Mahnoor Imtiaz

22110065

Cp Assignment

Following is the in-depth analysis into a comparison between AOIFI and IFRS

Two separate contracts are needed for the sale of asset under Ijarah; Contract of sale is signed when
ownership is transferred and before that Contract of Ijarah is signed when asset is being handed over
just for use. On the contrary the conventional leasing only requires one contract which handles the sale
and leasing legalities within.

Another difference is how penalties are placed under these both. In Ijarah the late payment charges are
not counted as the income of lessor but are counted towards the income for the charity being
coordinated by Sharia supervisory board while in conventional leasing covers those charges as time
value of money lost by leasing company, so it is counted as an income for the leasing company.

Furthermore, renting after asset becoming unusable is also different. In the case of Ijarah rentals are
stopped if the asset becomes unusable for whatever reason and under whatever circumstances, while in
conventional leasing the payments are not stopped and are still required to be made on time.

The repair period payments also are dealt differently. Conventional leasing charges the principle amount
as well as the interest during the repair period while under Ijarah no such amount is charged during this
particular period.

The mitigation of risk also is dealt differently. Under conventional leasing it is minimized via insurance
while in Ijarah Takaful is only mode of minimizing the risk.

Moreover, under conventional leasing interest is charged as soon as the contract is signed even if the
asset is not yet under the use of the person, while in Ijarah the rent is charged when the asset starts
coming under the use of the person renting it.

Lastly under conventional leasing the rights and liabilities are within the user themselves, while in Ijarah
all the right and liabilities are with IFI being the primary owner, followed by the related rights and
liabilities only being transferred to the customer.