They have a good point in disclosing the historical and current costs. On the accounting for waqf, it will increase the informativeness of the waqf financial reporting. However, the additional costs must be taken into account as to whether its benefits out weigh the costs. For waqf investments assets, it may be suitable to include the current market value as it directly affects the value of waqf investments in decision-making purposes, for example, to analyze the efficiency of earnings generated.
Recognition of Assets and Income Issues
Recognition is the process of incorporating items into the financial statements. The main objective of a financial statement is to provide useful information for decision making to investors and creditors (conventional accounting). Relevance and reliability is the main criteria for deciding on the recognition of an item. According to AAOIFI (1997), relevance means the existence of a close relationship between financial accounting information and the purposes for which this information is prepared. To be useful, financial accounting information should be relevant to one or more decisions of the users of that information. So, the information is capable of making a difference in user decisions. AAOIFI (1997) further elaborates that reliability is the characteristic, which permits users to depend upon information with confidence; however, this does not mean absolute accuracy since accounting information by necessity reflects estimates and judgments. In order to fulfill reliability, the information should be representationally faithful, objective, verifiable and neutral, that is free from any bias. However, items that do not meet the appropriate level of reliability are not recognized in the financial statement but may still be considered for disclosure in the notes to the accounts or the footnotes (Sloan, 1999). A problem arises as to what economic events should be considered to value an asset, for example, choosing the past transactions (historical costs) or current transactions which lead to market valuation (Liang, 2001).
For the waqf accounts, many assets especially the assets that are built for worship, i.e. a Masjid, are not recognized as fixed assets though they involve a huge amount of money to build. Much of the land on which the Masjid is built is waqf land. Presently, a Masjid is not recognized in the waqf account of the SIRCs in Malaysia unlike the recognition of churches and dioceses in the United Kingdom, where they are categorized under tangible fixed assets (functional assets). In Malaysia, only if they are old enough, they may be put under the heritage assets category. However, in the event that the related costs are difficult or impossible to trace, then the recognition is waived. Nevertheless, it will still be put into the notes to the accounts complete with an explanation to enhance public accountability. SORP 2005 requires that a functional asset be recorded and depreciated accordingly, where applicable.
For the purpose of this study, the recognition of waqf assets, liabilities, revenues and expenditure is the first issue to be considered. It is hoped that this study would provide some avenue as the solution, which will be evaluated through the input from the documents analyses, interviews and observations in the Federal Territory SIRC. As argued in Shahul (2000) and Shahul and Hisham (2006), the basis for Islamic accounting is in its dual accountability as compared to the accountability in conventional western accounting. This is because Islam does not separate religion from economic activities (Syafei et al., 2004), whereas conventional Western thought does. In fact, Islam covers all aspects of human life with its shari'ah.
The first objective of Islamic accounting is to benefit the Muslim Ummah as a whole in terms of socio-economics as mentioned in the five maqasid of the shari'ah. The shari'ah is the guideline that must be adhered to. Whereas in the Western conventional accounting, accounting is ultimately the tool for the capitalists to report their activities, which are profit oriented, mainly to their shareholders and creditors. Therefore, the Western conventional accounting ignores other stakeholders' relationship i.e. the environment and the interests of society (Tomkins and Karim, 1987).
Hence, in the consideration of accounting for waqf, the objectives and procedures must adhere stringently to the shari'ah and uphold the maqasid (objective) of the shari'ah to attain falah in this world and in the hereafter. Waqf accounts should be able to serve the various stakeholders and provide a true and fair view of the reporting of waqf affairs. Hence, it is argued that the non-profit bearing assets (functional assets) such as Masjid and Musalla should be recognized in the waqf accounts. It will better portray the fair value of the waqf assets. So, as what has been practiced by the conventional accounting standard body, a proposal and exposure draft must be tabled and discussed among the stakeholders to ensure the successful implementation and acceptance of any accounting standard by the practioners and society. This study will try to look into this problem and possibly point towards some solutions.
