How differences in contract lead to differing accounting treatment in Ijarah/conventional lease
Significant differences in relation to the accounting treatment between Ijarah and conventional lease are experienced due to the need to preserve and exercise Shari’ah financial operations. Unlike conventional lease according to IFRS (IAS 17) which is broad and open with no religious conditions, the expression of Ijarah as per AAOIFI (FAS 8) comes with an extra condition requiring that the nature and benefits enjoyed from Ijarah must be compliant with Shari’ah (Shariff & Rahman, 2002; p188). The religious condition forced the Muslim scholars designing the AAOIFI standards to fine-tune the general accounting treatment principles to comply with Shari’ah (Karim, 2010).
The first significant difference in the accounting treatment is experienced in the recording of leased property in the company books. In a conventional finance lease, the leased property is often capitalised in the lessee’s books as an asset in addition to the respective lease payments considered as a liability in company books of account. The asset is to be recorded at its fair market value at the time of commencement of the lease contract as recomnded by IAS 17. This is not the case with Ijarah contracts where the leased asset under the Ijarah Muntahia Bittamaleek are recorded as assets in the books of the lessor and a depreciation charge is effected on the books of the lessor. Additionally, all transactions involving Ijarah contract should be recorded as “Ijarah Assets’’ in the company books at a sum total cost borne by the bank to acquire the asset. However, Paragraph 43 and 53 of the IAS 17 requires that assets under operating leases be recorded according to ...
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...s transaction is only permissible if the damage happens before the right of ownership is transferred to the lessee.
Ways of reconciling any variations in interpretation
This research has highlighted significant disagreement of accounting practices between conventional lease and Ijara contracts that if not harmonised then it would be virtually impossible to make effective comparison of financial data between financial institutions especially for users of financial statements. The most effective way to reconcile the vibrations in interpretation is through robust consultations between Islamic scholars and conventional banking operators on lease contracts. This will only ensure that the Islamic banks do not only adopt Shari’ah complaint lease contracts but also universally accepted accounting treatment for similar transaction between Islamic financial institutions.
ii) If one is the owner or operator, liability may attach even if some other
The majorities of financial advisers do not have a formal accounting or tax background and thus have some challenges to overcome when reading tax returns of their clients. However they are still asked to help their clients in future planning. Since most accounting is to be done based on compliance with GAAP it would make sense to think that tax accounting should also be done this way, however both the IRS and the courts have stated that compliance with GAAP is of little significance when dealing with the objectives of tax accounting. The objectives of both accounting methods are simply different, because the primary goal of financial accounting is to provide useful information to all stakeholders and the primary goal of the income tax system is the equitable collection of revenue. Because of these differences it can be said that the users of accounting information are different for both methods. The assumption for financial accounting is the going-concern and the tax accounting system ignores this assumption. These differences give us the concept of timing differences and permanent differences. Understanding...
Tanyia is a 13-year-old African American female who currently resides at Vista Maria after being adjudicated on a Domestic Violence offense and being placed on Level 2 probation. She presents with a multitude of problems that will be the focus of her treatment needs of: verbal and physical aggression, fluctuating moods including irritability and anger, defiance, truancy from school, running away from home, associating with older males, substance use, traumas including physical abuse and rape, other sexual behaviors not appropriate for her age, and limited intellectual functioning. Her relationships within her family are very strained and lack adequate support, excluding her great grandparents. The goals in the therapeutic process are to facilitate
The movie portrays a group of teens coming of age and a man encumbered with age in a less privileged part of Atlanta. They face challenges that are hard to overcome due to the disadvantages they were put into. Uncle George is the brother of the deceased sister who is the boys’ mother. He battles with the obligation of raising two nephews and struggles with the idea that he could have success without the duty. Rashad is the eldest brother and takes on the parent role toward his younger brother. He is heir to the family cleaning business and juggles adult responsibility with adolescent fun. Ant is the youngest brother and tries to make an identity in an unpopular role. Each character faces their faults while staying together as a cohesive family.
Differences remain between U.S. GAAP and IFRS when it comes to revenue recognition. U.S. GAAP gives detailed rules covering 200 different pronouncements about how revenue should be recognized while IFRS offers two standards, IAS 18 and IAS 11; these deal with revenue and construction contracts. There is a current proposal for a new revenue recognition standard for both IFRS and U.S. GAAP (Doupnik & Perera, 2014). This standard seeks a main direction and corrects inconstancies between the two different views. This proposal would bring a unity to both entities and more progress toward
...n. Based on the definition of asset/liability, the operating leases items meet it. Therefore the amount should show as asset/liability off balance sheet as well.
“Iggy’s” is and always has been about creating a certain unique culture for their customers as well as for their employees. Igor and Ludmilla both built this business with hard work and a strong passion for their product. When they began hiring people they looked for employees who had the same kind of pleasure for baking as they did. They wanted to create a culture within their staff of taking pride in what they were doing. Their goal was to fully involve all of their employees in all aspects of the business and make sure they understood that were an important part of the business and key to its success.
Cornaggia, K. J., Franzen, L. A., & Simin, T. T. (2013). Bringing leased assets onto the balance sheet. Journal of Corporate Finance, 22345-360. http://dx.doi.org/10.1016 /j.jcorpfin.2013.06.007
Accounting provides economic and financial information for investors, creditors, external users, and the general public at large. Financial accounting is an aspect of accounting is the associated with the complexity of preparing financial statements: the Income statement, Retained earnings, Balance sheet and statement of cash flow. Financial accounting is the battlefield in the business world today. It is faced with unprofessional accounting practices that delve its principles. According to Valter W.J (1972), generally accepted accounting principles incorporate the consensus at any time as to which economic resources and obligations should be recorded as assets and liabilities, which changes in them should be recorded, when these changes should be recorded, how the recorded assets and liabilities and changes in them should be measured, what information should be disclosed and how it should be disclosed, and which financial statements should be prepared. Recognizing these issues, identifying the principal element, and alternatives is the rock upon which accounting ethical standard lies.
The modern Islamic Finance industry is young, its timeline begin only a few decades ago. However, islamic finance is involving rapidly and continues to expend to serve a growing population of muslims as well as conventional.
Leasing is the specialized mode of acquiring equipment without ownership. It is an alternative to ownership and supports in obtaining funds when other sources are either exhausted or are not feasible and thus a viable tool for maximizing the profits of a corporate entity. Entrepreneurs prefer leasing because it enables them to acquire equipments and make regular payment through earnings generated from use of such leased equipment. Leasing is highly beneficial if the equipment can generate additional earning over and above the lease rental. Thus, leasing is the most popular method of financing and is in the growth finance sector.
The globalization of business has resulted in the need for compatible accounting standards that can be used internationally for financial reporting. As a result, the International Financial Reporting Standards (IFRS) were developed by the International Accounting Standards Board (IASB) to unify the various financial reporting methods and create a single accounting standard which can be applied to any financial statement worldwide (Byatt). The global standardization of financial reporting will increase the readability and enhance comparability of globally traded companies’ financial statements, without the need of conversion or translation. There are a few main differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (U.S GAAP). The increasing recognition and acceptance of the International Financial Reporting Standards by accounting professionals in the United States, will affect the way in which the U.S will record financial statements in the future.
Judgement is a notion of relevance and reliability in developing and applying accounting policies. It is a requirement of management that they exercise a high degree of professional judgement when selecting appropriate accounting policies in the preparation of financial statements that is relevant to decision-making and assessment needs of users. Management should also consider the applicability of IFRS and AASB in dealing with similar and related issues and then the definitions, recognition criteria in the Conceptual Framework when there is no IFRS standard or interpretation in certain circumstances that are specifically applicable. Management may also consider the most current pronouncements of other standard-setting bodies to the extent that do not conflict with IFRS and AASB in developing accounting standards and accepted industry practices by using a similar conceptual framework.
The Financial Accounting Standards Boards (FASB) defined conceptual framework as a consistent of underlying concepts and the ideas that describe the nature and general purpose of financial reporting which may lead to consistent standard in accounting (Deegan 2010). The role of the conceptual framework is to ensure that financial statements in accounting are free from bias and to provide useful information that is useful for user’s decision making. The standard-setting board also formulated a range of perceptions and theories related to accounting to trigger the objectives of financial reporting. The standard-setting board keeps issuing the conceptual framework over time to ensure that the conceptual framework’s objectives are improving to provide useful financial information. The innovative work on conceptual framework was embraced in the United States by the FASB in the early 1970s. The FASB accomplished disappointment in attempting to generate a standard that at the outset might not appear to present, especially testing theoretical issues. Regardless, while attempting to achieve concession on Statement of Financial Accounting Standard, tending to the theoretical issues produced critical matter for the board members. In this manner, throughout the outset the FASB understood the requirement for an obvious conceptual framework. Based on Hines’s argument, the conceptual framework is mean to provide the ability to increase self-regulate of a profession in order to neutralizing government interference from arising. Whether this argument has been accepted or not will be discussed in more detail with supported evidence to clarify the main point about Hines’s argument. Further details about this argument will discuss below.
Lastly the challenges faced by the Islamic banking is the lack of unity in giving Shariah’s view. Therefor, it gives problem to the agencies as there are different methodologies that are being proposed when elaborating the law. In order to counter this challenges, agencies need to take initiatives of choosing the view which is parallel or nearly parallel with what was underlined by the Al-Quran and As- Sunnah.