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Time value of
Time value of money in Islamic money
accounting practice: a critical
analysis from maqa
sid

al-Sharī‘ah
Ahmad Baehaqi
Department of Islamic Accounting, Sekolah Tinggi Ekonomi Islam (STEI) SEBI,
Depok, Indonesia Received 27 September 2018
Revised 18 June 2019
17 December 2019
M. Nur A. Birton 7 April 2020
Department of Accounting, Universitas Muhammadiyah Jakarta, 9 June 2020
31 August 2020
Jakarta, Indonesia, and Accepted 12 September 2020

Fahmi Ali Hudaefi

Institut Agama Islam Darussalam (IAID) Ciamis, West Jawa, Indonesia and
Department of Publication and Networking, BAZNAS Center of Strategic Studies,
Jakarta, Indonesia

Abstract
Purpose – This paper aims to critically analyse the application of present value (PV) practised in the
concept of time value of money (TVM) from the perspective of maq
asid
al-Sharī‘ah (objective of Islamic law)
explained by Ibn ‘Ashur. The analysis is important as this concept has been adopted in the practice of Islamic
accounting measurement.
Design/methodology/approach – This paper uses qualitative research approach. The authors first
review literature related to TVM in Islamic perspective to understand the extent to which the scholarly
articles have been discussing this topic. Furthermore, the authors conduct face-to-face interviews with the
experts to comprehend the means of TVM application in the recent Islamic accounting practices. The tawhid
(monotheistic) paradigm is further used with special reference to the concept of maq
asid
al-Sharī‘ah of Ibn
‘Ashur to critically analyse the practice of TVM in Islamic accounting measurement.
Findings – This study identifies the opposing views among the experts on the topic of TVM from the
Islamic perspective. That is, the experts’ opinion on this issue can be classified into two. Firstly, a view that
rejects TVM and proposes the concept of economic value of time. Secondly, an opinion that recognises TVM
with the basis of bay’ al-mu’ajjal (deferred sale). This paper further critically analyses these two opposing

al-Sharī‘ah as explained by Ibn ‘Ashur
opinions. The discussion is established based on the theory of maq
asid
and the excerpts from interviewing the experts. This work draws a conclusion that such PV-based
measurement of TVM does not meet the Islamic principles explained in the theory of Ibn ‘Ashur’s maq
asid
al-
Sharī‘ah. Thus, the practice of PV measurement in Islamic accounting is debatable.

This paper is a part of the corresponding author’s master dissertation submitted to the University of
Muhammadiyah Jakarta, Indonesia. This paper was also presented at the 3rd Gadjah Mada
International Conference on Islamic Accounting and Finance in September 2018, at the University of
Gadjah Mada, Yogyakarta, Indonesia. The authors would like to thank the editor (Prof Dr
Mohammad Hudaib) and the anonymous reviewers for constructing comments and suggestions. The
authors also thank Dr Murniati Mukhlisin, the Rector of Institut Tazkia, for her contribution to
improving this paper The corresponding author also thanks The Ministry of Education and Culture
Journal of Islamic Accounting and
of Indonesia for awarding the author an Excellent Scholarship Program (Beasiswa Unggulan Business Research
Masyarakat Berprestasi) during his master’s degree study in University of Muhammadiyah Jakarta, © Emerald Publishing Limited
1759-0817
Indonesia. All errors remain with the authors. DOI 10.1108/JIABR-09-2018-0155
JIABR Research limitations/implications – This study does not establish a positivism discussion. It is thus
the generalisation of this work is not applicable to the Islamic perspective in general. Rather, it is limited to
Ibn ‘Ashur’s maq
asid

al-Sharī‘ah.
Practical implications – An analysis of PV measurement adoption in Islamic accounting from maq
asid

al-Sharī‘ah perspective is practically important to raise the awareness that such practice is debatable in
Islamic principles. That is, such debate opens new arena for academics, industry professionals and other
related stakeholders to further discuss an ideal practice of Islamic accounting.
Originality/value – This paper is among the pioneers that analyses the concept of TVM, in particular
relation to PV measurement in Islamic accounting practice from the perspective of Ibn ‘Ashur’s maq
asid
al-
Sharī‘ah.
Keywords Time value of money, Accounting measurement, Present value, Maq
asid

al-Sharī‘ah
Paper type Research paper

1. Introduction
The theoretical ground of money-based measurement is critical in accounting world
(Ahmed, 1994; AAOIFI, 2001; IAI, 2007; Kieso et al., 2014), including in the Islamic
accounting practices. There are four methods of Islamic accounting that the Financial
Accounting Standard Board (FASB) and the International Accounting Standard Board
(IASB) have established. They are historical cost, current cost, net realisable value and
present value (PV) or discounted value (FASB, 1984; IASB, 2010). In the recent practice of
Islamic accounting, most of the institutions have been adopting the existing conventional
measures (KPMG and ACCA, 2010; Gharbi, 2016). For example; the Malaysian Accounting
Standards Board (MASB) has been treating the Islamic financial transactions with PV
approach (ISRA, 2011; Shafii et al., 2013; Siswantoro, 2016, 2018). KPMG and ACCA (2010)
explained that PV method has been used by the Islamic financial institutions (IFIs) to
calculate the impairment losses and valuation techniques to obtain fair value. In Indonesia,
such practice has been adopted to calculate the impairment of loss on mur
abahah
receivables (Wiroso, 2014).
In the published scholarly works of Islamic finance, the adoption of PV in Islamic
accounting is debatable. The use of discounted cash flows to derive fair value estimation
remains a controversial issue under the Sharī‘ah framework (Gharbi, 2016). The
measurement of PV is endogenous in the concept of TVM, which the interest rate is
exogenous in the calculation of PV (PwC Indonesia, 2010). To the best of authors’
knowledge, such controversial practice has been occurring owing to the interest rate is
synonymous to rib
a (usually translated as interest or usury) which Islam forbids it.
However, the experts’ opinion has been varied whether the interest rate in the calculation of
PV meets the form of rib
a. Some of the experts are of the view on the permissibility of
interest rate as the pricing benchmark because rib
a happens only on a loan transaction
(Rosly, 2005, 2015; PwC Indonesia, 2010; Shafii et al., 2013). This is further supported by the
view that Islam recognises TVM in the context of bay’ al-mu’ajjal (deferred sale) (Rosly,
2005, 2015; Shafii et al., 2013). Nevertheless, others argue that TVM is impermissible in
Islam, and they propose the concept of economic value of time (EVT).
The debate on PV measurement in Islamic accounting demands further an extensive
discussion. The existing studies on this topic have primarily discussed the technical
perspective to understand the benefit that has been gained from such practising PV in
Islamic accounting. The recent works also have proposed some guidelines to adjust the
practice of PV being compatible with the Sharī‘ah. Meanwhile, the academic work that has
discussed such issue from the fundamental of Sharī‘ah remains insignificant. Thus,
analysing the concept of TVM and rib
a, and their relation to PV measurement is
fundamentally significant to understand the acceptance or rejection of such practice in Time value of
Islamic accounting measurement. On this basis, this work aims to analyse this issue from money
maq
asid

al-Sharī‘ah perspective explained by Ibn Āshūr.
To this end, this paper has been organised as follows. Section 2 presents studies in
accounting measurement issues and maq
asid
al-Sharī‘ah. Section 3 offers tawhīd paradigm
and maq
asid

al-Sharī‘ah methodology. Section 4 draws an analysis based on maq
asid
al-
Sharī‘ah upon the issue being discussed. Section 5 concludes and provides relevant
recommendation for future research.

2. Literature review
An accounting measurement intends to determine the monetary unit attached to a
transaction object or event so as to deliver a piece of semantic information (Suwardjono,
2005; Godfrey et al., 2010). In Islamic accounting, there are various approaches to study and
develop such measurement methods. Napier (2007), Yaya (2004) and Karim (1995) offered a
deductive approach by referring to the two principal sources of Islamic jurisprudence, which
are al-Qur’
an and al-Hadīth. In their studies, they derived these two primary Islamic law
sources into the concepts, principles and practical guidelines for Islamic accounting. Such
approach provides an authentic Islamic accounting method.
Aljedaibi (2014) explained the prohibition of unfair practice as the fundamental of Islamic
accounting. The Islamic values from al-Qur’
an and al-Hadīth, such as al-’adalah (justice),
honesty and others, are mentioned as the basis of Islamic accounting. Furthermore, the hal
al
provision is a unique factor in constructing the Islamic accounting measurement. This
provision requires the idea of accounting that must be free from the elements of rib
a and
gharar (uncertainty) (Haniffa and Hudaib, 2002).
The recent practice in calculating, assessing and determining the amount of zak
ah has
been proposed as the basis of the Islamic accounting measurement by Yaya (2004). In zak
ah
accounting, Mufraini (2006) explained the valuation of inventories or assets is assessed at
the end of the term based on the prevailing market exchange rate (a market price or value).
This practice implies that zak
ah accounting has been adopting the method of current cost
(Adnan, 1997; Adnan and Gaffikin, 1997; Baydoun and Willett, 1997, 2000; Yaya, 2004).
Apart from that, the concept of maq
asid
al-Sharī‘ah (Mulawarman, 2012; Aljedaibi, 2014) is
also relevant to the Islamic accounting discussion. This concept represents an Islamic
perspective in determining whether the current conventional accounting methods applied
are in accordance with Sharī‘ah principles.
It is thus the measurement based on the interest rate and the concept of PV as applied in
TVM has the potential to oppose the principles of Sharī‘ah owing to its relation to rib
a
(Muhammad, 2003; Vinnicombe and Park, 2007). Nonetheless, there is a view that allows the
application of TVM in a sales contract with the argument that the use of PV and interest rate
is merely for mathematic calculation.

2.1 Time value of money and present value in Islamic perspective

The concept of TVM and PV relates to the idea of the interest rate. The adoption of this
concept in Islamic accounting has been debatable among the topic experts. In the recent
debate, the Islamic finance experts’ opinion can be classified into two:
(1) those who have acknowledged that Islam is not against TVM with proposing the
concept of bay’ mu’ajal as the main argument; and
(2) those who have rejected the TVM and introduced the concept of EVT.
JIABR The experts who argue that Islam recognises TVM include Zarqa (1983), Khan (1991);
Khaf (1994), Ahmad and Hassan (2004); Rosly (2005), Abdul Khir (2013); and Suharto
(2018). They shared similar thoughts on the higher price charged in the differed
contract as a form of TVM. Such agreement allows additional earnings because
payments being delayed (Rosly, 2005, 2015; Abdul Khir, 2013; Suharto, 2014). This view
is seen to be in line with TVM, as it includes time as a part of the calculation in the
pricing of goods and services. Thus, discounting in sales contracts is permissible given
it is considered only a mere mathematical calculation that does not relate to the interest
rate (Zarqa, 1983). Furthermore, they also claim that TVM does not justify the interest,
yet interest itself as the opportunity cost that seems to justify TVM (ISRA, 2011).
Likewise, in bay’ mu’ajal case, an additional profit on a deferred payment or credits
represents an opportunity cost that is seen to be similar to the interest charged in a loan
contract.
Nevertheless, the expert’s idea of using interest rate as a benchmark of discount rate has
been different. Some are of the view of its permissibility, whereas some others are on the
contrary (Shafii et al., 2013). The opinion of the first group was approved by the Sharī‘ah
Advisory Council of the Central Bank of Malaysia and MASB. The accounting standards for
IFIs in Malaysia allows the measurement of PV accounting in sales transaction such as
mur
abahah.
Meanwhile, the experts who oppose the TVM include Gambling and Karim (1986),
Tomkins and Karim (1987); Khan (1992), Muhammad (2003); Vinnicombe and Park (2007),
Ismal (2012); Adnan and Muhammad (2014), Supriyanto (2015). According to Gambling and
Karim (1986), the prohibition of rib
a is representative of Sharī‘ah rejects TVM that justifies
interest, which is one of the forms of rib
a. Khan (1994) explained that TVM is the entrance to
rib
a. Thus, the acknowledgement of TVM may lead to practising rib
a. Khan (1994)
demonstrated the PV technique is not a mere mathematical calculation, as it justifies
interest. Hence, the main issue of PV is not only its relation to the interest rate but also the
concepts or assumptions behind the method.
Furthermore, Muhammad (2012), Adnan and Muhammad (2014); Supriyanto (2015)
stated that TVM is a subjective concept. The foundation behind the concept of inflation
and consumption presumption is a petty argument (Karim, 2007; Muhammad, 2012;
Adnan and Muhammad, 2014). Muhammad (2003), Vinnicombe and Park (2007)
elaborated that the discount technique is full of subjective value judgments and
estimation mix. The TVM concept that assumes the discount factor must be positive is
an unrealistic assumption. The nature of money in Islam is a tool of exchange with a
flow concept that keeps circulating, unlike goods or commodities (Karim, 2007;
Muhammad, 2012; Adnan and Muhammad, 2014). Therefore, the additional price in the
deferred sales cannot represent the recognition of Islam to TVM and ignoring the
assumptions applied in the TVM.
The experts who opposed the TVM proposed the concept of EVT. This notion treats that
time has economic value only (Antonio, 2000; Karim, 2007). In the current practice of Islamic
accounting, this EVT has been adopted by AAOIFI and the Indonesian Sharia Accounting
Standards Board of the Indonesian Institute of Chartered Accountants.
From the elaboration in the texts mentioned previously, the opposing thoughts among
the experts upon the TVM and PV and their relation to rib
a have now been identified. This
work further attempts to analyse the practice of PV in Islamic accounting measurement
from Ibn ‘Āshūr’s maq
asid
al-Sharī‘ah given such discussion remains insignificant in the
current literature.
2.2 Ibn ‘
ashūr perspective on maq
asid
al-Sharī‘ah as the research methodology Time value of
Maq
asid

al-Sharī‘ah is the objective to realise the masla

hah
(welfare) of the human (Al- money
Raysuni, 2005). Sharī‘ah aims to fulfil human needs by means of achieving masla
hah

and
avoiding mafsadah (damage) (Sahroni and Karim, 2015).
The scholars have been contextualising maq
asid
al-Sharī‘ah concept in the discourse of
Islamic economics. For example, in the measurement of IFIs performance, at least
Mohammed et al. (2008), Hudaefi and Noordin (2019) have developed the model of analysis
based on maq
asid
al-Sharī‘ah of Mu hammad

Abū Zahrah and Al-Ghaz
alī, respectively.
Meanwhile, Ashraf and Lahsasna (2017), Hanif (2018) proposed Sharī‘ah risk ratings for
IFIs. Furthermore, the concept of maq
asid
al-Sharī‘ah has been engaged to contextualise the
Islamic perspective and corporate social responsibility. The study on this topic at best have
been done by Dusuki and Abdullah (2007), Sairally (2013). In addition, maq
asid
al-Sharī‘ah
also has been used in the discourse of economic development. For example, Hudaefi and
Heryani (2019) discussed this theory and local economic development concept to study the
role of an Islamic institution in promoting these ideas.
Furthermore, the analysis of masla
hah

in the recent practices of IFIs, at least have been
done by Ishak (2019) in Malaysian’s IFIs context. Meanwhile, the idea of zulm (injustice and
exploitation) that may potentially exist in the concept of rent-seeking behaviour, and the
case of interest-free IFIs, have been studied by Farooq (2019), Mohammed and Waheed
(2019), respectively. Besides, fiqh (Islamic jurisprudence) analysis on the recent practices of
IFIs contracts has been addressed, at best by Ahmad and Ansary (2017), Hussain and Ali
(2017); Hamour et al. (2019).
Meanwhile, the studies that have pioneered the discussion of Islamic accounting in
general, at best have been done by Umar and Kurawa (2019). They discussed business chain
from an Islamic accounting viewpoint. Moreover, the studies that have explicitly discussed
the Islamic accounting measurement from maq
asid
al-Sharī‘ah may include the works of
Mulawarman (2012), Alim (2014); Birton (2015), Birton and Sholihin (2018). In general, their
works have discussed the position of maq
asid
al-Sharī‘ah as a basis for developing the
Islamic accounting measurement. They argued that maq
asid
al-Sharī‘ah is a concept that
plays the key to assess the conformity of the accounting practice in IFIs with Islamic law.
It is thus understood that maq
asid
al-Sharī‘ah theory has been used as research
methodology in the recent discourse of Islamic economics. The classical maq
asid
developed by
the traditional Islamic scholars does not cover the specific purposes of a group of law which
include certain fiqh
topics (Auda, 2008a, 2008b). Hence, it is less relevant to the current context,
including to analyse the practice of PV as an Islamic accounting measurement. That is,
therefore, this paper uses Ibn ‘Āshūr’s contemporary theory of maq
asid
al-Sharī‘ah to critically
analyse the practice of TVM and PV in Islamic accounting. The reason for using so is owing to
the comprehensiveness of Ibn ‘Āshūr’s contemporary thought.
Theoretically, Ibn ‘Āshūr (2006) divided maq
asid
al-Sharī‘ah into two:
(1) maq
asid
al-’
ammah (general goal); and
(2) maq
asid
al-kh
as
sah

(specific purpose).
Maq
asid

al-’
ammah is the goal of wisdom desired by Allah subh

anahu wa ta‘
al
a (as-Sh
ari’)
in all laws (tashri’) or most of them, where the purpose is not specific to a particular issue of
Sharī‘ah law. Whereas maq
asid
al-kh
as
sah

is the maq
asid

which Allah subh

anahu wa ta‘
al
a
orders to realise functional human objectives or to maintain the masla
hah

in their actions in
particular. The division of Ibn ‘Āshūr’s maq
asid

includes:
 al-maq
am;
JIABR  al-istiqra’ (induction); and
 al-tamyīz baīna al-washīlah wa al-maqshūd.

Al-maq
am is the process of maqshūd (understanding the ultimate meaning or goal and
wisdom)) contained in khit
ab syar’i (a script in Islamic law sources) concerning the situation
of the text, or spoken speech. Al-istiqra’ is to conclude the study on the problems and laws
that are partial to the general rule. The induction is done by tracing the ’illat of law then
draws the conclusion based on the similarity ‘illat. Al-tamyīz baīna al-washīlah wa al-
maqshūd means to distinguish between wasīlah (means) and maqshūd (goal). Thus, it
identifies the ways to reach maq
asid

al-Sharī‘ah (Al Hasany, 1995; Ibn ‘Āshūr, 2006).
Kamali (2008) elaborated that the formulation of classical maq
asid
al-Sharī‘ah
experienced significant development during the time of al-Ghaz
alī and al-Sh
a tibī.

Table 1
shows the differences between maq
asid
al-Sharī‘ah explained by al-Ghaz
alī and al-Sh
a tibī


and Ibn ‘Āshūr.

3. Research method
3.1 In-depth interview
This study lies in a critical tawhīd (monotheistic) paradigm that also has been developed by
Choudhury (2018). This method allows the introduction of al-Qur’
an, al-Hadīth and intuition
as part of its epistemology. Criticism aims to provide awareness that the concept of TVM
and PV from an Islamic perspective requires a careful examination. This study first
performed a systematic review to search the existing literature analytically for describing
and combining research evidence (Grant and Booth, 2009; Hudaefi, 2020).
Furthermore, an in-depth interview with the experts was engaged to gain a comprehensive
understanding that the literature does not offer. The purpose of the interview is to support the

Al-Ghaz
alī (d. 1111 M) Al-Sh
a tibī

(d. 1388 M) Ibn ‘Āshūr (d. 1907 M)

Al-Ghaz
alī ordered the Al-Sh
a tibī

‘necessities’ that Al-
Juwayni suggested as
follows: al-dīn (faith), al-
nafs (soul), al-aql (mind),
al-nasl (offspring) and al-
m
al (wealth). Al-Ghaz
alī
also coined the term al-
hifz (preservation) of these
necessities. Al-Ghaz
alī
differed maq
asid

into two;
religious maq
asid

or
religious purpose (faith)
and worldly maq
asid

or
worldy purpose (soul,
mind, offspring and
Table 1. wealth)
Maq
asid

al-Sharī‘ah
of al-Ghaz
alī, al-
Sh
a tibī

and ibn Source: Adapted from Al Hasany (1995), Ibn Ashur (2006), Al-Raysuni (2005), Kamali (2008) and Auda
‘
ashūr (2008a, 2008b)

adopted the same terminology Ibn ‘Āshūr is renowned as the
used by Al-Juwayni and Al-Ghaz
alī. Al- father of contemporary
Shatibi is renowned as the father of Maq

al-Sharī‘ah. To
asid
traditional Maq
asid

al-Sharī‘ah improve the extent of law, he
He divided Maq
asid

al-Sharī‘ah divided maq
asid

into 3 levels;
into two parts, namely, Maq
asid

al-Sh
ari‘ maq
asid

al-’
ammah (general
(Allah’s objectives) and Maq
asid
al- objective), maq
asid

al-kh
as
sah


Mukallaf (human’s objective). The Five (specific objective) dan
forms of Maq
asid

al-Sharī‘ah which become maq
asid al-khit

abiyah (purpose
the Maq
asid

al-Sh
ari‘ called al-kulliyat al- of Speech). Ibn ‘Āshūr
khomsah consist of hifz al-dīn (the proposed that the universal
preservation of religion), hifz al-nafs (the maq
asid of the Islamic law is
preservation of life), hifz al-aql (the to maintain orderliness,
preservation of intellect), hifz al-nasl (the equality, freedom, facilitation
preservation of progeny) and hifz al-m
al (the and fitrah (the preservation of
preservation of property). Keeping the five pure natural disposition)
forms of Maq
asid

comprises of three levels;
daruriyyah (the necessities), hajiyyat (the
needs) and tahsiniyyat (embellishments)
authors’ critical analysis upon the perspective of maq
asid

al-Sharī‘ah on the application of PV Time value of
in Islamic accounting measurement. Table 2 details the interviewee demographics. money
The authors understand that the reliability of research requires credibility,
transferability, dependability and confirmability. In this work, the reliability is depicted by
the authors’ selection of the competent participants and triangulating data sources. The
transferability is gained by explaining in detail and systematically discussed the main topic.

No. Experts Background Expertise

1 Interviewee A A member of the National Sharī‘ah Board – Maq

al-Sharī‘ah, fiqh

asid
Indonesian Council of Ulama (BPH-DSN), A (Islamic jurisprudence),
member of Indonesian Sharia Accounting mu
amalah m
aliyah
Standards Board (DSAS), a Lecturer of Sekolah (Islamic economic law)
Tinggi Ekonomi Islam (STEI) SEBI and University
of Indonesia and a member of Sharī‘ah Supervisory
Board of the Initiative Zakat Indonesia, Bank
Muamalat Indonesia, Bank Syariah Mandiri,
Maybank Islamic, Adira Multifinance Syariah and
BNP Paribas Investment Partners
2 Interviewee B A lecturer in Accounting Department of University Accounting and Islamic
of Muhammadiyah Yogyakarta and a Member of accounting
the Hajj Financial Management Agency (BPKH),
Indonesia
3 Interviewee C A lecturer at Ibnu Khaldun University (UIKA), Islamic finance and risk
Triskati University and Islamic State University management of Islamic
(UIN) Jakarta. A head department of Centre for bank
Business Study and Islamic Cooperative of UIKA
and a former Head of Sharī‘ah unit of Bank
Danamon, Indonesia
4 Interviewee D A Chairperson and a Lecturer of Islamic Islamic accounting and
Accounting Programme of STEI Tazkia, A Islamic financial planning
Chairperson of the Sharia Financial Accounting
Standard Development and Implementation
Programme – IAI Sharī‘ah Accounting
Compartment and an Islamic Finance Consultant
5 Interviewee E A DSAS Technical Team and a Director of Accounting and Islamic
Competency Development and Implementation of accounting
SAK of Indonesian Institute of Accountants (IAI)
6 Interviewee F A member of the DSAS, Head of the Accounting Accounting, audit and
Group of an Islamic bank in Indonesia and a tax, Islamic accounting
Chairperson of the Professional Accounting and and risk management
Tax Association of Indonesian Islamic Bank of Islamic bank
Association (ASBISINDO).
7 Interviewee G A Head of Accounting Policy and a General Ledger Islamic Accounting and
(GL) Management Department at an Islamic bank Risk Management of
in Indonesia Islamic Banking
8 Interviewee H An accounting System Manager of and Islamic Accounting, audit, Islamic
bank in Indonesia accounting and risk
management of Islamic
bank
9 Interviewee I A member of the BPH DSN, a Faculty Member and Sharī‘ah, accounting and
a Lecturer of University of Muhammadiyah audit and Islamic Table 2.
Jakarta, also an Auditor at a Public Accounting accounting Participant
Firm demography
JIABR The dependability is expanded by following the emerging issues in the examined subject.
Meanwhile, the explanation of data collection method procedures is done to gain the
confirmability.
Prior to conducting the interviews, the purposive method was used to decide the eight
respondents who are in the best position to clarify the issue arisen. The data was analysed
further based on Ibn ‘Āshūr’s maq
asid
al-Sharī‘ah. The analysis was focussed on the
excavation of the following concepts:
 maq


al-‘
ammah of the prohibition of rib
a; and
asid
 maq


al-kh
as
sah
asid
in the legality of the credit price.
The concept of maq
asid
al-kh
as
sah

describes the principal difference of opinion among the
experts upon the higher price in a deferred sale than that of in the cash transaction.
Furthermore, the analysis captured the issue of whether the discounted value is only a tool
that is independent of the assumptions behind the concept of TVM. The three sets of
maq
asid

al-Sharī‘ah explained by Ibn ‘Āshūr were engaged in analysing so. These are as
follows:
 al-maq
am;
 al-istiqra’; and
 al-tamyīz baīna al-washīlah wa al-maqshūd.

4. Discussion
4.1 Maq
asid

al-’
ammah of rib
a prohibition
The concept of TVM has been discussed to justify rib
a. That is because the TVM closely
relates to the ideas of opportunity cost theory, abstinence theory, the absolute theory of
capital productivity and inflation theory. These concepts have been promoting the
application of interest rate (Antonio, 2000). The scholars have performed al-istiqra’ against
the prohibition of rib
a by examining ’illat of law (rib
a), then they draw the general
conclusion from the law. According to Saeed (2004), rib
a qar d
or nasi’ah contains
exploitative elements against the poor by taking advantage that leads to the misery of other
groups. Rib
a includes the persecution against the troubled person, namely, the debtor
(Sahroni and Karim, 2015). Al Qardhawi (2003) argued that the prohibition of rib
a is meant
to prevent the persecution and mistreatment of the creditor (owner of money) against the
debtor (the borrower).
Furthermore, Saeed (2004) explained the prohibition of rib
a fadhl that aims to
prevent the potential of oppression in the exchange of commodities containing rib
a and
to use the money for good measure of the commodity. According to Karim (2007), the
transfer of rib
a-able goods comprises gharar, which means uncertainty for both parties
of the value of each good exchanged. This obscurity can lead to oppression against
either party. Meanwhile, Ibn ‘Āshūr (1984) in his al-Tahwīr wa al-Tanwīr explained the
prohibition of rib
a based on the verse “l
a ta
zlimūna wal
a tu
zlamūn” (al-Qur’
an, 1:279).
This verse means that not doing any cruelty that includes charging the interest. In this
case, rib
a is injustice or cruelty, which takes over the property of others in an injustice
way. Hence, the rationale to draw an understanding of maq
asid
al-’
ammah in the
prohibition of rib
a is to prevent injustice or persecution in the form of taking profits
inappropriately.
4.2 Maq
asid

al-kh
as
sah

of rib
a nasi’ah and its relation to time value of money Time value of
The prohibition of rib
a nasi’ah may represent the Sharī‘ah rejects the TVM. This is because money
TVM justifies interest as a return for the service in a loan transaction. The nature of TVM
changes and ensures the uncertainty. In investment, TVM ensures the business to make a
profit continuously. Whereas in business, there is always a possibility of either making
profit or loss. Using the interest rate as a reward or profit for a loan is the act of ensuring an
uncertainty, thus is forbidden. Qardhawi (2002), in his fatwa (legal opinion), explained:
Money does not give birth to money. But it’s just a job that gives birth to money. Whoever does
not work with his own hands, so with his money, he joined the people who work, and they
together gain profit or bear the loss. If only one-party benefits, then this is unfair and not a form of
unity in responsibility.
Although an investment that requires a guarantee to profit is oppression, in such
investments, the investors always get a profit. At the same time, the other party, be it either
the borrower or entrepreneur is persecuted and will bear its loss. The borrower or
entrepreneur is forced to pay the interest and principal to the capital owner.
During the interview, the Interviewee D (n = 1) explained that the al-Sh
ari’
(Sharī‘ah-Maker) aims at avoiding evil deeds because, in rib
a nasi’ah, al-ghunmu
(profit) appears without the presence of al-ghurmu (risk), then al-kharaj (business
results) appears without any dhaman (cost). Al-ghunmu and al-kharaj appear only because of
time. In this case, TVM does not follow the characteristics of Sharī‘ah transactions as it does
not meet these rules. Besides, TVM changes the function of money from the medium of
exchange in the process of circulating goods and services, into commodities that can be sold
or leased (Samuelson, 1958; Antonio, 2000). Although the primary function of money is a
means of exchange, money cannot be traded or leased.
The face-to-face with the experts (n = 2) has gained a renowned understanding of the
issue of TVM in maq
asid

al-kh
as
sah

context. The Interviewees A and B (n = 2) who are the
member of national Sharī‘ah board and an academics, respectively, asserted:
[. . .] from the aspect of the maq
asid,

the transaction of exchanging money with money is locked.
In this regard, the money turns into capital and becomes the purchase price. In Islam, there should
not be rib
a. Thus, money in Islam is a means of exchange that produces goods and services in its
example which bans rib
a nasi’ah or qar d
[. . .] (Interview A) [. . .] the function of money is limited
as a medium, or medium of exchange. Money cannot be considered as a commodity and is
debatable if money is considered so [. . .] (Interview B)
These views (n = 2) are in line with Ibn ‘Āshūr’s (2006) explanation on money as only a
medium of exchange, to facilitate the sharing of value and exchange activities of goods and
services. Money also acts as a differentiator between the seller and the buyer. The buyer
provides the money, whereas the seller provides the products. Ibn ‘Āshūr (2006) elaborated:
[. . .] money-based transactions as a means of encouraging the circulation of commodities and
wealth constitute one of the Sharī‘ah objectives. (Ibn ‘Āshūr, 2006)
Furthermore, the result from performing an interview with the interviewee C (n = 1) has
gained an understanding of the addition of profit (interest), that is certain (pre-fixed interest)
based on the time element without productive activity, could be seen as practising rib
a.
[. . .] so, TVM is rib
a because there is an addition of profit which is only based on the element of
time, no productivity. There is a confusion in TVM because it always stays positive in time
preference and is standardised in the form of FV = PV x [1þ (I x n)]. This practice is confusing
[. . .]. (Interviewee C)
JIABR According to Supriyanto (2015), the increase in the amount of money owing to interest is not
offset by the growth in the real sector (goods and services), which has been causing inflation.
The solution to the declining purchasing power of money owing to inflation is an invalid
reason because it causes another rise (creating a vicious cycle). In the concept of TVM, the
purchasing power of money is assumed to continue to fall. Otherwise, the prices of goods
continue to rise and never fall. In response to the opinion which allows TVM, Interviewee C
(n = 1) who is a lecturer stated:
[. . .] I disagree with those experts who mentioned that TVM exists in Islam. I propose the
economic value of time (EVT), which to me, is logically accepted by Islam [. . .].
At a glance, TVM in a transaction has the same meaning as EVT. As a matter of fact, EVT
has a different philosophy, and the concept is not limited to only transactions (certainty
contract) but also the profit-sharing contract (uncertainty contract). The idea of TVM in a
transaction is considered unacceptable.
TVM was created as a theory to justify interest in loan transactions. Furthermore,
Interviewee C (n = 1) mentioned that TVM normalises the form of formula FV = PV 
[1þ (I  n)]. The formula is also not logical as it is an exponential mathematical formula
used to calculate the rate of population growth (living things) in a region. In this case,
money is treated as if a living thing, whereas money is not a living thing. Money cannot
bear money and cannot grow on its own. According to Interviewee B (n = 1):
[. . .] the origin of the TVM is from the conception of plants. A plant grows, it does grow
(because plants are living things). But this is blindly adopted in money. Money is considered
to grow, whereas money is an inanimate object that makes it incomparable [. . .]
(Interviewee B).
The opinion states that TVM does not justify interest is an implication of a twisted theory to
the fact that conventional economists use the concept of TVM as the basis of interest
legitimisation (ISRA, 2011). In TVM, today’s money is more valuable than that of received in
the future, because the cash received today can be invested and earns. The delay on the use
of money (opportunity cost) is then compensated by giving interest (Bawerk, 1930; Rahman,
1995). The concept of TVM was first used by conventional economists in the contract form
to legitimise the taking of interest, not in the contract of buying and selling. On this basis,
the fundamental of Islamic law cannot readily accept TVM and set aside the assumptions
behind it.
The Sharī‘ah against rib
a depicts its rejection of PV measurement, as it represents
interest, which is the form of rib
a (Gambling and Karim, 1986; Tomkins and Karim, 1987;
Muhammad, 2003, 2012; Vinnicombe and Park, 2007). The calculation of PV, which adopts
the interest rate as the element of rib
a, is not suitable with the method of Islamic accounting
measurement (Birton, 2015; Siswantoro, 2016, 2018). The consequence of practising rib
a
does affect not only the creditor and the debtor. It also involves the accountant during the
transaction. This has been told in the related al-Hadīth.
Given this explanation, thus the opinion of Rosly (2005), Shafii et al. (2013) and others
who stated no prohibition of using the interest rate as a discount rate, seems to be not in line
with the Sharī‘ah. According to Interviewee E (n = 1), the PV, conceptually, in accounting is
used for recording financial instruments of interest loans and not in a transaction. Therefore,
it does not make sense if it is used to calculate the practice of mur
abahah receivables
impairment. The recent accounting standard separates accounting treatment for the
financial instrument, which adopts PV and accounting treatment for a transaction. This as
Interviewee E (n = 1) stated:
 [. . .] when IFIs use PV to calculate mur
abahah receivables impairment, it does not make sense. Time value of
Mur
abahah financing means Islamic banks recognise the loss. Thus, PV cannot be used for
mur
abahah impairment [. . .]. (Interviewee E) money
This is the basis that underlies the Indonesian Sharia Accounting Standards Board of
Indonesian Institute of Chartered Accountant (DSAS-IAI) to reject the application of PV
concept, discount and determination of the fair value of Level 3 inputs in IFIs. DSAS-IAI
considers the use of discount in IFIs as an excessive in interpreting IFRS 13 of financial
instruments, without regard to the conformity with the characteristics of Sharī‘ah transactions.
Mulawarman (2012) elucidated that TVM relates to the uncertain condition. From an
Islamic accounting point of view, such unknown state or interest determination of a loan (an
investment which is considered profitable) is an act of rib
a caused by gharar. This practice
ensures of the uncertain condition that is forbidden in Islam. Therefore, the PV
measurement technique not only promotes rib
a but also covers gharar.
In general, the was
a’il al-maq
asid

can be divided into two. Firstly, was
a’il that
delivers to masla


hah, and secondly, was
a’il that prevents damage (Laldin and Furqani,
2013). The recognition of TVM and PV in Islam can open rib
a-based transaction and
legitimise it in economic transactions. Thus, maq
asid
al-Sharī‘ah in the wealth ( hif

zu al-
m
al) may not be achievable. The was
a’il can be explained by the metaphor of “path”. In
this regard, the TVM and PV can be seen as the “path” that leads to rib
a. Thus,
recognising them in Islamic accounting implies similar practice with that of
conventional. In consequence, realising maq
asid
al-Sharī‘ah in IFIs industry seems to
be impracticable (Figure 1).

4.3 Maq
am al-khit
ab (purpose of speech)

In al-Qur’
an (1: 275), the prohibition of rib
a and the revelation of hal
al in the contract of sale
is mentioned simultaneously. The majority of Muslim jurists agree that the law of deferred
sale or credit is permissible. The deferred transaction is included in the meaning of al-bay’ in
al-Qur’
an (1: 275). According to the Tafsīr al-Tahwīr wa al-Tanwīr, the word ’alif and lam in
the sentence al-bay’ refers to all the type of a contract of sales (Ibn Ashur, 1984).
Furthermore, Ibn ‘Āshūr (2006) explained that sale transaction and rib
a might look the
same at first, as both are profitable, especially when payment in the sale is deferred.
Nevertheless, the contract of sale is different from rib
a. It is a transaction between two
parties involving the exchange, whereas rib
a is a transaction that only affects one party; the
lender meets the borrower. Thus, seeking profit in the contract of sale is allowed.
Conversely, it is prohibited in a loan contract. According to Ibn ‘Āshūr (2006):
Sale and rib
a might look the same since they involve financial transactions aiming at a profit,
especially when a sale contract is deferred. Seeking profit is allowed for the parties engaged in
selling, whereas it is forbidden in loan contracts.
Maq
am al-khit
ab of al-Qur’
an (1: 275) indicates the validity of deferred sale or credit
although the price in such contract is higher than the cash transaction. The additional cost is
ratified because the seller’s right is delayed, and such a higher price compensates for the
postponement (Antonio, 2000; Muhammad, 2012). In addition, al-bay’ itself is a real sector
transaction and a natural certainty contract that creates economic value added (Muhammad,
2012).
There are benefits for both seller and buyer in a deferred sale. The maq
asid
of deferred
sale transaction is that buyers can meet their needs with the purchase of goods even if they
do not have cash (As-Sa’dy et al., 2008). Islam requires the seller to pay attention to the needs
of buyers and provide convenience in the payment process. The seller entitles the right to
JIABR Philosophically, present value
measurement comes from time
value of money (TVM) principle
TVM also known as (positive time preference)
Positive Time Preference
(PTP) refers to:
“a dollar today is worth TVM is a theory/concept used
more than a dollar in the to justify interest payment in a
future, because a dollar loan transactions as a
today can be invested to compensation for;
get return” 1. the decreasing buying
power of money because of
inflation
Money is not functioned 2. a sacrifice for the
as a means of exchange postponement use of money
but as a commodity which including the loss from gaining
can be traded (exchange profit if it is invested.
of money with extra
money as payment)

Present value Is used to

measure or to determine a
fair value from financial
instruments which can’t be
observed as active market
Conceptually, present value is is absent.
properly used in accounting of
financial instruments (interest
based loan)
Is used in interest loan
accounting, so (generally)
the present value
calculation refers to the
level of interest rate as a
discount rate
Conclusion:
Figure 1. Philosophically and conceptually,
the calculation of present value is
TVM concept from not based on the principle and
Islamic perspective characteristic of shariah

determine the price if the payment is made on a deferred basis. This increase is not TVM,
but as compensation owing to the deferment (Antonio, 2000; Muhammad, 2003, 2012). In this
case, both the seller and the buyer can take the benefit from a contract of sale with the
deferred payment (As-Sa’dy et al., 2008).
Even though this transaction is permitted, it is not intended for long-term contracts (10–
15 years) which can create volatility with very high duration. Unlike the interest in a loan
transaction that refers to the TVM concept, the determination of the profit margin for bay’ al-
mu’ajjal or mur
abahah which is inherently based on the principle of EVT is short-term so
that there is no additional practice without the existence of ’iwad. If it is used in a long-term
contract, it is feared that the additional profit will only follow the prevailing interest rate
trend in the money market and is linear based on the concept of the time value of money
(Supriyanto, 2015).
Turning now to draw the Islamic perspective on TVM, it is thus described the summary
of Ibn ‘Āshūr’s maq
asid-based

analysis with al-istiqra, al-tamyiz and al-maq
am methods on
the prohibition of rib
a and its relation to the PV measurement method in the TVM concept.
Figure 2 depicts this matter.
 1. Al-Istiqra’ / Induction: Time value of
Maqāṣid al-Sharī‘ah “To prevent any harm and money
acts of injustice in
Economic”
Maqāṣid al-'āmmah
(General objective) 2. Al-Tamyīz baīna al-washīlah wa al-
maqshūd / Distinguishing wasā'il (the
means) and maqāṣid (the purposes):

Maqāsid al-khāṣṣah “To make money remain functioning as money

(Specific intent) during the goods and services circulation
process, not as commodity”
(Present Value is filled with TVM concept
assumption which can lead to recognition
towards ribā and it must be rejected)
3. al-Maqām:
Maqāsid al-khitābiyah
(Purpose of speech) “The contract of sales is different with riba.
Deferred purchase or credit is allowed
although it is more expensive than the
cash price” Figure 2.
(The additional price is not a recognizition Maq
asid

al-Sharī‘ah
towards TVM but economic value of time / of Rib
a prohibition
EVT)

5. Conclusion
This paper has critically analysed the TVM and PV from Ibn ‘Āshūr’s theory of maq
asid
al-
Sharī‘ah. Based on the methods of al-istiqra’, al-tamyiz and al-maq
am, the maq
asid
al-
Sharī‘ah of Ibn ‘Āshūr seems to oppose the TVM and PV measurement, based on the
authors’ analysis. It is clear that the concept of al-istiqra’ clarifies the maq
asid

al-’
ammah in
the prohibition of rib
a. This concept urges to avoid upon the oppression, the acts of
persecution and the injustice in an economic system.
Furthermore, the al-tamyiz method has identified the maq
asid
al-kh
as
sah

upon the
elimination of rib
a. That is, maq
asid

al-kh

as sah


treats money as its function of a medium of
exchange and not as a commodity. Based on these points, the nature of TVM and PV that
promote the charge of interest rate is the rationale of Sharī‘ah to claiming them being
contradictive to the Islamic principles, at best to the concept of Ibn ‘Āshūr’s maq
asid
al-
Sharī‘ah based on the authors’ analysis.
The claim that has been made in this study limits its generalisation. In this regard, it
does not propose any positivists’ perspective, given the method of analysis that was
used in this paper. Even so, the discussion that this work established is theoretically
and practically important for the discourse of Islamic accounting. The academics can
take the benefit from this study to understand the different opinions of the experts
regarding the Islamic perspective on TVM. Meanwhile, the industry professionals may
refer to this study to recognise that such practising PV is debatable in Islamic
accounting measurement, notably when it is analysed using the concept of Ibn ‘Āshūr’s
theory of maq
asid

al-Sharī‘ah.
Furthermore, this work credits several recommendations that are relevant to future
studies. In this regard, future works may engage more respondents, not only from one
country but also other countries where the development of IFIs is in an advanced stage. It
will be interesting to analyse the experts’ opinion from such countries, so that the discourse
of Islamic perspective on TVM and PV, and its relation to the Islamic accounting
measurement will be further developed.
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Corresponding author
Ahmad Baehaqi can be contacted at: ahmad.baehaqi@sebi.ac.id

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