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Accounting treatment for corporate zakat: a critical review

Accounting treatment for corporate zakat: a critical review Purpose – The purpose of this paper is to review the accounting treatments for corporate zakat, as advocated by accounting standards and guidelines, as well as those been practised by relevant corporations. The aim is to determine their appropriateness and adherence to both the Islamic as well as the accounting theoretical perspectives. Design/methodology/approach – Accounting standards and guidelines related to zakat, including the Financial Accounting Standard No. 9 and the Technical Release i ‐1, are examined. Additionally, analyses are made on the practices of Islamic financial institutions to determine their compliance with both standards and ontological aspects of zakat. Findings – The study reveals that there is a general misconception of zakat, as indicated in several standards and guidelines, which has consequently resulted in inappropriateness in their proposed corporate zakat recognition and measurement and hence presentations. These inaccuracies, in one way or another, have not been in line with the true spirit of zakat in Islam. More worryingly, some unfavorable consequences may and in fact have already been implicated on the larger Muslim community as a result. Research limitations/implications – An alternative view on the accounting treatment of corporate zakat is offered in this paper with the aim to provide a fair and proper assessment of zakat on corporate wealth, which is more parallel to the true spirit of zakat. Originality/value – The paper integrates both the revealed and the contemporary accounting knowledge in scrutinizing the standards and practices as well as in recommending an improved and meaningful alternative. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Islamic and Middle Eastern Finance and Management Emerald Publishing

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Publisher
Emerald Publishing
Copyright
Copyright © 2009 Emerald Group Publishing Limited. All rights reserved.
ISSN
1753-8394
DOI
10.1108/17538390910946258
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to review the accounting treatments for corporate zakat, as advocated by accounting standards and guidelines, as well as those been practised by relevant corporations. The aim is to determine their appropriateness and adherence to both the Islamic as well as the accounting theoretical perspectives. Design/methodology/approach – Accounting standards and guidelines related to zakat, including the Financial Accounting Standard No. 9 and the Technical Release i ‐1, are examined. Additionally, analyses are made on the practices of Islamic financial institutions to determine their compliance with both standards and ontological aspects of zakat. Findings – The study reveals that there is a general misconception of zakat, as indicated in several standards and guidelines, which has consequently resulted in inappropriateness in their proposed corporate zakat recognition and measurement and hence presentations. These inaccuracies, in one way or another, have not been in line with the true spirit of zakat in Islam. More worryingly, some unfavorable consequences may and in fact have already been implicated on the larger Muslim community as a result. Research limitations/implications – An alternative view on the accounting treatment of corporate zakat is offered in this paper with the aim to provide a fair and proper assessment of zakat on corporate wealth, which is more parallel to the true spirit of zakat. Originality/value – The paper integrates both the revealed and the contemporary accounting knowledge in scrutinizing the standards and practices as well as in recommending an improved and meaningful alternative.

Journal

International Journal of Islamic and Middle Eastern Finance and ManagementEmerald Publishing

Published: Apr 3, 2009

Keywords: Islam; Accounting procedures; Accounting standards; Social economics

References