)

ZAKAT ACCOUNTING FOR

ISLAMIC INSTITUTIONS
Principles of Zakat

• What is zakat?

-payment made annually under Islamic law on certain kinds of property and used for charitable and
religious purposes, one of the Five Pillars of Islam.

This Chapter covered:

• Measurement of Zakat (zakatable amount & zakat payable) by using 2 methods
i) Net Assets Method (NAM)
ii) Net Invested Fund Method (NIFM)
• Valuation of wealth subjected to zakat (cash equivalent value)
• Disclosure of Zakat in Financial Statement of IFIs.
Accounting Standard on Zakat (AAOIFI FAS 9)

Purpose of Accounting Standard for Zakat:

• To help Islamic banks and other Islamic business entities to
perform zakat obligations;
• Enable to reduce the differences that exist on the methods
used by Islamic banks and other Islamic business entities in
measuring zakat and valuing assets subjected to zakat; and
• Help to improve the quality of disclosure on zakat
information in the financial statements of the Islamic bank
and business entities.
Accounting Standard on Zakat (AAOIFI FAS 9)

ACCOUNTING TREATMENT ON ZAKAT

Lunar calendar 2.5% (Malaysia)
Hijrah calendar 2.5775%

VALUATION OF ASSETS
Cash equivalent value = market value = fair value
 BASIC SOFP

Statement of Financial Position as at ….

Non Current Assets
+Current Assets
NAM NIFM
TOTAL ASSETS

Current Liabilities
+Non Current Liabilities
+Equity
TOTAL LIABILITIES & EQUITY
 NAM vs NIFM of Measuring Zakat Payable

NAM NIFM
Current Assets Equity + Non current Liability
- Current Liabilities - Non current Assets
Zakatable amount +/- Adjustments
Zakatable amount

Zakat payable = zakatable amount x 2.5%