Applying IFRS9 with Sukuk by IFRS’s Compliant Firms

Abstract

This paper explores the applying of the IFRS 9 by the IFRS’s compliant firms with Sukuk, concentrating on the problems of Sukuk classification and using the expected credit loss model. Employing the methodology of three stages; started through a written survey with listed firms financial managers then semi-structured interviews language with Islamic accounting and IFRS's experts. Finally, a questionnaire distributed to external auditors. The article concluded; the IFRS’s compliant firms could apply the IFRS9 with Sukuk with considering some Islamic rules related to the Sukuk. The article gives a practical guide to deal with Sukuk under IFRS9. Instructions were suggested to classify and measure the Sukuk. listed firms shall justify that treatment according to the IFRS’s conceptual framework. Additionally, using the equity methods as IAS 28 and classifying as financial assets by fair value through profit or loss. Debt-based Sukuk are classified only under amortised cost since they are not tradable. The listed firms should apply the ECLM on Debt-based Sukuk only, and by using other prevailed factor than the interest rate when involving the expected credit loss. providing solutions to the mentioned problems will increase the willingness of the IFRS’s compliant firms to invest in Sukuk and advance the Sukuk market.

Keywords

• Sukuk
• IFRS 9
• financial assets classification
• expected credit loss model

References

1. Safari, M., & Ariff, M. (2013). Do Debt Markets Price Ṣukūk and Conventional Bonds Differently? Journal of King Abdulaziz University: Islamic Economics, 26(2).
2. Schutte, W. D., Verster, T., Doody, D., Raubenheimer, H., & Coetzee, P. J. (2020). A proposed benchmark model using a modularised approach to calculate IFRS 9 expected credit loss. Cogent Economics & Finance, 8(1), 1735681.