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Ijarah Contracts in the Russian System of Debt Relationship

Vol. 21, Iss. 8, AUGUST 2018

PDF  Article PDF Version

Received: 1 June 2018

Received in revised form: 20 June 2018

Accepted: 2 July 2018

Available online: 15 August 2018

Subject Heading: INTERNATIONAL STANDARDS OF ACCOUNTING AND REPORTING

JEL Classification: G29, K39, M49

Pages: 929–945

https://doi.org/10.24891/ia.21.8.929

Sokolov B.I. Saint-Petersburg State University, Saint Petersburg, Russian Federation
b.i.sokolov@spbu.ru

https://orcid.org/0000-0002-2216-1345

Ivanova E.Yu. Saint Petersburg State University of Industrial Technologies and Design, Stint Petersburg, Russian Federation
ivanova_ey@list.ru

https://orcid.org/0000-0001-6027-7480

Importance The article presents a comparative analysis of Shariah Standard No. 9 – Ijarah, Ijarah Muntahiyah Bittamleek, IFRS 16 – Lease. The research focuses on the relationships of debtors and creditors – Ijarah and Ijarah Muntahiya Bittamleek (lease and lease ended with ownership).
Objectives The research is to determine the position of Ijarah contracts as part of debt relationships and possibilities of their use in the national financial market.
Methods We surfed mass media and performed theoretical analysis, generalization of scholarly and legislative literature, comparative analysis of collected data.
Results The concept of lease was found to be more controversially understood than its accounting formats. Lease contracts and Ijarah contracts basically regulate a certain type of debt relationships. Repayment of debt for idle property use is a mutual obligation under the Ijarah contract, rather than exchange. When lease-to-own is concerned, the contract stipulates not only issues of debt but also exchange. The article reviews the nexus among borrowed property, loan and lease and differentiates them. We assessed whether Shariah Standard No. 9 can be applied in the Russian legal environment.
Conclusions and Relevance As we discovered, additional rules are not required to account for Ijarah contracts and adapt them to the Russian laws, with some aspects of lease as per Shariah Standard No. 9 providing even a better view of its substance than IFRS 16. Lease contracts are most homologous to Ijarah contracts, while lease-purchase contracts match Injarah Muntiahiya Bittamleek. The latter is advisable in case of large-scale investment projects or purchases of expensive equipment.

Keywords: debt, loan, rent, lease, ijara, ijarah muntahiyah bittamleek

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