The MASB's primary role is to develop accounting and financial reporting standards. It is the MASB's operating procedure that generally precludes the MASB or its staff from giving advice to any individuals or corporations or to individual cases nor to act as an arbitrator regarding any issue. Resolution of matters concerning the application of the accounting standards should be addressed and discussed with the respective independent accountants, or auditors.

Likewise the MASB's resources do not allow for it to respond to students individual requests for help in completing their assignment.

Here are some of the questions that the staff frequently receives from preparers, auditors and users of MASB Standards. The answers to the following questions have been prepared by the MASB staff and do not in any way represent the official position of the MASB.

1. What is ‘financial reporting from an Islamic perspective’?

Financial reporting from an Islamic perspective is a process through which appropriate information is communicated to users which assists them to assess whether an entity is operating within the bounds of Shariah and fulfilling its responsibilities to society and the environment, and for users to make decisions that would persuade the entity to fulfil or to continue to fulfil those responsibilities.

2. How do Malaysian financial institutions account for Islamic transactions?

Shariah compliant transactions and events shall be accounted for in accordance with MASB approved accounting standards, unless there is a Shariah prohibition.

3. What do we do if a requirement in MASB approved accounting standard violates Shariah?

We are not aware of any MASB accounting requirement that violates Shariah.  However, in the extremely rare circumstances where there is a Shariah prohibition to a requirement in an MASB approved accounting standard, that requirement need not be complied with, and MASB will undertake to issue alternative guidance.

4. What do we do if an Islamic accounting issue is not addressed in existing standards?

FRS 108, Accounting Policies, Changes in Accounting Estimates and Errors, and SOP i-1 provide guidance on the selection and application of accounting policies in the absence of a MASB approved accounting standard that applies to a transaction, other event or condition.

In such circumstances, management shall use its judgement in developing and applying an accounting policy that results in information that is:

a)    relevant to the economic decision-making needs of users; and

b)    reliable, in that the financial statements:

      i.   represent faithfully the financial position, financial performance and cash flows of the entity;

      ii.  reflect the economic substance of transactions, other events and conditions, and not merely the legal form;

      iii. are neutral, i.e. free from bias;

      iv. are prudent; and

      v. are complete in all material respects.

In making the judgement described, management shall refer to, and consider the applicability of, the following sources in descending order:

a) the requirements and guidance in Standards and Interpretations dealing with similar and related issues; and

b) the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Framework.

Management may also consider the most recent pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards, other accounting literature and accepted industry practices, to the extent that these do not conflict with the sources described above.

5. Can we apply AAOIFI financial accounting standards?

The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) sets accounting, auditing, governance, ethics and shariah standards for Islamic financial institutions.  While it is a pioneer in Islamic standard-setting, the MASB is concerned that its accounting standards may not have been developed based on a conceptual framework similar to the MASB approved accounting standards.  Thus, the MASB has not approved AAOIFI financial accounting standards for use by entities under its purview.

If for some reason, there is a matter that is not dealt with by MASB approved accounting standards, but for which guidance may be found in an AAOIFI financial accounting standard, an entity may consider the AAOIFI requirement, provided that it is in accordance with the requirements of FRS 108 on the selection and application of accounting policies. [See the answer to question 4 above.]

In general, this would mean that an entity may not apply AAOIFI recognition and measurement requirements that depart from MASB requirements.  However, the inclusion of additional disclosures required under AAOIFI standards, if appropriate, may be acceptable.

6. If an entity complies with MASB Islamic accounting pronouncements, does that mean the entity is Shariah-compliant?

Not necessarily. MASB Islamic accounting pronouncements provide guidance on how the MASB approved accounting standards are to be applied to Islamic transactions and events.  They do not in any way validate an entity’s activities as being Shariah-compliant.

7. Does MASB have a Shariah Council/Board?

No. The MASB does not have a Shariah Council/Board but may seek the opinion of Shariah advisors or advisory bodies as necessary.  However, any views expressed do not in any way constitute Shariah rulings of either the MASB, or of the Shariah advisors or advisory bodies.