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Sharia accounting standard for sukuk (Islamic bond) accounting in Indonesia

Sharia accounting standard for sukuk (Islamic bond) accounting in Indonesia PurposeThis paper aims to analyze the need of Islamic banks for specific Statement of Financial Accounting Standards (SFAS) No. 110 for sukuk accounting in Indonesia. In fact, some Islamic banks have already prepared International Financial Reporting Standards (IFRS), and accordingly, a suitable standard is needed for this case.Design/methodology/approachThe research methodology involved interview with a senior accounting manager of an Islamic bank focusing on relevant topics in sukuk to sharpen the analysis. Equally important, research reviewed and compared financial statements on sukuk accounting among Islamic banks, before and after adoption of sukuk accounting standard.FindingsIFRS require market valuation based on interest rate. As interest rate is unlawful in Islamic teaching, IFRS may not accordingly be suitable. Therefore, SFAS No. 110 was issued by the Indonesian Institute of Accountants (Ikatan Akuntan Indonesia). Considering the fact that this standard did not explicitly adopt the IFRS paradigm, there have been consequent conflicts in Islamic bank management because of preference of global recognition to IFRS. Adopting IFRS would be more compatible with other countries’ general accounting standards. In addition, significant differences are found in sukuk accounting treatments by Islamic banks before and after the standard adoption.Research limitations/implicationsThis research only focuses on such question of why specific accounting standard for sukuk accounting is needed by Islamic banks in Indonesia, while only few Indonesian Islamic banks were initially aware of the issue.Originality/valueThis paper may be the first paper discussing the response to and need for sukuk accounting in Indonesian Islamic banks. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Islamic Accounting and Business Research Emerald Publishing

Sharia accounting standard for sukuk (Islamic bond) accounting in Indonesia

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1759-0817
DOI
10.1108/JIABR-11-2013-0040
Publisher site
See Article on Publisher Site

Abstract

PurposeThis paper aims to analyze the need of Islamic banks for specific Statement of Financial Accounting Standards (SFAS) No. 110 for sukuk accounting in Indonesia. In fact, some Islamic banks have already prepared International Financial Reporting Standards (IFRS), and accordingly, a suitable standard is needed for this case.Design/methodology/approachThe research methodology involved interview with a senior accounting manager of an Islamic bank focusing on relevant topics in sukuk to sharpen the analysis. Equally important, research reviewed and compared financial statements on sukuk accounting among Islamic banks, before and after adoption of sukuk accounting standard.FindingsIFRS require market valuation based on interest rate. As interest rate is unlawful in Islamic teaching, IFRS may not accordingly be suitable. Therefore, SFAS No. 110 was issued by the Indonesian Institute of Accountants (Ikatan Akuntan Indonesia). Considering the fact that this standard did not explicitly adopt the IFRS paradigm, there have been consequent conflicts in Islamic bank management because of preference of global recognition to IFRS. Adopting IFRS would be more compatible with other countries’ general accounting standards. In addition, significant differences are found in sukuk accounting treatments by Islamic banks before and after the standard adoption.Research limitations/implicationsThis research only focuses on such question of why specific accounting standard for sukuk accounting is needed by Islamic banks in Indonesia, while only few Indonesian Islamic banks were initially aware of the issue.Originality/valueThis paper may be the first paper discussing the response to and need for sukuk accounting in Indonesian Islamic banks.

Journal

Journal of Islamic Accounting and Business ResearchEmerald Publishing

Published: May 8, 2018

References