Murabaha - An Islamic Financial Tool and Challenges vis-a-vis the International Accounting Standards

12 Pages Posted: 10 Dec 2012 Last revised: 12 Aug 2015

See all articles by Cenap Ilter

Cenap Ilter

California State University

Date Written: December 10, 2012

Abstract

Interest has been forbidden in Quran-the holy book of Islam whereas Murabaha is a particular kind of sale in Islamic Finance where the seller expressly mentions the cost he has incurred of a commodity to be sold and sells it to another person by adding some profit or mark-up thereon which is known to the buyer. In terms of Generally Accepted Accounting Principles-GAAP and International Financial Reporting Standards-IFRS inventories are valued at the 'lower of cost and net realizable value.' This paper explores the murabaha and its degree of compliance with IFRS rules as far the profit share is concerned.

Keywords: Murabaha, IFRS, interest, profit share, capitalization, amortization

JEL Classification: M40

Suggested Citation

Ilter, Cenap, Murabaha - An Islamic Financial Tool and Challenges vis-a-vis the International Accounting Standards (December 10, 2012). Available at SSRN: https://ssrn.com/abstract=2187200 or http://dx.doi.org/10.2139/ssrn.2187200

Cenap Ilter (Contact Author)

California State University ( email )

1000 East Victoria Street
SBS C 306
Carson, CA 90747
United States
2096225198 (Phone)

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