The concept of prudence implies that a firm should take a very pessimistic outlook in estimating income, expenses, assets and liabilities and promotes the need to be cautious in overstating assets or profits especially in the face of inevitable uncertainties in the business world. Circumstances that lead too uncertainties such as collectability of doubtful receivables, the probable useful life of assets and other contingencies are recognised by the disclosure of their nature and extent with a reasonable dose of prudence in the preparation of financial statements. The concept of consistency implies that a company should rarely if ever change the way in which financial information is prepared and presented. However, the comparability is regard to be more fundamental objective than consistency.
Again, the contention is that Islamic Banking is no different from conventional banking; worse still it is claimed that Islamic Banking is more detrimental than conventional banking. How can this be? I watched the video and aghast by the level of ignorance to the nature of Islamic Banking.
And gauging from the response by the rest of the audience, it seems that the audience themselves knows no better. It seems that a lot of individuals are still unconvinced about Islamic Banking. Furthermore, the impression that it is worst-off than conventional banking needs to be addressed.
Islamic Banking, while on the surface is still banking, but it is built on a totally different foundation. There are significant difference which is brought about by a single requirement; Shariah-compliance. For a conventional banking, the purpose of set up is to collect deposit and to give loans.
This is the shareholders understanding of what it should be. But what is Islamic Structure then? It is a single function where customer deposits or investment pool is used to fund financing portfolio or deploy into investment instruments, from which returns are derived and recognise.
It fits perfectly on how the Bank is to be managed. Finally, the processes in an Islamic Bank and conventional Bank are also different, simply due to the structure of which it has been set up. There is a broader requirement for oversight and research required to ensure the Islamic products and services meets Shariah requirements.
A lot more layers to comply with, a lot more details needed.
It provides an oversight accountability in ensuring that all the operations of an Islamic Bank is consistent with the rules of Shariah. There is a huge layer of governance surrounding an Islamic Banking proposition.
The Shariah Committee must ensure their decisions have taken into account all requirements of justice, customer protection, compliance to Sharia, interpretation to customary civil practices as well as practicality of implementation.
In short, decisions must be clear, defensible and without any doubt to its validity. But it does not mean the operation of Islamic Banking and the deployment of its funds are for charitable purposes. There are costs for running an Islamic Banking business, and as far as possible it should be at par to the costs of running a conventional banking business.
Returns on Shareholder capital is also important to ensure that capital is continued to be invested into Islamic Banking for it to grow.
With growth comes the ability to continue supporting the ummah. The key word is sustainable banking. You cannot grow or even survive if you are not competitive. The amount of work that needs to be done in relation to the fundamental difference between an Islamic Bank and conventional Bank.
The contract between a customer and a conventional bank is simple; a loan where interest is charged upon over a period of time. But look at an Islamic contract.THE DIFFERENCES BETWEEN ISLAMIC ACCOUNTING AND CONVENTIONAL ACCOUNTING 1.
BWFS ISLAMIC ACCOUNTING GROUP ASSIGNMENT 1 INTRODUCTION The debating between the best practice either the Islamic accounting or conventional accounting in the accounting line still being non-ending issue until today.
Islamic banks and other NBFIs who adopt Islamic modes of Financing can account for such transactions under Islamic Financial Accounting Standards which are different from conventional accounting. Jan 05, · The concern of this project paper is to explore the differences between Islamic accounting and its conventional counterpart.
The distinctions need to be addressed as both accounting is presently thought of many people as synonymous. THE DIFFERENCES BETWEEN CONVENTIONAL AND ISLAMIC ACCOUNTING ABSTRACT The concern of this project paper is to explore the differences between Islamic accounting and its conventional counterpart.
Islamic accounting may require a different statement altogether to deemphasize the focus on profits by the income statement provided by conventional accounting.
Islamic Accounting recognizes that all including the society are the users of the reports. What are the difference between Islamic accounting and Conventional accounting? such transactions under Islamic Financial Accounting Standards which are different from conventional accounting.