Accounting for Islamic financial institutions: study guide four

Learning outcomes

Chapter one: Framework of financial reporting for Islamic financial institutions

• Explain the importance of financial reporting in Islam.
• Explain the need for a reporting framework particularly for Islamic financial institutions.
• Identify the financial reporting and accounting objectives for Islamic financial institutions.
• State the relevant assumptions and principles for reporting by Islamic financial institutions.
• Describe what is meant by useful information for Islamic financial institutions.

Chapter two: Financial reporting of Islamic financial institutions

• State the limitations of International Financial Reporting Standards.
• Explain the need for financial reporting standards to cater for the unique features of an Islamic financial institution (IFI).
• Describe and explain the types and purpose of financial reporting standards for an IFI.
• Describe the due process and adoption of financial reporting standards for an IFI.

Chapter three: Financial statements I: balance sheet and statement of restricted investment

• Describe components of the financial statements of Islamic financial institutions (IFIs).
• Describe the elements of the balance sheet of an IFI.
• Explain the classification, presentation and disclosure of equity, liabilities and investment accounts in the balance sheet.
• Understand Statements of Restricted Investments.
• Understand accounting policies and general disclosures of IFIs.

Chapter four: Financial statements II: income statement and accounting policies on income determination

• State the classification, presentation and disclosure of revenue, expense and distribution in the income statement.
• Explain the implications of separate  and pooling methods of income determination.
• Explain the significance of financial accounting policies on profit distribution.
• Identify additional statements of Islamic Financial Institutions (IFIs).
• Compute and analyse the financial performance of an IFI.

Chapter five: Investment accounts and profit distribution policy

• Distinguish the nature of unrestricted and restricted investment accounts.
• Account for unrestricted and restricted investment accounts.
• Explain the implications of source of financing involving investment accounts.
• Apply a profit allocation model in determining distributable profit.
• Explain the importance and relevance for profit equalisation and investment risk reserves.

Chapter six: Accounting and reporting: Mudarabah and Musharakah financing

• Distinguish the types and forms of financing and investment contracts.
• Describe the salient features of Mudarabah financing.
• Identify the financial reporting requirements of Mudarabah  financing.
• Describe the salient features of Musharakah financing.
• Identify the financial reporting requirements of Musharakah financing.

Chapter seven: Accounting and reporting: Murabahah financing

• Explain the nature of asset-based financing transactions.
• Describe the salient features of Murabahah financing.
• Explain the reporting requirements of Murabahah financing for Islamic financial institutions.

Chapter eight: Accounting and reporting: Ijarah and Ijarah Muntahia Bi Tamleek

• Explain the nature of operating and finance lease.
• Describe the salient features of Ijarah financing.
• Explain the reporting requirements of operating Ijarah.
• Explain the reporting requirements of Ijarah Muntahia Bi Tamleek.
• Distinguish between a finance lease and Ijarah Muntahia Bi Tamleek.

Chapter nine: Accounting and reporting: Salam and Istisna' financing

• Describe the salient features of Salam financing.
• Explain the reporting requirements of Salam financing.
• Describe the salient features of Istisna'  financing.
• Explain the reporting requirements of Istisna' financing.

Chapter ten: Corporate governance

• Describe nature and developments of corporate governance.
• Identify types of corporate governance models.
• Explain the unique feature of corporate governance of IFI.
• Describe how a governance committee complements an audit committee.

Chapter eleven: Auditing of Islamic financial institutions

• Describe the nature of the audit framework.
• Identify and explain the auditing standards for IFI.
• State the principles and objectives of auditing of IFI.
• Specify the role of auditors for IFI.

Chapter twelve: Shari'ah governance

• Explain the importance and need for Shari'ah  governance.
• Describe the role of the Shari'ah board and Shari’ah review.
• Describe the Shari'ah review and internal Shari'ah review processes.