1.

0 INTRODUCTION

The Islamic monetary framework varies from the customary financial framework
because of its utilization of Islamic Shari'ah rules (for example Islamic law). The
lessons of Islam disallow items that charge riba (for example premium or usury)
which customary banks apply as an expense of propelling credit (Ullah, 2013).
Conversely, Islamic money depends on benefit hazard sharing. Under this model, the
Islamic bank embraces to share benefits got from a speculation by a client just as
potential misfortunes emerging from the endeavor. Islamic banking is proceeding
with its colossal development across the globe with resources coming to up to $1.3tn
(Taplin, 2012). After the foundation of the principal Islamic bank in Dubai in 1975,
Islamic banking expanded quickly and with in excess of 300 banks spread across in
excess of 70 nations. A huge segment of these Islamic banks is situated in nations
containing the Gulf Cooperation Council (GCC) (Ahuja, 2012).

The expanded development has prompted the need to build up an administrative

system to direct their activities and handle the errand of planning valuable principles.
To this end, the Accounting and Auditing Organization for Islamic Financial
Institutions (AAOIFI) was set up in 1991 to plan bookkeeping, examining,
administration, morals and Shari'ah principles for Islamic Financial Institutions (IFI).
Be that as it may, little examination has researched the consistence with such norms
(Sarea, 2015).

Bookkeeping ideas and shows just as bookkeeping principles are created to best serve
financial dynamic of incredible partners. Thusly, bookkeeping capacities as a method
of force (Hopwood and Miller, 2015) and a significant financial apparatus that
associations can use to legitimize a few practices, conceal others, make information
and design choices (Carruthers and Espeland, 2011) on the reason of realism. The
recovery of Islamic financial aspects, particularly the development of Islamic banking
and money, raised worries on the relevance and ramifications of a portion of the
regular bookkeeping standards just as the reason and capacity of bookkeeping and
responsibility. At the point when Islamic monetary organizations (IFIs) cross public
limits, they present further difficulties regarding bookkeeping guideline consistence
(Salah, 2012).
Islamic bookkeeping is impacted by the climate in which it works that is the reason
Salah (2012) utilized a somewhat extraordinary definition to allude to as the way
toward recognizing, estimating and conveying monetary and other pertinent data,
roused by Islamic perspective and morals and followed the "shariah" (Islamic law) to
allow educated decisions and choices by potential and anticipated that users of
information should upgrade social government assistance and look for mardhatiallah
(the gifts of Allah) (Ousama, 2013). Accordingly, the paper attempts to look at the
revelation consistence with explicit AAOIFI monetary bookkeeping norms identified
with the most utilized Islamic financing results of Murabaha, Mudaraba Financing
and Musharaka. It thinks about the consistence of exposure of Islamic banks in Qatar
with Bahrain which is accepted to be further developed as far as the use of AAOIFI
bookkeeping norms. This examination could likewise show the inadequacies in the
use of AAOIFI monetary bookkeeping principles by Islamic banks in the two nations
(Fatima, 2017).

2.0 TO WHAT EXTENT THE DIVERGENCE/CONVERGENCE OF ISLAMIC

AND WESTERN FRAMEWORKS?

Monetary detailing in IFI industry is not quite the same as customary association
because of the idea of Islamic financing tasks and the agreements hidden these
exchanges, additionally the fiscal summaries of IFI should reflect consistence with
shariah prerequisites. The segments of IFI incorporate (accounting report, pay
articulation, among others). By and large those articulations above are normal to
regular and IFI, besides the IFIs are needed to reveal as per AAOIFI guidelines:
Statement of changes in limited speculations; Statement of sources and employments
of assets in the Qard/Hassan and good cause store; Statement of sources and
employments of assets in the zakat reserve (Naim, 2017).

As indicated by Hamid (2016), numerous methodologies that manage the IFI through
nations, for instance, concerning the shariah sheets a few nations require shariah
board for each bank like Kuwait, while different nations, like Malaysia, embrace
separate shariah sheets for each save money with a shariah administrative leading
group of Central bank that carries soundness to the business as it holds a definitive
choice on the legitimacy of new agreement; this additionally lessens the disparity
between fatawas gave by the shariah sheets of IFI. Concerning the shariah board, Iran
could be considered as an anomaly frequently ignored; as it is a representation of
country that doesn't need shariah board (Mardini, 2013).

As indicated by (Archer and Karim, 2016), the AAOIFI bookkeeping principles are
set up after the equivalent fair treatment as the IFRS; which incorporates in addition
to other things, the issuance of openness drafts and holding formal conference. The
significant undertakings of AAOIFI are the normalization and harmonization of
global Islamic money rehearses, the confirmation that shariah standards and rules are
regarded in Islamic monetary foundations, the help of the development of the business
via trainings, courses, and distribution of periodical pamphlets.

While planning and introducing their fiscal reports, the AAOIFI has embraced a few
suppositions: IFI should conform to it, by receiving those suspicions as a body-setting
had settled on options from various ways of thinking to furnish the business with
presumptions that work with the combination of IFI into worldwide monetary
business sectors; despite the fact that a supposition that is denied by the greater part of
shariah researchers (Karim, 2016). These divergences between researchers establish
an obstruction to bookkeeping improvement in this area, since it makes issues
concordance practically speaking.

This suspicion acknowledges the duration of presence of IFI, the reception of such
position is defended by the assessment of numerous researchers who consider that
except if the mudarabah contract stipules a restricted term, the coherence is assumed
(Marston, 2015). Numerous researchers protect this situation by reference to Islamic
standard of Istishab "assumption of progression". The AAOIFI Statement of Financial
Accounting (SFA) perceives a different bookkeeping element for IFI from its
proprietors, researchers like Khoja (2013) who acknowledge it, contend that during
the early hundreds of years of Islam this partition was recognized in open area in both
the establishment of enrichment (waqf), and in the public depository and by utilizing
the standard of Maslaha characterized as the demonstration of looking for a decent,
and the aversion of an insidious as perceived by the Shariah (Karim, 2016).

This Maslaha ought to meet to points of shariah (Maqâsid) characterized by Imam

Alghazali as the advancement of prosperity of all humankind by defending their
confidence (noise), their human self (nafs), their mind (aql),their descendants (nasl)
and their riches (mal). Kamil (2016) have stretched out this idea to private substances
like companies. The exposure standard expresses that an element needs to deliver data
that impacts the fiscal summaries translations; these revelation should empower a
reasonable introduction Islamic researchers acknowledge it, by the by, a significant
point that Islamic bookkeeping doesn't allude to is the part of substance over structure
under which the representing exchanges is identified with their substance and
financial reality and not just their authoritative document. This idea is one of the vital
determinants of dependable data in the IFRS system, while; it isn't acknowledged by
the AAOIFI (Karim, 2016).

3.0 WHAT ARE THE ADVANTAGES/DISADVANTAGES AND

STRENGTHS/WEAKNESSES OF EACH FRAMEWORK?

Ullah (2013) analyzed the consistence of AAOIFI rules in regards to general

introduction and divulgence in the fiscal reports of Islamic banks recorded in
Bangladesh. The examination analyzed seven Islamic banks recorded on the
Bangladesh Stock Market and included 203 things of consistence. Ullah (2013)
inferred that the degree of consistence was moderately low, as just 91 of the 203
things were unveiled. Thus, he suggests that the Islamic banks should build the degree
of consistence with the norm and better reveal the budget reports. A constraint of this
examination was its rejection of other IFIs that would have extended the example to
give more dependable discoveries.

Sarea and Hanefah (2013a, 2013b) at that point utilized the dispersion advancement
hypothesis to look at consistence with AAOIFI bookkeeping guidelines. The
examination saw that advancement dissemination of thoughts encourages reception.
They found that bookkeepers' insights fair and square of consistence with AAOIFI
impacted their choice to follow AAOIFI principles. Also, the discoveries showed a
positive connection between relative benefit, similarity and perceptibility and AAOIFI
bookkeeping principles. This implies that the relative benefit, similarity and
recognizability of the AAOIFI bookkeeping principles implies the more probable the
norms will be embraced.

Conversely, the discoveries showed a negative connection between trialability,

intricacy and AAOIFI bookkeeping guidelines. Having a negative connection among
trialability and AAOIFI norms shows that Shari'ah standards were not being
attempted, however they should be completely received by all gatherings. The
negative connection among intricacy and AAOIFI principles implies that the less
intricate the bookkeeping norms are, the almost certain they were to be embraced.

To be dependable, data should address reliably the exchanges and different occasions
it either implies to address or could sensibly be required to address. In this way, for
instance, a monetary record ought to address dependably the exchanges and different
occasions that bring about resources, liabilities and value of the element at the
announcing date which meet the acknowledgment models.

Al-Abdullatif (2017) inspected the use of the AAOIFI principles by the Islamic
financial area in Saudi Arabia. The investigation investigated the adequacy and
significance of Islamic banks' yearly reports from the perspective of members. Also,
the examination investigated the members' perspectives with respect to the
Islamization of customary banks in Saudi Arabia inferring that numerous respondents
showed acknowledgment for the use of AAOIFI bookkeeping guidelines in the
country. Prominently, members expressed that there is a need to include the
establishments in the standard setting measure. Numerous members called attention to
the need to fabricate a solid AAOIFI information base that is open to all classes of
clients and the need to offer more preparing for chiefs and bookkeepers to improve
their capacity to manage AAOIFI bookkeeping norms.

Different examinations that researched the AAOIFI norms issues zeroed in on a

solitary norm for top to bottom investigation. One of the norms that pulled in
numerous investigations is the sukuk standard (for example Islamic bonds). Large
numbers of the investigations analyzed and examined the nature and impacts of the
new AAOIFI sukuk professions gave in 2008 (Ali, 2008; Kamil, 2008; Lahsasna and
Idris, 2008; Naim et al., 2013). For instance, Naim et al. (2013) investigated the new
guidelines on sukuk that were given by AAOIFI because of Sheik Taqi's solid
analysis that 85% of sukuk issuance didn't follow the lessons of Shari'ah. By
analyzing tests earlier and after the profession and focusing on debateable regions in
the declaration, for example, possession move, valuing and ensure component, the
analysts found that there were minor changes on the guideline term and condition
after the proclamation. The examination suggested that the new declaration didn't
have a lot of impact in changing the Shari'ah counsels and industry players when
settling on more precise standards and choices.
Likewise, Salah (2010) in his examination inspected what the 2008 AAOIFI sukuk
declaration meant for the legitimate, underlying highlights of (value based) sukuk
structures and talked about ongoing endeavors to issue (value based) sukuk structures
that follow Shari'ah lessons. The examination found that experts should fathom that
(value based) sukuk is certainly not a static and unequivocal item. The examination
explained the different systems identified with structure. It likewise demonstrated the
impediments of the utilization of procurement endeavors is just permitted at market
worth and fixing the occasional installments should be dependent upon genuine
valuation at development.

A contextual investigation of the Saudi Hollandi Bank by Naim (2013) represented

how certain creative components could be applied to these exchanges: the utilization
of a save account and on-account installments subject to genuine valuation are
Shari'ah's obliging instruments that experts can apply. In any case, certain parts of the
construction of the Saudi Hollandi Bank sukuk brought up issues that merit seeing for
the further improvement of the sukuk market. In addition, Ali (2015) featured some
new enhancements and issues in sukuk in the light of the AAOIFI Shari'ah
declaration. The investigation tracked down that the AAOIFI declaration brought
about a reconsideration of market familiarity with sukuk. Sukuk ought not and could
at this point don't be seen as a rigorously fixed pay instrument with capital
conservation highlights. In the event that the proclamation is severely clung to, the
value based sukuk ought to carry on like value instruments and not to be pulled to find
a way into the fixed pay box.

Further, Lahsasna and Idris (2016) analyzed the AAOIFI sukuk proclamation in 2008.
It tracked down that the AAOIFI declaration is to guarantee the Shari'ah consistence
in sukuk issuance and exchanging. In addition, the examination reasoned that it is
essential for the sukuk business to meet the necessities of the AAOIFI declaration to
guarantee the attractiveness of the item, particularly in the event that it is for the
worldwide market.

4.0 EVALUATE THE PRESENTATION AND DISCLOSURES OF

MUDARABAH, MUSHARAKAH, MURABAHAH, IJARAH AND SUKUK IN
THE BANKS’ FINANCIAL STATEMENTS.
Nadzri (2016) inspected the viability of AAOIFI in managing the bookkeeping and
divulgence of zakat and riba in IFIs. By utilizing content examination and including
25 IFIs that are individuals from AAOIFI, the analyst inferred that the degree of
divulgence by the tested IFIs is lower than the AAOIFI necessities. Additionally, the
examination tracked down that the IFIs observing AAOIFI norms offer more
exposure contrasted with non-supporters of AAOIFI guidelines. In any case, the
exploration incorporated a little example of AAOIFI individuals and inspected just
restricted norms. Nadzri (2016) suggested that further examinations can be led on a
bigger example zeroing in on more guidelines. He likewise suggested the
appropriation of substance examination through a joined quantitative and subjective
methodology for more powerful outcomes. Various examinations that have been
directed on Bahrain because of the generally enormous number of IFIs utilizing
AAOIFI norms (Vinnicombe, 2012).

A few investigations utilized bookkeepers' discernments as a pointer (Sarea, 2012;

Sarea and Hanefah, 2013a, 2013b), while others analyzed budget reports as a marker
(Vinnicombe, 2012). Sarea (2012) inspected the degree of consistence of bookkeeping
rehearses with AAOIFI guidelines. Utilizing 129 surveys managed to bookkeepers
from different Islamic banks in Bahrain and utilizing clear insights to investigate the
outcomes, the examination found that there was an undeniable degree of consistence
with AAOIFI guidelines. The examination recommended that the purpose for the high
consistence is because of the consistency of the norms with the guideline forced by
the national bank in Bahrain.

An investigation by Vinnicombe (2016) inspected the level of consistence following

the methodology received by Tower et al. (1999) and Taplin et al. (2002). The
methodology included investigating consistence by creating two separate files to
comprehend the level of consistence and their unwavering quality. At first, the
investigation created two files yet broadened the center acquiring from past
examinations that inspected the level of consistence of Islamic banks in Bahrain with
AAOIFI principles. The examination conquered issues identified with subjectivity and
restricted principles remembered for the past investigation by including the whole
Islamic banks authorized by the national bank in Bahrain. Vinnicombe (2016)
estimated the consistence comparable to few Islamic financing items and issues
explicit to Mudaraba, Musharka, Murabaha, zakat and SSB prerequisites, confined
venture accounts and unhindered speculation accounts. The examination built up the
exposure list dependent on the utilization of items because of various reasons. To
begin with, it offers better knowledge into the general consistence by Islamic banks.
Second, a few agreements are covered by more than one norm, and a few guidelines
cover more than one item. The examination tracked down an undeniable degree of
consistence with AAOIFI guidelines, yet there was no increment in consistence in the
course of recent years. The outcomes showed a generally low degree of consistence
concerning zakat. Interestingly, the appropriation of SSB necessities showed the most
elevated level of consistence. Consistence with the three items is high particularly for
the non-infringement for nondisclosure. The examination prescribed the need to
command the reception of zakat norms. Notwithstanding, there are a few restrictions
in this investigation, for example, barring banks outside Bahrain since Bahrain was
the lone country where Islamic banks are ordered to conform to the AAOIFI norms at
the hour of the examination.

5.0 UPGRADES TO BE MADE TO THE CURRENT ACCOUNTING

PRACTICES BY THE ISLAMIC BANKS

One of the principle issues confronting Islamic banking incorporates an absence of

normalized bookkeeping and evaluating guidelines (Pomeranz, 2016).
Notwithstanding, traditional bookkeeping is improper for Muslim clients and Islamic
associations (Hameed, 2014), and it is unseemly to force unmodified Western
bookkeeping rehearses on agricultural nations (Karim, 2013). Furthermore,
International Accounting Standards dependent on such procedures would make
troubles for Muslims all throughout the planet. Thusly, it is basic for the Muslim
bookkeepers to create bookkeeping principles that are extraordinarily adjusted to
Islamic requirements and for Muslim nations (Shadia and Rahman, 2015).

There is absence of proof with respect to the appropriation of the Islamic bookkeeping
norms and examination of Islamic financial standards under the public Shari'ah
warning board, national bank jobs, political frameworks, and monetary designs. Also,
the serious issue is in the premise of bookkeeping principles and exposure in IFSs that
is as yet dependent on the ordinary bookkeeping theory (Harahap, 2013). The
reception of bookkeeping guidelines by Islamic banks will help improve their validity
and fuel their development around the world (Ariss and Sarieddine, 2014). Be that as
it may, the quick advancement of Islamic monetary organizations needs principles for
revealing data, fulfilling the overall norms of exposure as well as guidelines
identifying with Islamic qualities (Harahap, 2013). The genuine state and the degree
of execution of the Islamic Accounting Standards, like AAOIFI, prerequisites among
Islamic banks is right now obscure and should be examined dependent on the way that
these necessities are deliberate, and nobody has the position to implement them
(ARISS, 2014).

What's more, because of the shortfall of Islamic bookkeeping principles, Islamic

monetary organizations at present have applied distinctive bookkeeping guidelines to
their readiness of monetary revealing. In this manner, varieties exist regarding their
class structure, political frameworks, general sets of laws, monetary frameworks,
instructive frameworks, and the actual idea of directing business and business
proprietorship (Choi and Meek, 2015). Moreover, the issue might be because of
absence of portrayal of the assorted climate factors because of embracing or following
distinctive bookkeeping norms by Islamic banking. These distinctions among nations
would direct extraordinary bookkeeping rehearses, each intelligent of the natural
variables of its individual country. A solitary, blended norm of bookkeeping practices
would be unseemly and not delegate of the relative multitude of differed ecological
variables displayed in worldwide business sectors (Lovett, 2012). Be that as it may,
bookkeeping norms are utilized to produce similar and solid bookkeeping data to help
financial backers, lenders, and different clients to settle on venture choices. These
guidelines mirror the way of life, history, and different attributes of bookkeeping
issues confronting that country (Abonewa, 2015).

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