Participation finance products and accounting processes: A comparative analysis according to TAS / TFRS and IFFAS for participation banks and business entities

The realization of financial activities within the framework of Islamic legal rules is defined as participation finance. Interest, excessive uncertainty, gambling, illicit goods and services are among the prohibitions of participation finance. Participation finance products, which operate on the basis of trade, profit and loss sharing principle, are the methods used in the participation financial system. Participation banks are accepted as institutions operating according to the participation financial system and carry out their activities by using participation finance products. The purpose of this study is to explain and develop suggestions through discussion the accounting recording processes of participation finance products in practice within the scope of Turkish Accounting Standards / Turkish Financial Reporting Standards (TAS / TFRS) and Interest-Free Financial Accounting Standards (IFFAS). Participation finance products within the scope of IFFAS published by the Public Oversight Accounting and Auditing Standards Authority (POA) constitute the scope of the study. In line with the purpose and scope of the study; an analysis of the examples which are constructed in the context of commercial relations of business entities with participation banks, taking into account the expert opinions is included in the application section of the study. The sample practices of the accounting processes of participation finance products in the axis of TAS / TFRS and IFFAS are criticized within the framework of the relevant standards and suggestions are made. At the same time, the current Uniform Chart of Accounts (UCA) used by business entities and participation banks in accounting processes are also criticized and accounts not included in the UCA are recommended for participation finance products. Also; this study is important in terms of contributing to the literature and practitioners in this field as a pioneering study of accounting recording processes within the scope of TAS / TFRS and IFFAS.