpose) are that as a practitioner's viewpoint it provides a brief overview and personal judgments, rather than an empirical analysis of developments applying a theoretical framework.Practical implicationsThe practical implications were IPSASB's increased outreach to the research community providing opportunities for academics to have increased input into IPSAS development, with likely benefits to researchers and the IPSASB.Social implicationsPractitioners’ engagement with academics supports increased understanding of the respective views leading to better outcomes for practitioners and academics working in the area of public sector financial reporting and its regulation.Originality/valueThis article is the first to (a) describe the IPSASB's increasing outreach to academics during 2019–2020 and (b) compare the IPSASB's strategies for the period of 2019–2023, with its strategies since the beginning of IPSAS developments in 1996–1997.

Determinants of mandatory disclosure compliance in Swedish municipalities

2020 ◽  
Vol 32 (2) ◽  
pp. 247-265
Author(s):  
Pierre Donatella
Keyword(s):  
Financial Reporting ◽  
Design Methodology ◽  
Mandatory Disclosure ◽  
Local Networks ◽  
Content Type ◽  
Government Accounting ◽  
Reporting Practice ◽  
Professional Environment ◽  
Prior Literature ◽  
Practical Implications

PurposeThe purpose of this article is to examine whether, and if so, to what extent, noncoercive isomorphism determines mandatory disclosure compliance at a later stage of an accounting reform.Design/methodology/approachThe analysis of compliance is based on data from 289 Swedish municipalities for 2016, which is nearly two decades after the initial legal reform in which mandatory requirements were imposed by the Swedish government in an effort to harmonize financial reporting practice. Following the standard approach in the literature, an unweighted compliance index was used as dependent variable. Proxies for municipal accounting networks and involvement in professional government accounting associations were used to explain individual municipalities' levels of compliance.FindingsDifferences in individual municipalities' levels of compliance were strongly related to the financial reporting practice of other municipalities in their accounting network. These results suggest that normative and mimetic isomorphic pressure stemming from these local networks, where accounting departments continually meet and share experiences, is a very potent force. In contrast, isomorphic pressure stemming from involvement in activities offered by professional government accounting associations is generally not a potent force at this stage.Practical implicationsIn settings where municipal accounting networks exist, it may be effective to stimulate de facto harmonization by directing information, education and other efforts toward the professional environment in which these networks operate.Originality/valueUnlike prior literature, the data in this study are from a later stage of a public sector accounting reform.

Causality in qualitative market and social research

2019 ◽  
Vol 22 (3) ◽  
pp. 405-413
Author(s):  
Clive Roland Boddy
Keyword(s):  
Qualitative Research ◽  
Design Methodology ◽  
Social Research ◽  
Pragmatic Approach ◽  
Social Phenomena ◽  
Content Type ◽  
The Past ◽  
The Moment ◽  
Practical Implications

Purpose Academic qualitative researchers have been criticized for rejecting the idea that their research can establish causality while market and social researchers, with their realist and pragmatic approach to research, take for granted that it can. This paper aims to explore the ability of qualitative research to determine cause and effect in terms of market and social phenomena. Design/methodology/approach The literature on causality in qualitative research is reviewed and discussed. The discussion is further informed by the author’s own experience of undertaking commercial and academic market and social qualitative research over the past 33 years. Findings In qualitative market and social research, the determination of causality is often needed but rarely discussed. This paper explores this occurrence and brings to the fore, via discussion and the use of example, the ways in which causality can be determined by qualitative research. Practical implications A determination of what events bring about predictable changes in social and market environments can be established via qualitative research particularly at a probabilistic level of causality. This implies that policymakers should give a greater emphasis to qualitative findings than then sometimes do at the moment. Originality/value Causality in market and social research is rarely discussed by practitioners but is nevertheless a premise of much of the qualitative research that is undertaken. This paper is therefore distinctive in that it examines whether this premise is justifiable.

Measuring Shariah non-compliance risk (SNCR): claw-out effect of al-bai-bithaman ajil in default

2017 ◽  
Vol 8 (3) ◽  
pp. 272-283
Author(s):  
Saiful Azhar Rosly ◽  
Muhammad Arzim Naim ◽  
Ahcene Lahsasna
Keyword(s):  
Content Analysis ◽  
Design Methodology ◽  
Islamic Banking ◽  
Legal Environment ◽  
Islamic Banks ◽  
Legal Cases ◽  
Content Type ◽  
Potential Loss ◽  
Critical Requirement ◽  
Practical Implications

Purpose The purpose of this paper is to examine the meaning, nature and measurement of Shariah non-compliant risk faced by Islamic banks. Design/methodology/approach Al-bai-bithaman ajil (BBA) contract documentation is analyzed in the light of the legal environment in Malaysia and measurement of Shariah non-compliant risk based on constructed or hypothetical cases. Findings Shariah non-compliant risk will adversely affect bank’s earnings when BBA contracts are deemed invalid in the court of law, either in a foreclosure or ruling via court declaration. Research limitations/implications The paper is written based on content analysis, Malaysian legal cases with hypothetical examples for better understanding. Practical implications Islamic banking should be able to use the findings to estimate potential loss from Shariah non-compliant risk and make the necessary provisions. Originality/value This paper provides new insights of risks faced by credit-intensive Islamic banks, that when relinquishing critical requirement of Islamic contract such as ownership risk will suffer loss.

Sharīʿah appraisal on the issue of imposing burden of proof to the entrepreneur in trust based contracts

2016 ◽  
Vol 7 (2) ◽  
pp. 148-169
Author(s):  
Asmadi Mohamed Naim ◽  
Mohd Noor Habibi Hj Long ◽  
Mahyuddin Abu Bakar ◽  
Muhammad Nasri Md Hussain
Keyword(s):  
Qualitative Research ◽  
Comparative Analysis ◽  
Design Methodology ◽  
World Wide ◽  
Descriptive Analysis ◽  
Burden Of Proof ◽  
Islamic Banks ◽  
Content Type ◽  
Business Requirements ◽  
Practical Implications

Purpose The purpose of this paper is to examine the Shariah view on the legitimacy of requiring the entrepreneur to prove that he/she has complied with all business requirements in case the actual profit was below the expected profit in trust-based contracts such as mudarabah and musharakah. Design/methodology/approach This paper is part of the research which applies qualitative research approaches, including among others, content analysis, interviews, observations and descriptive analysis using fiqh muqaran (comparative analysis of jurists’ arguments) in few phases. Findings The study found that shifting the burden of proof to the fiduciary is the weightier view and necessary to ensure that both sides are protected. The considerations of protecting people’s wealth (ḥifẓ amwāl al-nās) and mitigating widespread greed (ṭamaʿ) are among the reasons for allowing elements such as ʿurf, tuhmah and dalālat al-ḥāl to be treated as bayyinah in trust-based contracts when the fiduciary is obliged to defend himself from litigation. Research limitations/implications The study is meant to strengthen the practices of Islamic banks world wide. Practical implications Few protections can be applied for capital provider. Social implications This study is meant to give solution in dealing with moral hazard of both parties, and to provide solution to the regulator for policy drafting and to increase confidence to the industry. Originality/value The finding is important in assisting the regulators in drafting the policy to protect both parties without neglecting the essence of trust-based contracts.

Evaluation of residual clearance after pre-joining and pre-joining scheme optimization in aircraft panel assembly

2016 ◽  
Vol 36 (4) ◽  
pp. 376-387 ◽  
Author(s):  
Di Yang ◽  
Weiwei Qu ◽  
Yinglin Ke
Keyword(s):  
Pareto Optimality ◽  
Design Methodology ◽  
Elastic Behavior ◽  
Assembly Model ◽  
Content Type ◽  
Scheme Optimization ◽  
Constrained Variation ◽  
Practical Implications ◽  
Excessive Number

Purpose For the automatic drilling and riveting in panel assembly, gaps between the skin and strangers are inevitable and undesirable. At present, the determination of pre-joining schemes relies on workers’ experience, introducing excessive number and inappropriate locations of pre-joining. This paper aims to present a new method for the evaluation of residual clearances after pre-joining and the pre-joining scheme optimization, providing operation guidance for the workers in panel assembly workshop. Design/methodology/approach In this paper, an equivalent gap assembly model for pre-joining is proposed on the basis of the mechanism of variation. This model retains the essential elastic behavior of the key features during the pre-joining operation and calculates the residual clearances in the view of the potential energy. Subsequently, this method is embedded into a Pareto optimality-based genetic algorithm, and the optimal pre-joining schemes are achieved with the consideration of the total residual clearances and the permissive tolerances. Findings The equivalent gap assembly model has the capability to predict an acceptable degree of accuracy of the residual clearances and achieve the optimized pre-joining schemes with less number of pre-joining at the same level of residual clearances. Practical implications The optimized pre-joining schemes are given in the form of Pareto optimality set, and workers can select suitable results according to their inclination to the quality and efficiency. Originality/value The paper is the first to propose the equivalent gap assembly model for the pre-joining operation, which provides for the simplification of the calculation of residual clearances based on the constrained variation principles.

Classification of profit-sharing investment accounts

2017 ◽  
Vol 10 (3) ◽  
pp. 351-370 ◽  
Author(s):  
Aprilia Beta Suandi
Keyword(s):  
Financial Reporting ◽  
Sample Selection ◽  
Accounting Standards ◽  
Financial Statements ◽  
Profit Sharing ◽  
Islamic Banks ◽  
Content Type ◽  
Current Accounting ◽  
Islamic Financial Institutions

Purpose The purpose of this paper is to examine the classification of profit-sharing investment accounts (PSIAs) under various accounting standards, and determine whether Islamic banks maintain uniform practices when the same accounting standards are applied. It also aims to determine whether Islamic banks consider investment account holders (IAHs) important financial statement users by disclosing necessary information pertaining to PSIAs. Design/methodology/approach A sample composed of financial statements from 63 Islamic banks from 15 countries is compared with respect to the information related to PSIAs. Findings The results show heterogeneity of classification for PSIAs. Applying the same standards does not lead to the uniform classification of PSIAs when banks apply International Financial Reporting Standards, while financial statements applying Financial Accounting Standards by the Accounting and Auditing Organization for Islamic Financial Institutions are more similar. The perplexity in classifying PSIAs brings obscurity on the treatment for PSIA-related accounts, particularly returns attributable to IAHs. The fact of fewer disclosures pertaining to PSIAs in Islamic banks – which apply accounting standards not specifically tailored to Islamic finance – suggests that IAHs receive less attention under those accounting standards. Research limitations/implications The main limitation relates to the lack of financial statements available online and the possibility of sample selection bias toward larger Islamic banks. Originality/value This research contributes to the limited literature on accounting for PSIAs, and reveals the diversity of reporting methods for unique transactions in Islamic banks and the insufficiency of current accounting standards to guide them, which create possible challenges of comparability.

Joint stock company with variable capital (JSCVC)

2014 ◽  
Vol 56 (4) ◽  
pp. 302-310 ◽  
Author(s):  
Bijan Bidabad
Keyword(s):  
Design Methodology ◽  
Joint Stock Company ◽  
Islamic Banks ◽  
Stock Company ◽  
Investment Funds ◽  
Content Type ◽  
Legal Personality ◽  
Profit Distribution ◽  
Practical Implications ◽  
Financial Outcome

Purpose – The purpose of this paper is to propose joint stock company with variable capital (JSCVC), as financial sharing funds and banks necessitate that their capital and number of shareholders be instantaneously variable. Legal personality and accounts clearing of this type of corporations are different from conventional companies. Design/methodology/approach – JSCVC is a corporation in which capital and shares of shareholders vary by new entrance or withdrawal of shareholders at any point of time. Findings – Interest rate-based calculations were removed and Rastin Sharing Accounting was applied for JSCVS. Shareholders of JSCVC share the company’s nominal capital proportional to nominal values of their shares. Financial outcome of JSCVC is proportional to values of shares weighted by shares duration of participation. Research limitations/implications – To prevent spoiling of shareholders’ rights, legal procedure of issuing shares for JSCVC should be defined in compliance with domestic commerce laws in any country. Practical implications – JSCVC can be used by majority of investment funds, credit unions, saving and loan associations, pension and provident funds, thrift saving plans as well as Islamic banks and financial sharing activities. In JSCVC, deposit at a bank is treated as a share of the company (bank). Social implications – JSCVC has fair profit distribution and accounts clearing arrangements. Originality/value – Different variable capital companies have been defined in many countries’ laws, but essential modifications are presented in JSCVC definition to regulate financial sharing arrangements and bank’s performances.

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