Abstract

The following paper on murābaha explores the challenges vis-a-vis the International Financial Reporting Standards (IFRS). Some aspects are first analyzed and then compared to specific IFRS, namely IAS 2-Inventories, IAS 23-Borrowing Costs, IAS 16-Property, Plant and Equipment, IAS 18-Revenue, IAS 40-Investment Property, and taxable income. Murābaha, a method of Islamic Financing with its fixed profit margin, offers the seller a more predictable income stream, however, it is also a controversial issue in the Islamic world of finance due to the sensitivity of the profit margin as opposed to interest. From IFRS’s point of view, there are controversies between IFRS and murābaha applications. The paper tries to explain the controversies and proposes solutions to overcome the reporting differences between murābaha applications and IFRS.

Keywords

Murābaha; Interest-Profit Margin; IFRS; IFAS-1; Islamic Bank; Wakālah; Brokerage Fee.