AN ANALYSIS OF BUSINESS ZAKAT REPORTING IN ISLAMIC BANKING INSTITUTIONS: EVIDENCE FROM MALAYSIA, INDONESIA AND BRUNEI
DOI:
https://doi.org/10.53840/ijiefer157Keywords:
Business Zakat, Zakat Reporting, Zakat Disclosure, Islamic Banking Institutions, Zakat AssessmentAbstract
The reporting requirements for business zakat accounting in Islamic banking institutions are still in their early stages, with only minimal zakat disclosure currently mandated. Consequently, the disclosure of zakat accounting is insufficient despite its crucial role in enhancing transparency and accountability, building the trust and confidence of the stakeholders, and ensuring compliance with Shariah principles. The primary objective of the study is to analyze zakat reporting requirements and compare them with current business zakat reporting practices in Islamic banking institutions in Malaysia, Indonesia, and Brunei. This study employs a qualitative research approach by examining the annual reports of three selected Islamic Banks, chosen based on the availability and accessibility of their audited financial statements and annual reports for the financial year ending 31 December 2023. A content analysis of the annual reports of Bank Islam Malaysia Berhad, Bank Muamalat Indonesia and Bank Islam Brunei Darussalam Berhad was performed to evaluate the recognition of zakat expenses, the measurement of assets and liabilities for zakat, and the presentation and disclosure of business zakat. The findings are mixed yet interesting. In the absence of approved accounting standards for Islamic financial institutions, Bank Islam Malaysia Berhad has demonstrated full disclosure practices on its business zakat reporting. Whereas, Bank Muamalat Indonesia is still insufficient in reporting the business zakat despite having a proper accounting standard for zakat. For Bank Islam Brunei Darussalam, the business zakat reporting is adequate even though Brunei has only one enactment related to zakat collection and distribution. The measurement, recognition, presentation, and disclosure criteria should be upheld, with additional requirements for full disclosure by zakat-paying business entities. This study proposes the proper establishment of zakat accounting standards to provide comparable and reliable financial information for various stakeholders.
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