Insurance vsTakaful: identical sides of a coin?

Purpose - – The purposes of this paper are threefold. First, it aims to argue normatively how Shari’ah precepts governingTakafuloperations are translated into (rightfully) different accounting and reporting ofTakafuloperators. Second, it provides a critical review of the available and applicable accounting and reporting standards and guidelines related toTakafulin the Malaysian context. The third objective which constitutes the empirical piece of this paper centred on the basic numerical evidence obtained from the survey of final-year accounting students with regards to their ability in identifying the basic (dis)similarities in accounting and reporting betweenTakafuland insurance based on the published financial statements. Design/methodology/approach - – A mixed-mode research approach was adopted covering archival document reviews and focused group survey. Findings - – Findings are arguably informative and relevant to diverse stakeholders. First, the missing jigsaw puzzle representing accounting and reporting in theTakafulliterature is uncovered by extending the explanations ofTakaful-insurance conceptual and operational differences to that of accounting and reporting. The essence primarily lies on the different operational set-up attributed to the elements of gharar, maisir and riba. Second, the comparative analysis of accounting and reporting rules indicates that AAOIFI standards are less detailed in terms of accounting treatment over certain areas ofTakafuloperations (e.g. Re-Takaful), but these are more holistic, focused and specific in some other relatively important reporting areas reflecting the unique nature ofTakafuloperations. Third, findings based on the MalaysianTakafulaccounting and reporting guideline suggest that accounting and reporting betweenTakafuland insurance are perceived to be a coin having monographic characteristics on both sides. Originality/value - – The research explicitly extends and highlights the impact of Shari’ah precepts governingTakaful’s operational nature on its accounting and reporting. It also provides empirical evidence on the nature of Malaysian-basedTakafulaccounting and reporting guidelines which mirror its insurance counterpart.