The Relevance Of Goodwill Reporting In An Islamic Context

In recent years global finance has seen the emergence of Islamic finance as an alternative to the western secular system. While the two systems posses largely similar concepts of social equity and well-being the major divide between them rests in the distinction between divine and natural law as a source of protection for the downtrodden. As communication barriers between the Arabic and Anglo-European accounting systems start to blur, the question posed for the practitioners as to what constitutes a source of equity becomes more and more relevant. Considering the case of Islamic countries, besides internally-generated and acquired goodwill Islamic sources of social equity such as zakat also provide a source of social equity. For the purpose of this paper, two models pertaining to value relevance are tested for a sample of 56 companies in 6 accounting jurisdictions with the purpose of identifying the underlying sources of social equity revealing that zakat disclosures marginally improve the accuracy of the model.