Is it a Revenue or Liability?

Abstract

ABC finance PLC is a leading Islamic finance provider in Sri Lanka. It provides lease, Hire purchase and loan facilities to customers. Company is using different jargons to introduce products In the Islamic unit loan lease products are called as Murabha and Ijahra respectively. Islamic finance is been conducting accordance with the principles of sharia law. Sharia law prohibits acceptance of specific interest penal interest and fees for loans. Company recognizes interest under profit share. Though company is charging and collecting penal interest for due rentals, it is not recognized to the period profit. This practice has been created an issue with accounting standers and financial reporting frame work.