Once seen as a niche area, Islamic (or Shariahcompliant) finance has expanded rapidly over the past five years and is now an increasingly important element of the global economy. Modern Shariah-compliant products have come to cover the full spectrum of banking, capital markets, asset management and, more recently, insurance (takaful) business. Many of the growing number of companies being attracted to the Islamic finance sector are conventional institutions looking to tap into rising market demand, alternative investment opportunities and fresh sources of funding.
As the sector continues to grow, the question of how best to account for Islamic finance on an international basis is coming to the fore. This challenge is especially pressing for global groups with diverse international stakeholders and extensive financial reporting obligations, which need to align accounting for Islamic finance with the treatment of their conventional business. At the same time, the pursuit of alignment must not compromise Shariah principles.