Ijarah by Umer Mustafa

Top 20 FREQUENT WORDS

ijarah 28 lease 21 ansari 12 ford 12 hyder 12 mustafa 12 omar 12 partner 12 presentation 12 rhodes 12 sidat 12 sale 10 transaction 10 asset 9 accounting 8 bittamleek 7 muntahia 7 amount 6 lessor 6 depreciation 5 expected 5 expenses 5 ifas 5 islamic 5 loss 5 recognized 5

DOCUMENT KEY POINTS

• i ijarah muntahia bittamleek ijarah wa iqtina is an ijarah transaction in which the ownership of the subject asset is expected to be transferred to the lessee after the end of the lease term
• what is ijarah i ijarah is a contract whereby the owner of an asset other than consumables transfer its usufruct to another person for an agreed period for an agreed consideration

• i on the other hand the conventional banks as well as islamic banks currently operating in pakistan are accounting for ijarah as a financing transaction just like finance lease a in accordance with ias
• ijarah a difference of treatment i the ifas a issued by icap as well as the aaoifi standard suggest the accounting treatment similar to an operating lease transactions with certain exceptions

• i according to aaoifi standard these are presented as investments in ijarah assets while as per ifas a these are included in property plant and equipment with separate disclosure
• ijarah a accounting by islamic bank as lessor i asset is recognized at historical cost and depreciated as per normal depreciation policy with an expected realizable value at the end

• i depreciation term shall generally be equal to the lease term except where it is expected that the asset will be given on ijarah again to same or some other customer in which case the depreciable life shall be equal to the asset s useful economic life
• most suitable method is generally the straight line method because the rentals are generally also accounted for on a straight line basis

• ijarah a accounting by islamic bank as lessor i lease rentals including other associated charges and ijarah related expenses are allocated proportionately in financial periods over the lease term
• i according to aaoifi standard a provision for repairs is established if repairs are material and differ in amount from year to year

• m lessee assets at historical cost deposit a recorded as liability depreciation monthly rentals a repair and maintenance a including provision for repairs recorded as revenue expenses incidental to ownership over the term when due presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
• purchase of assets and lease lease rentals of rs

• i in case of expected selling price is nil or fixed or equivalent to some pre agreed amount the residual value for the purpose of depreciation should be equivalent to such amount
• i same accounting treatment should be applied as in case of ijarah as according to the substance of transaction all the risks and rewards remain with the lessor

• impairment i in case where a leased asset has become impaired that is when the expected future economic benefits from that asset are lower than its carrying amount the ias a shall be applied to work out the recoverable amount and any resultant impairment shall be recognized as a loss
• i impairment provisions according to prudential regulations should also be recorded in addition to specific impairment as discussed above

• sale and lease back transaction a operating ijarah a lessee s perspective i sale and lease back resulting sale price into an ijarah i if the sale price is same as that of its fair value any gain or loss shall be recognized in equal to fair different from period in which such value fair value transaction occurs and i if the sale price is different gain or loss gain or loss allocated as from its fair value any gain or recognized in an adjustment loss shall be amortized period in to ijarah which allocated as an adjustment transaction expenses amortized to ijarah expenses over the occurs over the lease lease term
• term presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co

• sale and lease back transaction a ijarah muntahia bittamleek a lessee s perspective i according to aaoifi standard in case of sale and lease back resulting into ijarah muntahia bittamleek gains or losses resulting from sale shall be allocated as an adjustment to ijarah expenses over the lease term
• presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co

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DOCUMENT WORD ANALYSIS

Main Category

AlHuda Material\islamic banking

KeyWords

contract price sale asset financing lease client purchase ijarah payment profit musharakah lessee amount commodity housing agreement contracts ownership project

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DOCUMENT REFERENCES

Number of Pages

12

Published Date

2016-09-17 00:25:47

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