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  1. Substance over form concept
  2. Time value of money concept
  3. Differences in interpretation of the concepts in the IFRS and AAOFFI
  4. Effect of the interpretations on accounting treatment of different contracts in practice
  5. Ways in which Convergence can be achievedbetween these Issues

To start with, substance over form is an accounting concept which is widely used by all accounting entities. This concept emphasizes more on the reality of the financial status of an entity instead of the legal standards that the entity has taken in its events and transactions as seen in their financial statements (College Accounting Coach, 2006).For the operationalization of this concept of accounting, it is very important that there be an understanding of the company in question, heredeepinvestigationd to have a deep investigationn into the issues to look for proof supporting the financial statements being evaluated (Supreme Justice, 1935).

[...] In this case, the transaction is a sale of a mansion and the repurchase of the same. Contrary to the IFRS standards where they do not indicate the building on the balance sheet, in the AAOIFI, there must be the inclusion of the building in the end year balance sheet accounts as well as the gain from the sale of the building and the rental income. Thus, the accounts would be as under: (Yousaf) Thus, it is evident that the deviations in the standards affect the presentation of contracts in practice. [...]


[...] However, this is not the case when it comes to Islamic finance. According to the Islamic finance, money being used as a store of value does not and cannot apply. The focus of money being used as a store of value is what the concept of time value of money focuses on. This being the case, it can be deduced from the analysis that the AAOIFI does not adhere to this concept. The Islamic finance focuses on the form while the IFRS focuses on the substance of the contracts and transactions. [...]


[...] Islamic Accounting and Financial Reporting Substance over Form Concept To start with, substance over form is an accounting concept which is widely used by all accounting entities. This concept emphasizes more on the reality of the financial status of an entity instead of the legal standards that the entity has taken in its events and transactions as seen in their financial statements (College Accounting Coach, 2006).For the operationalization of this concept of accounting, it is very important that there be an understanding of the company in question, heredeepinvestigationd to have a deep investigationn into the issues to look for proof supporting the financial statements being evaluated (Supreme Justice, 1935).It hastobe done carefully because most of the transactions requiring investigation are usually complex to be evaluated superficially. [...]


[...] [Online] Available at: http://www.slideshare.net/EzzedineGHLAMALLAH/ernst-youngs-the- world-takaful-report-2012 [Accessed 26 February 2015]. Islamic Banking Al Murabahah. [Online] Available at: http://sharia-banking.blogspot.com/2006/10/al-murabaha.html [Accessed 26 February 2015]. Malysian Accounting Standards Board Islamic Finance. [Online] Available at: Http://www.iasplus.com/en/news/2012/novemeber/islamic-finance [Accessed 26 February 2015]. Schaefer, C Investment Principles Every Young Person Should Know: Time Value of Money. [Online] Available at: http://www.schaefersblog.com/3-investment-principles-every- young-person-should-know-1-time-value-of-money/ [Accessed 26 February 2015]. Supreme Justice Gregory v. Helvering U.S [Online] Available at: https://supreme.justia.com/cases/federal/us/293/465/case.html [Accessed 26 February 2015]. [...]

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