Questions
1. Explain the differences between Ijarah Muntahia Bitamleek (as defined
by the AAOIFI FAS 8) and Al Ijarah Thumma Al-Bay’ (AITAB) as
practiced by Malaysian financial institutions.
2. Outline the contractual conditions of ijarah financing as prescribed by
the shari’ah.
3. Bank Shari’ah Berhad entered into an ijarah contract with Mahabbah
Sdn. Bhd. to lease an equipment for a period of 3 years. The Bank
purchased an equipment from a local trader on the 1st of January 2000
for RM160,000. The Bank also incurred legal fees of RM1500 relating
to the ijarah contract, which the bank considered to be material.
Other details about the ijarah are as follows:
Fair value of equipment: At the beginning of 2000 - RM160,000
At the end of the lease i.e. 31 December 2002 - RM20,000
Number of installments on bi-monthly basis - 18
Rentals at the end of every two months - RM12,000
Estimated useful life - 3 years
Estimated residual value at the end of useful life - RM16,000
Estimated expenditure incurred in the second year - RM12,000
Required:
a) Prepare journal entries to record the above ijarah contract in the books of Bank
Shari’ah Berhad assuming the lease was treated as Ijarah Muntahia Bitamleek
through sale for a token consideration (agreed to be equivalent to 50% of the
estimated residual value at the end of useful life).
I. At the beginning of ijarah;
II. On receipt of first rental;
III. At the end of second year; and,
IV. At the end of ijarah term.