Author :
Abstract
This study examines how the distinctive contractual characteristics of Islamic financial instruments can be represented within an IFRS-based financial reporting framework while preserving global comparability. Using a normative comparative standards analysis, relevant AAOIFI Financial Accounting Standards are compared with corresponding IAS/IFRS requirements for Murabaha, Mudarabah, Musharakah, Salam, Istisna, Ijarah, and Sukuk. The analysis considers recognition, subsequent measurement, profit or loss recognition, presentation, risk allocation, and settlement. The findings reveal substantial areas of convergence and show that differences between AAOIFI and IAS/IFRS cannot be reduced to opposing measurement techniques. Rather, key divergences arise where contractual structure, legal form, ownership characteristics, and risk allocation affect accounting representation. Some differences concern recognition or measurement, whereas others can be addressed through supplementary presentation or disclosure guidance. Ijarah shows particularly strong convergence potential, while other instruments require greater visibility of contract-specific information. Accordingly, the study proposes selective convergence rather than wholesale incorporation of AAOIFI requirements into IFRS. AAOIFI can serve as a specialised reference for identifying relevant reporting implications, while Shariah-compliance determinations remain outside the IASB's standard-setting role. The study contributes by translating selected AAOIFI–IFRS differences into targeted accounting, presentation, and disclosure guidance within the existing IFRS architecture.
Keywords
Abstract
This study examines how the distinctive contractual characteristics of Islamic financial instruments can be represented within an IFRS-based financial reporting framework while preserving global comparability. Using a normative comparative standards analysis, relevant AAOIFI Financial Accounting Standards are compared with corresponding IAS/IFRS requirements for Murabaha, Mudarabah, Musharakah, Salam, Istisna, Ijarah, and Sukuk. The analysis considers recognition, subsequent measurement, profit or loss recognition, presentation, risk allocation, and settlement. The findings reveal substantial areas of convergence and show that differences between AAOIFI and IAS/IFRS cannot be reduced to opposing measurement techniques. Rather, key divergences arise where contractual structure, legal form, ownership characteristics, and risk allocation affect accounting representation. Some differences concern recognition or measurement, whereas others can be addressed through supplementary presentation or disclosure guidance. Ijarah shows particularly strong convergence potential, while other instruments require greater visibility of contract-specific information. Accordingly, the study proposes selective convergence rather than wholesale incorporation of AAOIFI requirements into IFRS. AAOIFI can serve as a specialised reference for identifying relevant reporting implications, while Shariah-compliance determinations remain outside the IASB's standard-setting role. The study contributes by translating selected AAOIFI–IFRS differences into targeted accounting, presentation, and disclosure guidance within the existing IFRS architecture.
Keywords
AAOIFI, IFRS, Islamic financial reporting, Islamic financial instruments, Selective convergence, Shariah-compliant finance
