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Syariah 101, paragraph 56). Accounting and
Auditing Organization for Islamic Financial
Institutions (AAOIFI) in the framework of the
preparation and presentation of financial statements
have a viewpoint on the presentation and preparation
of financial statements sincerely or faithfully.
Presentation and preparation of financial statements
faithfully according to AAOIFI are "If the
information is to represent faithfully the transaction
and other events that it purports, it is necessary that
they are accounted for and presented in accordance
with its substance and economic reality as well as
the legal form ". The financial statements that
provide information faithfully according to AAOIFI
are financial statements that present transactions in
accordance with their economic substance and legal
form (AAOIFI, 2015). So, the quality of Islamic
financial statements will be realized if the
transactions are prepared and presented in the
financial statements in accordance with economic
substance and legal form. The principle of substance
over form in the Islamic accounting perspective is
less in line with the Islamic principles because
contracts or Akad in Islamic financial transactions
are the basis for determining the rights and
obligations for each party conducting transactions
(Sultan, 2006).
The financial statements in Islamic accounting
perspective aim to provide information on Islamic
principle conformity of the transactions that occur so
that financial statements should be presented and
prepared based on the suitability between legal form
and its economic substance. Islamic accounting has
a principle that the economic substance and legal
form of Islamic financial transaction must be the
same because every individual who is bound in a
contract or contract must exercise his / her rights and
obligations as agreed in the contract. So, if the
economic substance is not the same as the legal form
will cause non-conformity with the Islamic
principles (Sultan, 2006). Accounting treatment for
Islamic financial transactions with the principle of
economic substance must be the same as the legal
form is often constrained by aspects of measurement
of rights and obligations. So that the Islamic entity
in Indonesia in the preparation and presentation of
its financial statements more using the principle of
substance over form as an effort to overcome the
constraints of measurement of Islamic financial
transactions in Indonesia.
Case study in this research is financing
transaction of homeownership using musyarakah
mutanaqisah contract. Musharakah mutanaqisah
contract is joint ownership of assets or capital of one
party reduced due to the gradual purchase by the
other party (MUI, 2008). Musharakah mutanaqisah
contract in Indonesia applied to financing home
ownership by an Islamic bank.
The musyarakah mutanaqisah contract
application in the financing of home ownership by
an Islamic bank is Islamic bank and the customer
share in home ownership, and the customer pays the
rent for the utilization of the asset. Rent payments by
customers will be shared between the bank and the
customer so that the bank earns profit sharing on the
lease and the customer using the profit sharing
obtained to purchase the bank's ownership of the
house, so that within the agreed time period along
with the right of home ownership will move
completely to the customer.
The accounting treatment of musyarakah
mutanaqisah transactions by Islamic banks in
Indonesia currently uses the principle of substance
over form. The submission of musyarakah capital by
Islamic bank is recognized as the surrender of cash.
capital, so the Islamic bank does not recognize the
existence of joint ownership of the house purchased
together with the customer. Meanwhile, the
musyarakah mutanaqisah contract in Islamic law is
legally home ownership between banks and
customers. The Islamic law of musyarakah
mutanaqisah contract mentions the existence of asset
ownership by the bank, but the ownership rights of
the asset by the bank are not represented in
accounting because the Islamic bank never
acknowledges the existence of musharaka
mutanasqisah assets. The phenomenon will be the
focus of the study. This study is to analyze how the
implications of the use of the principle of substance
over form in the accounting treatment of Islamic
financial transactions on the quality of Islamic
financial statements in Indonesia.
2 LITERATURE REVIEW
2.1 Qualitative Characteristics of
Financial Report
The Characteristics of financial statements should
have four main characteristics that are
understandability, relevance, reliability, and
comparability (Kartikahadi et al, 2016). The
financial statements have understandability
characteristics if the financial statements provide
convenience to users of financial statements in
understanding the information provided. The
relevant characteristic of the financial statement is
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