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Abstract
Key Takeaways
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Introduction
Discussion
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Business and Management
Accounting

Analysis of the True and Fair View Concept: An Islamic Perspective

Profile image of A. A. Ousama (Ousama Abdulrahman Anam)A. A. Ousama (Ousama Abdulrahman Anam)

2015, International Journal of Managerial and Financial Accounting

https://doi.org/10.2139/SSRN.1962266
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24 pages

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Abstract

The aim of this paper is to critically examine the applicability of the concept of ‘True and Fair View’ (TFV) from an Islamic perspective. It then explores the position and roles of TFV in the Islamic accounting context. The sources of data consist of the shari’ah fundamentals from the Islamic legal sources, in addition to relevant accounting standards and regulations. The paper found that the TFV concept is not contrary to Islamic shari’ah and that TFV plays certain roles in Islamic accounting. Thus, the paper suggests that the Islamic standard setters retain the term as it is not against Islamic shari’ah and it will help avoid confusion among users of financial statements. With this, the TFV concept should continue to be used in Islamic accounting until a more appropriate phrase is coined. The paper can be considered among the first papers that analyse the TFV concept from an Islamic perspective.

Key takeaways
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  1. The concept of 'True and Fair View' (TFV) aligns with Islamic shari'ah, facilitating Islamic accounting's development.
  2. TFV plays a key role in ensuring full disclosure and accountability in Islamic financial reporting.
  3. Islamic accounting differs from conventional accounting in objectives and information types communicated to users.
  4. The paper advocates retaining the term TFV in Islamic accounting to avoid confusion among financial statement users.
  5. This study contributes to the limited literature on TFV from an Islamic perspective, encouraging future research.
Figures (2)
Figure 1 Sources of Islamic shari’ah
Figure 1 Sources of Islamic shari’ah
Table 1 The condition of valid ‘urf
Table 1 The condition of valid ‘urf

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FAQs

sparkles

AI

What challenges does Islamic accounting face in aligning with conventional standards?add

The study reveals that Islamic accounting significantly differs from conventional practices, especially regarding the prohibition of riba' (interest), complicating standard alignment.

How did the concept of True and Fair View evolve in Islamic accounting?add

The paper traces the True and Fair View (TFV) requirement from UK laws established in 1947, asserting its eventual adaptation in Islamic standards despite lacking formal definitions.

What role does True and Fair View play in zakat determination?add

TFV ensures accurate financial reporting, facilitating zakat calculations, as all accounts must be prepared truthfully to fulfill obligatory Islamic wealth redistribution.

How is compliance with shari'ah ensured in Islamic financial reporting?add

Financial statements must adhere to shari'ah rules and maintain transparency, with an emphasis on full measurement and disclosure, distinct from mere compliance with accounting standards.

What implications does the absence of Islamic accounting standards have?add

Without defined Islamic accounting standards, practitioners rely on conventional frameworks, risking socio-economic behaviors inconsistent with Islamic values, as highlighted in the study.

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Saiful Alam

PSU research review, 2022

Purpose-This paper aims to examine the Islamic accounting research. In particular, the paper extensively investigates the literature on Islamic accounting to understand the issues, contexts, methods and theoretical paradigms thereof. Design/methodology/approach-The study has adopted a literature review approach. It has examined the key journal publications for 30 years in accounting discipline and systematically identified the Islamic accounting papers during 1990-2020. In total, 95 papers were identified until June 2020, and they were thoroughly reviewed to identify the relevant issues, contexts, methods and theoretical paradigms. Findings-The study has found that Islamic accounting papers covered issues of both Islamic organizations (e.g. Islamic financial institutions) and of Muslim countries. The key issues include the regulation and regulatory compliance, annual report disclosures, corporate and Islamic governance, accounting profession, gender, accountability matters, management accounting and control, waqf accounting and zakat management. The study has also observed various normative guidelines from the academics on how the teaching of Islam is enacted in accounting, accountability and governance matters to attain the maqasid al-shari'a, i.e. human welfare, social justice and equity. Research limitations/implications-The study is not empirical. Hence, the limitations of literature review papers are applicable in this case. Moreover, it is possible that this study could not identify some of the important literature on Islamic accounting (such as the papers published in Arabic by the academicians and professionals of Arab world). Practical implications-The study enables both Islamic accounting academics and practitioners to identify the main Islamic accounting issues and realize the importance of Islamic accounting. Social implications-When the author considers Islamic accounting as a social construction and tries to understand the phenomenon through social theories, the author acknowledges the relevance of Islamic accounting in the society in which it operates. It can be noticed from the discussion that Islamic accounting emphasizes on social welfare, balance, equity and providing relevant information to follow the commandments of God. Originality/value-To the best of the author's knowledge, this study is the first to provide a synoptic view on the issues, context, methods and theoretical paradigms of Islamic accounting, while covering major accounting journals in 30 years.

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The Importance of Islamic Accounting in Modern Era
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Purpose – This paper aims to determine the importance of the Islamic Accounting in modern era. In particular, the paper analyzes the values of the Islamic principles in the accounting process that prevent the unexpected activity such as fraud, dishonest etc to appear in reality. Arthur Anderson case was a result of the fraudulent activities that lead to its termination. Certainly this kind of case is expecting not to be happened in the future. Design/methodology/approach – The paper adopts the descriptive analysis and elaboration of the important element of the Islamic principles used in the accounting process. Furthermore, this paper attempt to make clear distinction between values underlying the Islamic accounting and that of the conventional accounting. Findings – the comparison of those two systems leads to the conclusion that the value in Islam such as honest, fair, truth (which is important in the Islamic accounting process) has more meaning than the similar value of in the conventional accounting. Hold firmly the Islamic value obviously leads to the decrease fraudulent practices and other unexpected activities. Moreover, it increases the social welfare of the stakeholders as Islam requests people to bring as much as benefit to other community. 1 Practical implication – The implication is that the current conventional modern accounting value must be redefined to bring the stakeholders in getting more benefit and creating less damage to the society. The reporting value should provide information to the stakeholders on the current state of the real condition and provide solution which leads to the increase of the stakeholders' welfare.

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  • Islamic Accounting
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