INTERNATIONAL ISLAMIC UNIVERSITY MALAYSIA COURSE OUTLINE Kulliyyah Economics & Management Sciences Department Accounting Programme Master

of Science in Accounting (MSc) Name of Course / Mode Accounting for Islamic Institutions Course Code ACC 6830 Status Elective Course Level Postgraduate Credit Hours 3 credit hours Contact Hours Lecture 3 credit hours Pre-requisite (if any) Nil Co-requisite (if any) Nil Instructional Strategies Lectures, Group Discussions, Problem Solving, Pr esentations, Group Works Course Assessment State weightage of each type of assessment LO Method % 1, 3, 4 Group Assignment 20 1-5 Article Review 5 1-5 Participation 5 1 - 3 Midterm 25 1 - 5 Final examination 45 Total 100 Instructor (s) Dr. Noraini Mohd. Ariffin Room no: A313 Contact no: 03-61964683 E mail: [email protected]/[email protected] Consultation hours: Tuesday/Wednesday: 2.30 pm 4.30 pm Semester Offered Semester 1 Course Synopsis This course is designed to expose students with accounting for I slamic institutions, particularly Islamic banks with reference to relevant stand ards including MASB, BNM and AAOIFI. Topics include accounting for Mudarabah, Mu sharakah, Murabaha, Ijarah, Salam, Istisnaa, Zakat and Shariah Audit. Course Objectives The objectives of this course are to: 1. Introduce the accounting framework for Islamic financial institution (IF I) 2. Familiarize students with the features of IFI 3. Introduce students with accounting treatments for transactions in the IF I 4. Comprehend the control concepts, auditing and governance of IFI 5. Understand the concept of zakat and its calculations for IFIs Learning Outcomes Upon completion of this course, students should be able to: 1. Explain accounting principles as applied in Islamic financial institutio ns. 2. Prepare accounting treatment for recognition, measurement and disclosure of Islamic financial service such as Mudarabah, Musharakah, Murabaha, Ijarah, S alam and Istisnaa. 3. Discuss accounting issues for Islamic financial institutions. 4. Explain the role of auditing in Islamic financial institutions. 5. Explain the zakat accounting treatment and issues in Islamic financial i nstitutions

Content outline of the course / module and the SLT per topic Weeks Topics Task/Reading 1 13/9 Accounting and Financial Reporting Framework for Islamic Financi al Institutions. Introduction to AAOIFI Accounting Standards Islamic financial reporting framework and regulatory environment (e.g. AAOIFI, F AS 1, MASB Tri-3) Case Study: Financial Statement of Bank Islam, Bahrain Islamic Bank and Public B ank AAOIFI Statement of Financial Accounting (SFA) 1 [Accounting Obj ectives] AAOIFI SFA 2 (Accounting Concepts) AAOIFI Financial Accounting Standard (FAS 1) [Presentation & Disclosure] MASB TR-i 3 [Presentation and Disclosure] 2 20/9 Accounting and Financial Reporting Framework for Islamic Financi al Institutions. Fundamentals of accounting e.g. double entry system, journal entries, accounting equation Fundamentals of financial reporting e.g. Income Statement, Balance Sheet, etc. Accounting principles and concepts from Islamic perspective AAOIFI Statement of Financial Accounting (SFA) 1 [Accounting Obj ectives] AAOIFI SFA 2 (Accounting Concepts) AAOIFI Financial Accounting Standard (FAS 1) [Presentation & Disclosure] MASB TR-i 3 [Presentation and Disclosure] 3 27/9 Accounting for Islamic Deposit and Investment Principles of Wadiah and Mudarabah Accounting recognition and measurement for Islamic deposit and investment Profit distribution policy for investment account holders: Separate Investment A ccount Vs Pooling method Article 1 4 4/10 Accounting for Islamic Equity Financing Principles of Mudarabah and Musharakah Financing Accounting recognition and measurement of Mudarabah financing AAOIFI FAS 3 [Mudarabah] Article 2 Article 3 5 11/10 Accounting for Islamic Equity Financing Accounting recognition and measurement of Musharakah financing Cash vs. Accrual basis of income requirements AAOIFI FAS 4 [Musharakah] Article 4 6 MID TERM EXAM 7 1/11 Accounting for Islamic Asset Financing Principles of Murabahah, Bai Muajjal and Bai Bitahaman Ajil (BBA)

Accounting recognition and measurement of Murabaha financing Presentation and disclosure requirements AAOIFI FAS 2 (Murabahah)

Article 5 8 8/11 AB) Accounting for Islamic Asset Financing Principles if Ijarah, Ijarah Muntahia Bitamleek and Al-Ijarah Thumma al-Bai (AIT Accounting recognition and measurement of Ijarah financing AAOIFI FAS 7 (Ijarah)

Article 6 9 22/11 Accounting for Islamic Asset Financing Accounting for Salam and Istisnaa Recognition and measurement Presentation and disclosure AAOIFI FAS (Salam) AAOIFI FAS (Istisnaa) 10 29/11 Auditing & Control of Islamic Financial Institutions The roles and importance of Shariah Supervision and governance in Islamic Financi al Institutions. The roles and functions of Shariah Advisory or Supervisory Committee (Board). Internal and external auditing issues for Islamic financial institutions. The needs for Shariah auditing for Islamic financial Institutions. AOIFI Governance and Auditing Standards IFSB Governance Standards Article 11 6/12 kat] 7 Accounting for Zakat for Islamic Financial Institutions Objectives and basic principles of zakat Zakat Accounting for business wealth Zakat Accounting for Islamic financial institutions AAOIFI FAS 9 [Za

Article 8 12 & 13 13/12, 20/12 Group Presentation Main references supporting the course The reference lists shall be presented in accordance with APA bibliographic prac tices and in alphabetical order. Required Text book: Abdul Rahim Abdul Rahman (2011). An Introduction to Accounting Theory and Practi ce, CERT Publications Accounting Standards and Guidelines: AAOIFI Statement of Financial Accounting (SFA) 1 [Accounting Objectives] AAOIFI SFA 2 [Accounting Concepts] AAOIFI FAS 1 [General Presentation & Disclosure in the IFI] AAOIFI FAS 2 [Murabahah] AAOIFI FAS 3 [Mudarabah]

AAOIFI FAS 4 [Musharakah] AAOIFI FAS 7 [Salam] AAOIFI FAS 8 [Ijarah] AAOIFI FAS 9 [Zakat] AAOIFI FAS 10 [Istisnaa] AAOIFI Governance and Auditing Standards IFSB Governance Standards MASB TR-i 3 [Presentation and Disclosure] Articles: 1. Yaya, R. (2004), Would the Objectives and Characteristics of Islamic Business Organisations Meet the Islamic Socio-Economic Objectives? Journal of Accounting a nd Auditing Indonesia 2. Sulaiman, M & Abdul Latiff, R (2005). Corporate Reporting of Islamic Financia l Institutions: Examining the Gap between the Desirable and the Actual. Accounti ng, Commerce and Finance: The Islamic Perspective Journal. 3. El-Tegani, A. A. (1994) Accounting Postulates and Principles from Islamic Pers pective. Review of Islamic Economics. 4. Meera, A.K.M & Abdul Razak, D. (2009) Home Financing through the Musharakah Mu tanaqisah Contracts: Some Practical Issues. Journal of King Abdulaziz University. 5. Talib, A. A. (2000) Islamic Banking Financing Instruments and the Concepts of Substance Over Form: The Case of Bai Bithaman Ajil, Accounting, Commerce and Fin ance: The Islamic Perspective Journal. 6. Al-Habsyi, S. M., (2004) Reporting Lease Assets from an Islamic Perspective: E conomic Substance Over Form, IIUM Accounting Conference II, Kuala Lumpur. 7. Abdul Rahman, A.R (2008), Shariah Audit for Islamic Financial Services: The Nee ds and Challenges, International Shariah Research Academy (ISRA) Islamic Finance S eminar, Kuala Lumpur, Malaysia. 8. Adnan, M. Akhyar and N. B. Abu Bakar (2009) Accounting Treatment for Corporat e Zakat: A Critical Review, International Journal of Islamic & Middle Eastern Fin ance and Management (forthcoming). Or, Proceeding of the 2008 AAAA Conference, D ubai.

Prepared by: Dr. Noraini Mohd. Ariffin Department of Accounting, KENMS. Checked by: Assoc. Prof. Dr. Suhaiza Ismail Head, Department of Accounting Approved by: Prof. Dr. Khaliq Ahmad Dean, Kulliyyah of Economics and Management Sciences

Academic Calendar: Lectures: 10 September 21 October (6 weeks) Mid Sem Break: 22 October 28 October (1 week) Lectures: 29 October 23 December (8 weeks) Revision Period: 24 December 27 December (4 days) Examination Period: 28 December 13 January 2013 Malaysia Day: 16 September (Monday) Eid Adha: 26 October (Friday) Deepavali: 13 November (Tuesday) 1 Muharram: 15 November (Thursday) Sultan Selangors Birthday: 11 December (Tue) INSTRUCTIONS ON CONTINUOUS ASSESSMENT ASSIGNMENTS 1. Article Review (5%) Each group must present a selected article review from the list of articles prov ided for the course. The assigned articles are indicated in the course outline. The remaining groups need to submit on page review of the article. The Presentation: Each group will make a 10 minute presentation of the allotted day, and allow 5 m inutes for questions and answers. 2. Group Assignment (report 10%, presentation 10%).

Notes

Each group must analyse the issues in all the 16-Islamic banks annual reports in Malaysia for the year 2011. Extra credit will be given if the group can intervie w an officer of an Islamic bank to get his/her view on the issues. Issues include: 1. 2. 3. 4. 5. 6. 7. 8. Mudaraba Impact of International Financial Reporting Standards on Islamic Banks Corporate Social Responsibility Musharakah Murabaha Ijarah Shariah Audit Zakat

The Presentation: Each group will make a 20 minute presentation of the findings on the allotted da y, and allow 10 minutes for questions and answers. Subsequently, a report should be submitted. The Report: The report must be typed in Times New Roman, font size 12, double-spaced with ta ble of contents, numbered paragraphs, abstract, cover page and between 12-15 pag es (about 3,000 to 4,000 words) (excluding any appendix). A bibliography or refe rences must be given at the end of the work. The due date to submit the project is on 21 December 2012 (Friday) before 5.00 p m at the Department of Accounting office. Remember: Late submission will be penalized. Plagiarism will result in f ailure. All members in the group must participate and contribute their ideas in

answering the project.