Time value of money in Islamic accounting practice: a critical analysis from maqāṣid al-Sharī‘ah

Abstract

Purpose This paper aims to critically analyse the application of present value (PV) practised in the concept of time value of money (TVM) from the perspective of maqāṣid al-Sharī‘ah (objective of Islamic law) explained by Ibn ‘Ashur. The analysis is important as this concept has been adopted in the practice of Islamic accounting measurement. Design/methodology/approach This paper uses qualitative research approach. The authors first review literature related to TVM in Islamic perspective to understand the extent to which the scholarly articles have been discussing this topic. Furthermore, the authors conduct face-to-face interviews with the experts to comprehend the means of TVM application in the recent Islamic accounting practices. The tawhid (monotheistic) paradigm is further used with special reference to the concept of maqāṣid al-Sharī‘ah of Ibn ‘Ashur to critically analyse the practice of TVM in Islamic accounting measurement. Findings This study identifies the opposing views among the experts on the topic of TVM from the Islamic perspective. That is, the experts’ opinion on this issue can be classified into two. Firstly, a view that rejects TVM and proposes the concept of economic value of time. Secondly, an opinion that recognises TVM with the basis of bay’ al-mu’ajjal (deferred sale). This paper further critically analyses these two opposing opinions. The discussion is established based on the theory of maqāṣid al-Sharī‘ah as explained by Ibn ‘Ashur and the excerpts from interviewing the experts. This work draws a conclusion that such PV-based measurement of TVM does not meet the Islamic principles explained in the theory of Ibn ‘Ashur’s maqāṣid al-Sharī‘ah. Thus, the practice of PV measurement in Islamic accounting is debatable. Research limitations/implications This study does not establish a positivism discussion. It is thus the generalisation of this work is not applicable to the Islamic perspective in general. Rather, it is limited to Ibn ‘Ashur’s maqāṣid al-Sharī‘ah. Practical implications An analysis of PV measurement adoption in Islamic accounting from maqāṣid al-Sharī‘ah perspective is practically important to raise the awareness that such practice is debatable in Islamic principles. That is, such debate opens new arena for academics, industry professionals and other related stakeholders to further discuss an ideal practice of Islamic accounting. Originality/value This paper is among the pioneers that analyses the concept of TVM, in particular relation to PV measurement in Islamic accounting practice from the perspective of Ibn ‘Ashur’s maqāṣid al-Sharī‘ah.