Abstract:

The following paper on Murabaha explores the challenges vis-à-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. Murabaha, 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 Murabaha applications. The paper tries to explain the controversies and proposed solutions to overcome the reporting differences between Murabaha applications and IFRS.