Individual assgmt-Q1 Mohd Nazimin Ismail

Individual assgmt-Q1 Mohd Nazimin Ismail - Seminar In...

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Unformatted text preview: Seminar In Islamic Accounting Perspective FAR 730 Individual Assignment: Question 1 Prepare for Dr Zuraeda Ibrahim Prepare by Mohd Nazimin Ismail 2014695604 Question 1 (a) Accounting Standards are the accounting practices issued by recognized expert accountancy bodies. Harmonization of accounting standards has become a highly demanded issue of discussion and debate among accounting professionals around the globe. Question 1 (a) Minimize the differences in financial reporting processes Difficulties in making assessment on performance of companies. • Multinational companies operating • Regulators and auditors will get the same information • This occurrence hinders the valuation and consequently the decision making process. • Harmonization helps better assessment of performance and decision making. Consistency to be achieved under IFRS Improves the quality of financial reporting throughout the globe • Contributes to better understanding between investors, lenders and other businesses as there will be the nature of predictability in place • Increased auditing efficiency and money saving as companies has to use only one set of reporting standards Question 1 (b) Most of the countries in the world are gradually moving towards adoption of to International Financial Reporting Standards (IFRS) The adoption of IFRS on Accounting for IFIs may have few impacts in terms of the accounting treatment. Receipt of interest - Riba-interest is forbidden in Quran. Interest in the conventional sense includes an intrinsic assumption of the time value of money. Substance over form - IAS 17 treated finance lease as asset and shown as a non-current asset and a corresponding liability in the in the leaseholder’s financial statements. . Islamic leasing contracts due to sharia requirements cannot be accounted as a financing lease Question 1 (b) Murabahah The recognition and measurement methods used by a number of IFIs are mainly based on straight line method, which is not permissible under IAS 17 as it recommends use of actuarial method which uses interest tables to allocate the interest charges to particular periods. Question 1 (c) The fast growth and development of Islamic financial institutions (IFIs) around the world requires reliable financial reporting standards to ensure their transparency, comparability and fairness Hence increasing the fulfilment of accountability toward Allah (God) and society (Haniffa and Hudaib (2007). Question 1 (c) Cultural barrier Investor’s limited recognition Constraints on adopting AAOIFI as an appropriate reporting standard Limited recognition of central banks Clashes with mainstream regulations References 1. Samy Nathan Garas, 2012, Internationalization of 2. 3. 4. 5. Islamic Financial Institutions: Challenges and Paths to Solution. Murniati Mukhlisin, Mohammad Hudaib, Toseef Azid, 2015, The need for Shariah harmonization in financial reporting standardization: The case of Indonesia. Nazim Uddin, 2012, Comparative Analysis of Reporting Practices of Islamic Financial Institutions (IFIs). Nikhil Chandra Shil, 2009, Harmonization of Accounting Standards through Internationalization. ACCA & KPMG, 2010, Harmonising Financial Reporting Of Islamic Finance. ...
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