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TREATMENT
AND ISSUES IN TAKAFUL
ACCOUNTING
TAKAFUL
Mutual cooperation
which it has become
synonymous with
Islamic Insurance
NATURE OF TAKAFUL
DIFFERENCES
The accounting and reporting for Takaful has not been covered
by FRSi and is still being developed. As an alternative, the
Malaysian Government through its specific Takaful Act (1984)
delegated the function of formulating the accounting techniques,
format and contents of accounting disclosure of Takaful
companies to the Central Bank (BNM)
• Mudharabah model
• Wakala model
• Waqf
Claims
- claims incurred before the reporting date
- claims which have been reported or not
Deficiency reserves
-expecting contributions charged are not adequate to cover
expected claims
Contingency reserves
- set aside proportion of claims which will be made in the future
3. REVENUE AND EXPENDITURE
RECOGNITION
• Cash vs accrual
• takaful organizations recommend the recognition of
revenues under cash basis
• surpluses determined based on “actual” and not
“accrued” revenue
• Shubber and alzafri: deposit accounts+liability and equity
because of hybrid source of capital
• Muhammad (2002):
Revenues on investment=income
!
3 Insurance funds collected are Cumulative takaful
managed for the benefit of insurance funds are
business profits enjoyed by the managed by the concept of
company and shareholders mudharabah