There can be various types of Ijarah contracts which have been discussed in this study. The features of Ijarah contracts have also been studied in details. Although Ijarah contracts are similar to leasing contracts, still some differences exist. Accounting and Auditing Organisation for Islamic Financial Institutions, (AAOIFI), sets out standards for accounting of Ijarah contracts. The impact of International Financial Reporting Standards (IFRS) on Ijarah contract accounting has also been discussed in this study. Ijarah Contracts Ijarah It means leasing. It includes a contract where the financial institution buys equipment, machinery and other different assets and then leases it to the owner of a business firm for a rent or fee. The contract has provisions for the lease duration and the amount of fees to be set out in advance. The financial institutions possess the ownership title of the leased assets during the lease period. From the view of Islamic finance, financial contracts like real estate financing, project financing, vehicle financing, etc. are usually included in the Ijarah concept (Bank Negara Malaysia, n.d., p. 3). Ijarah wa Iqtina Ijarah wa-Iqtina contract is another version of the Ijarah contract where on completion of the lease contract the client can take over the ownership of the leased asset (Abou-Gabal, Khwaja & Klinger, 2011, p.10). It is implied as lease-to-purchase. It is similar to hire purchase system. Here the lessor can purchase the asset at the end of the contract. It is very much identical to Ijarah contract with the exception that the business owner has the option to buy the asset at the end of the contract. Previously paid fees are considered to be a portion of the purchase price of the asset. These types of lease agreements are very common in case of home financing. Ijarah Thumma Al-Bai This is a combination of two types of contracts. One is the Ijarah contract meaning leasing of the assets. The other one is Bai contract meaning the contract of purchasing the assets. Ijarah-wa-Iktina This is a type of lease contract where there is an agreement and undertaking taken by the lessor to purchase the assets at an agreed predetermined price during the tenure of the lease contract. It is also similar to the agreement related to hire purchase with one exception that the lease agreement can be terminated before the completion of the tenure of the contract and the asset can be bought by the client. On expiry of this type of lease contract, the leased asset is transferred to the lessee on fulfilment of all the terms and conditions of the contract. The lessee also has the option to buy the asset during the tenure of the lease contract at a price which was set out when the lease contract was formulated. The purchase price is usually set with reference to the market value of the asset or the residual value of the asset and is agreed in advance during the signing of the lease contract (Jonson, 2006, p.540-541). Features of Ijarah Contract Ijarah contract comprises of various features. Some of its primary features have been
ISLAMIC ACCOUNTING Table of Contents Table of Contents 2 Introduction 4 Ijarah Contracts 4 Ijarah 4 Ijarah wa Iqtina 4 Ijarah Thumma Al-Bai 5 Ijarah-wa-Iktina 5 Features of Ijarah Contract 5 Services and Usufruct 5 Assets under Ijarah 6 Liabilities and Ownership Rights 6 Utilisation of Assets under Lease 6 Period of Lease 6 Payment of Lease Amounts 6 Enhanced Features 7 Default and Compensation 7 Promise in Ijarah Contract 7 Termination of Ijarah Contract 7 Selling of Leased Assets 8 Takaful for Ijarah 8 Leasing and Ijarah – Similarities and Differences 8 Differences in Accounting Treatment of Ijarah and Financial Lease 10 Ijarah – Accounting Treatments 11 Asset Recognition 11 Revenue Rec…
The research aims to present and analyze the both the merits and demerits of Ijarah sukuk and its difference with conventional lease bond. The evaluation will also cover the consistency between Ijarah sukuk and Maqasid al-sharia and its implications over financial transactions affecting the Muslims.
The purpose of this research paper will be to discuss the history of Islam; Islam and culture; the main principles of the Islamic law; Islamic finance and banking; Islamic finance variations and investments; Islamic education; Islamic architecture; Islamic clothing; Islamic literature; the Mosque; Islamic art and calligraphy.
Similarities and Differences between Ijarah Contract and Leasing 4. AAOIFI Standards and IFRS Recommended Accounting Treatment of the Ijarah/Leasing Contracts 5. Conclusion 1. Introduction: A sound banking method forms the base for every winning financial system.
Islamic finance has become a centre of attention in the global financial market with its practice mainly focused on being ethical which is based on the teachings of Prophet Mohammad (P.B.U.H) and the Holy Scripture of the Muslims with the principle consistent with Shariah (Islamic law), The Holy Qur’an.
The principles stated in Islamic finance are very old. Islamic banking rules and regulations are based on the teachings of Islam religion. In Islam, short-selling, gambling, or uncertain money investments for abnormal profit maximisation are strictly prohibited.
According to Mavrakis (2009, pp. 2 – 5), Islamic finance has emphasised on trying to remove completely any interest involved in financial transactions. The Quran, which is the Divine revelation presented to Prophet Mohammed, who is the Prophet of Islam, expressly forbids charging of interest, or riba, and Prophet Mohammad himself emphasised on this as mentioned in the Hadith, which is the other source of Islamic law, the Shariah.
banks. Islamic financial institutions are bound by Sharia law, which forbids the collection of interest, or engaging in speculative activities. This study examines whether Islamic financial products can be applied as mainstream products in the U.K. Can Islamic Finance ever become a mainstream product in the U.K.
More elaborately this report will show the importance of Islamic Banking, development model for a country through Islamic banking.
3) In the next part I discussed about the Islamic Banking in Bangladesh and try to show the situation of Islamic Baking through situation analysis.
This study examines whether Islamic financial products can be applied as mainstream products in the U.K.
The emergence of the capitalist system that focuses on the acquisition of individual profits has
IFRS and Accounting, and Auditing Organization of Islamic Financial Institutions (AAOIFI) were founded based on establishing a unified way of reporting the financial transactions across all the sectors. However, the
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