Investigating the Compliance of Operations and Financial Statements of Banks in the Foreign Exchange Sector With Interest-Free Banking Standards

The proper fulfillment of the contracts specified in the Usury-Free Banking Act requires the implementation of special accounting rules which reflects the Usury-Free banking approach in the financial statements of the banks. Among these criteria, is the separation of bank income from Joint / Non-joint activities, and the formulation of Performance Statement of Investment Deposits. These criteria should be considered both in the domestic and foreign currency sector of the bank financial statements.
Through the analysis of Iran Central Bank's regulations on the calculation of Joint Revenues and the sharing of surplus earnings, and also by the examination of former financial statements of banks and the standard financial statements announced by the CBI, we show that the accounting processes related to foreign exchange deposits and facilities, is different from the Rial sector and does not fulfill the requirements of Usury-Free banking approach. This makes it virtually impossible to implement issues such as "Ala-al-hesab Interest on investment deposits" and "utilization of investment deposits in joint activities".
In fact, the current accounting practices regarding banks' foreign exchange assets and liabilities are exactly the same as those defined in conventional banking. Despite, Analyzing the international Sharia-compliant accounting standards, as well as the financial statements of foreign Islamic banks, shows that they do not distinguish between the monetary units of Islamic banks deposits in this regard. In order to remedy this defect in the banking system of Iran, suggestions are presented regarding the relevant regulations and standards.