Principles of Islamic banking and finance/PIBF202/Financial reporting/Video signpost
In this video, Dr. Shamim Siddiqui from Hamdan Bin Mohamed Smart University, provides an overview of differences between conventional and Islamic accounting.
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Video transcript
For accountants who have been brought up with the knowledge that accounting is a technical, value-free and objective discipline, it may not be easy to accept the term Islamic accounting. However, in an Islamic economy, like any other system, business community has a role of stewardship toward society. Islamic laws define duties and guidelines towards employees, customers and competitors. That is why objectives of Islamic accounting include ethical aspects in a more significant way compared to the conventional system. This is not to suggest that the conventional system does not care about ethical issues. A s a matter of fact, after the financial crisis of 2008, there have been suggestions to improve financial reporting standards to reveal the true financial positions of business entities. In many cases, all kinds of manipulations were made through different accounting practices to hide the dismal conditions of companies. The main goal of an Islamic accounting is to make sure that the true status of business entities are shown to their owners, investors, suppliers and the government entities. Furthermore, Islamic banks deal within a Shariah framework. As a result, the nature of their transactions is different from that of conventional banks. The users of the information generated by Islamic financial institutions have different needs from the users of the information published by conventional institutions.
