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The purpose of this paper is to investigate the techniques used by Islamic financial institutions (IFIs) to shift conventional instruments to Shariah-compliant instruments. The paper additionally aims to explore the effect of these techniques on financial reporting.

The study recognized two techniques used by the IFI: the combination of contracts which compartmentalizes the economic transaction into a series of linked sub-transactions, and the inclusion of donation (Tabarru) in commercial contracts. The paper also reviews the accounting treatment according to the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), and compares it to the concepts adopted by the traditional financial reporting framework concepts (especially substance over form concept).

With regard to the combination of contracts technique, the major accounting challenge is whether the substance over form concept is considered. Mixed results are found: in some products, the economic substance is presented in the financial reports, while in other cases, the legal form of the contract is reported. This ambiguity may hinder the faithful representation of financial statements. The Tabarru contract is used to justify the risk-shifting practices by Islamic banks. The accounting effects of such contracts may result in failure to recognize assets or liabilities in the financial reports, earnings management and incomplete financial information for the users of the financial reports.

This study is a response to the call raised by the consultative group established by the International Accounting Standards Board. It provides an additional insight into the accounting treatments for a combination of contracts and Tabarru contracts. It also contrasts the accounting treatments, as stipulated by the AAOIFI, with the conventional accounting frameworks.

Islamic banks use Mudarabah contract to replace the interest-bearing deposits with profit-sharing investment accounts. The purpose of this paper is to explore the challenges and problems associated with the employment of Mudarabah contract by Islamic banks.

The study critically analyzes the Mudarabah contract used by Islamic banks. It reviews the evolution of the contract from its traditional type to more complicated types such as compound, unrestricted, commingled and continuous Mudarabah. The paper investigates the problems that have emerged from implementing such types in current business settings.

The paper proves that implementing the Mudarabah contract by banks imposes several problems among which are the following: difficulty in the determination of total profit resulting from Mudarabah and in allocating this profit to the multiple parties involved in Mudarabah; usage of reserves to cater against future losses may undermine the concept of Mudarabah profit-loss sharing and lead to earnings management; corporate governance is also a major problem in Mudarabah contract, as the depositors are exposed to risks but have no governance rights; and Mudarabah may also lessen the fair presentation of financial reporting.

The paper examines the evolving Mudarabah contract and its implementation challenges, based on available literature (no empirical analysis was conducted).

The implications are significant for the future development of Islamic contracts and Islamic accounting treatments.

Many studies explored the Mudarabah contract from a Shariah or law perspective. However, this paper investigates the Mudarabah contract with a focus on the implication on accounting and financial reporting because of the lack of studies in this area. Furthermore, it demonstrates the persistent flaws in the Mudarabah contract, and it proposes a new model for mobilizing funds, i.e. mutual fund.

This paper aims to investigate the economic substance of Islamic banks’ transaction as perceived by the employees and regulators of banks and the effect of such substance on the need for special accounting standards for Islamic banks. If there is a distinctive “Islamic economic substance”, then special accounting practices may be necessary such as the standards of the Accounting and Auditing Organization for Islamic Financial Institutions.

A qualitative inquiry on one of the leading Islamic banks in the Middle East was conducted to investigate the economic substance of the bank’s main two transactions; the deposit system and Murabaha financing, as perceived by informants within one of the earliest Islamic banks and its regulators.

It is found that despite the belief that the transactions under examination were different from equivalents within conventional banking, practice within the bank was not consistent with such a belief. Informants largely perceived the economic reality of the investigated transaction as being not different from conventional banks’ transactions, and this would affect the need for special accounting and regulatory frameworks.

This investigation is confined to informants working within one Islamic bank; their views and perceptions may not coincide with those working in other Islamic banks in the world.

The results of this investigation provide policy implications for Islamic banks, regulators and standards setters in regard to the need for special accounting standards for Islamic banks.

The paper is one of the first papers that uses a qualitative inquiry on the main transactions of Islamic banks and the related need for special accounting practices. The paper provides a new perspective on the debate over whether Islamic banking is genuinely innovative or is merely a replicate for conventional banking.

This paper aims to propose a model of Zakah treatment for financial instruments. The model depends on the link between the financial assets and liabilities that emerge from a financial instrument contract.

The determination of Zakah on contemporary financial instruments is controversial, with various conflicting Fatwas being presented. This paper introduces a theoretical model that integrates Fiqh rules, accounting, finance and economic principles to propose a method for calculating Zakah on financial instruments. This theoretical model can be the foundation for future empirical and statistical testing.

The proposed model advocates omitting the financial assets/liabilities when determining the Zakah base for companies, as the Zakah burden relies on the owner of the real asset. The paper elaborates on the implementation of the model on debts, investments and cash accounts.

The paper does not investigate whether or not the accounting approach in dealing with financial contracts is deemed acceptable by Fiqh scholars, nor does it discuss whether or not this may affect the Zakah fatwas regarding these types of accounts.

The paper establishes a conceptual framework for the Zakah on financial assets. This will pave the way for future empirical research and testing to validate the framework in different contexts. In addition, if regulators adopt this model and apply it to all companies, it would promote fairness and justice at the national level.

The proposed model advocates omitting the financial assets/liabilities when determining the Zakah base for companies, as the Zakah burden relies on the owner of the real asset. The paper elaborates on the implementation of the model on debts, investments and cash accounts.

To the best of the authors’ knowledge, this is the first attempt to utilize the accounting approach in order to determine the amount of Zakah.

Although recent research acknowledges the importance of reducing the inefficient activities from road transportation, there is still a missing link in literature of how transportation extended wastes impact road haulers efficiency. The purpose of this paper is to investigate the relationship between waste reduction practices (WRP) and fleet operational efficiency (FOE) in road hauler firms.

A theoretical model was developed to assess this relationship. The authors test the model with a sample from logistics companies providing road haulage services in the Middle East, providing a contribution to extant literature from a different setting.

Results suggest that WRP have a positive and significant impact on FOE. A valuable scale for the measurement of operational efficiency was developed and validated, representing an index toward the most efficient organization.

The findings of this study serves as a tool for shippers to benchmark the efficiency levels of their motor carrier service providers against each other, considering that segmentation is a relevant issue to understand the choice in favor of a given provider to the detriment of another. Furthermore, road haulers can use the efficiency measurements as a basis for establishing future action plans to adopt waste reduction practices.

The research deals with a newly emerging stream of research on linking waste practices to road transport. The authors contribute to this developing body of research through filling a gap in the link between waste and road transport operational performance. The research is also different from recent literature in that the authors provide insights from a larger population, unlike other similar studies who used VSM and studied only a particular case. Thus, the work is important to generalize the findings, especially that the authors provide a perspective from a non-western perspective.

The purpose of this paper is to examine the use of the social welfare concepts of Takaful and Tabarru’ (donations) as tools to guarantee deposits in the Islamic banking industry, and the effect of such practice on the concept of risk sharing in Islamic finance.

The study critically analyzes the Mudaraba contract used by Islamic banks to mobilize funds, the use of Profit Equalization Reserves and Investment Risk Reserves, the use of other income smoothing techniques and the insurance of Islamic banks’ by regulatory agencies in some countries based on the Takaful and Tabarru’ concepts.

This paper shows that Islamic banks are increasingly using the concepts of Takaful and Tabarru’, which are intended originally for social welfare, as tools to justify the move to more guaranteed-in-substance type of deposits, and hence, more risk shifting rather than risk sharing in the Mudaraba contract. This use, is argued, moves Islamic banking towards more market-oriented, but less Shariaa-compliant in substance.

This papers examined the behaviour of Islamic financial institutions and Islamic scholars based on the available literature. No empirical analysis was conducted.

This paper contributes to the ongoing debate about the substance of Islamic banking transactions and the risk shifting inherent in such transactions. Furthermore, it is the first study that examines the extent of utilizing different social welfare concepts to legalize – from Shariaa perspective – Islamic banking transactions.

The purpose of this paper is to examine the accounting treatment for mudarabah contract and its implications on the reliability and fairness of the financial statements. In addition, the paper also aims to explore the effect of provisions and reserves on profit allocation among unrestricted investment account holders (UIAHS).

This study reviews the accounting treatment for mudarabah contract as stated in the Accounting Standards for Islamic Financial Institutions issued by the AAOIFI and compares it with other financial reporting frameworks, especially the IFRS.

The paper finds that presenting UIAHS in a separate category in the financial position statement (balance sheet), without reclassifying the assets in the financial position statement to reflect the assets attributable to UIAHS, suggests undue bias in the financial statements. This contradicts the concepts of full disclosure and true and fair view of the financial statements. The paper also reveals that reserves may result in profit misallocation among UIAHS. Additionally, there is an overlap between provisions and reserves, which may affect the reliability and fairness of the financial statements. It is also revealed that reserves presented under the UIAHS section could not be readily understandable since investors have no right to these reserves. The paper further finds that using a donation contract in business may result in diverting wealth from the less wealthy to the wealthier.

The paper criticizes the AAOIFI treatment for UIAHS and suggests an extension to this treatment by presenting assets attributable to UIAHS in order to enhance disclosure. Additionally, it questions the applicability of using donation (Tabarru) contract in transactions with profit‐making substance.

To investigate the performance of moving average trading rules in an emerging market context, namely that of the Jordanian stock market.

The conditional returns on buy or sell signals from actual data are examined for a range of trading rules. These are compared with conditional returns from simulated series generated by a range of models (random walk with a drift, AR (1), and GARCH‐(M)) and the consistency of the general index series with these processes is examined. Sensitivity analysis of the impact of transaction costs is conducted and standard statistical testing is extended through the use of bootstrap techniques.

The empirical results show that technical trading rules can help to predict market movements, and that there is some evidence that (short) rules may be profitable after allowing for transactions costs, although there are some caveats on this.

New results for the Jordanian market; use of sensitivity analysis to investigate robustness to variations in transactions costs.