The Effect of Substance Over Forms Principle towards Islamic Financial Reporting Quality

Noven Suprayogi

2017

Abstract

One of the principles that must be implemented to ensure the reliability of financial reporting is substance over forms principle. The substance over forms principle require that in preparing financial reporting should prioritize the substance and economic reality of a transaction or event rather than its legal form. A contract or akad in an Islamic financial transaction is the basis for determining the rights and obligations of each party conducting the transaction so that in Islamic accounting perspective the financial reporting must present transactions in accordance with their economic substance and legal form. This study used a qualitative approach with case study method to analyze the implications of using the substance over forms principle toward the quality of Islamic financial statements. The case study used is the financing of homeownership with musyarakah mutanaqisah contract in Islamic bank. The result of the research shows that the use substance over forms principle in Islamic financial reporting can decrease the quality of Islamic financial reporting on relevance and reliability aspect. The substance over forms principle will lead to Islamic financial reports in providing confusing information to users of financial reporting and causes the transactions to be incompatible with Islamic principles because economic substance is not in accordance with its legal forms.

Paper Citation

in Harvard Style

Suprayogi N. (2017). The Effect of Substance Over Forms Principle towards Islamic Financial Reporting Quality.In 1st International Conference on Islamic Economics, Business, and Philanthropy - Volume 1: ICIEBP, ISBN 978-989-758-315-5, pages 353-358. DOI: 10.5220/0007082103530358

in Bibtex Style

@conference{iciebp17,
author={Noven Suprayogi},
title={The Effect of Substance Over Forms Principle towards Islamic Financial Reporting Quality},
booktitle={1st International Conference on Islamic Economics, Business, and Philanthropy - Volume 1: ICIEBP,},
year={2017},
pages={353-358},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0007082103530358},
isbn={978-989-758-315-5},
}

in EndNote Style

TY - CONF

JO - 1st International Conference on Islamic Economics, Business, and Philanthropy - Volume 1: ICIEBP,
TI - The Effect of Substance Over Forms Principle towards Islamic Financial Reporting Quality
SN - 978-989-758-315-5
AU - Suprayogi N.
PY - 2017
SP - 353
EP - 358
DO - 10.5220/0007082103530358