OBU RAP Topic 5


An evaluation of the use of short term and long term Islamic financial instruments and their impact on the financial statements of an organization

Islamic financial instruments

“Better knowledge of various financial instruments in general and Islamic Financial instruments in particular along with proper discussion of  their recording / presentation in financial statement under well qualified mentor is key to success for passing RAP under this topic”

Overview

Islamic finance system is based on the principles of Islamic law (also known Shariah) and guided by Islamic economics. Two basic principles behind Islamic finance system are the sharing of profit and loss and, significantly, the prohibition of the collection and payment of interest. Collecting interest is not permitted under Islamic law. Due to unethical ways of collecting money by corporate culture it is very important to use Islamic financial instruments in finance system.

It seems that Islamic financial instruments are not only becoming popular in the Muslim world but are also attracting more attention and gaining wider acceptability in the rest of the world. Addressing the 9th World Islamic Economic Forum (WIEF) in London on 29th October, 2013, British Prime Minister David Cameron announced the introduction of “world first” Islamic Index for the London Stock Exchange as well as plans for Britain to become the first non-Muslim country in the world to issue Islamic bonds. (Source: Business Recorder). Based on this recent development, we can assess overall importance of various financial instruments in all over the world.

An important aspect that student should consider under this topic is that generally he/she should have fair understating of various financial instruments that he gained from various ACCA qualification and particularly have good understanding of Islamic financial instruments. Students need to identify pros and cons of usage of Islamic financial instruments and moreover its impact on overall financial statement of selected organisation. Athough ACCA students may not have enough knowledge of various Islamic financial instruments but their knowledge about other financial instruments can help to gain quick understanding of Islamic financial instruments as majority of their principles are same except two basic principles of Islamic Law (discussed above). Huge information available for various Islamic financial instruments over web so proper mentoring under well qualified mentor help students to pass RAP under this topic with good grades.

Key features / requirements

  • Assessment of various Islamic financial instruments.
  • Evaluation of various short term and long term Islamic financial instruments current in use of selected organisation.
  • Discussion on overall impact of various short term and long term financial instruments of selected organisation.
  • Discussion of how efficiently management of the selected organisation is meeting all basic principles of accounting with respect to usage of various short term and long term financial instruments.
  • Provide some quantitative and qualitative analysis (wherever applicable) to substantiate above mentioned aspects in proper manner.
  • Maintain proper balance in explanation / analysis of different aspects that required under this topic.

*Feedback from project mentor is essential to get good grades in RAP.

Key Success Factors

  • Good knowledge of various financial instruments and how these instruments impact on financial statements.
  • Excellent knowledge of various short term and long term Islamic financial instruments.
  • Proper discussion of various aspects of short term and long term Islamic financial instruments.
  • Proper assessment of various short term and long term Islamic financial instruments with respect to their impact on financial statement of the selected organisation.
  • Proper application of all selected aims and objectives (that decided in inception of RAP) in appropriate sections of RAP.
  • Proper answering of all research questions (that decided in inception of RAP) in appropriate sections of RAP.
  • Usage of proper research methodology to achieve good result against all selected aims and objectives (that decided in inception of RAP).
  • Maintain proper sequence of all discussion in logical manner by keeping all requirements of the topic.
  • Logically conclude all performed work at the end of Research Report by keeping in consideration of all requirements of the topic.

*Feedback from project mentor is essential to get good grades in RAP.

Major benefits for choosing this topic

  • Student will practically apply his/her bookish knowledge into real life.
  • Student will aware off proper application of Islamic financial instruments.
  • Major aspects / steps involve in valuation and recognition of financial instrument will clear to student.
  • Various techniques learned under this topic will substantially help student in his/her professional life.

Major possible limitations faced by student under this topic

  • Students may not entertain well by the management of selected organisation in provision of required information due to various issues (e.g. confidentiality aspects, non availability of authorized person to disseminate information to student for research work, etc.)
  • Student may not find good stuff from internet  or other sources (due to weak research approach) to bring ideas for improvement in the project.
  • Student may be confused due to variation in actual information (verbal or documented) provided from primary sources with the result that he/she actually derive from his/her research work as per requirement of the topic.

 *Feedback from project mentor is essential to get good grades in RAP.

Suitable organisation under this topic

The most suitable organisation under this topic is that for which student have access to management of the company and moreover management of the company is willingly provide all required information to student as required under the topic. Selection of most appropriate organisation is very essential as student must have better understanding of overall operations of the organisation and moreover he/she also have enough knowledge of the sector in which his/her selected organisation actually operates. Based on better knowledge of the organisation and respective sector , student will be able to interlink various aspect of overall operations of the selected organisation with all requirements of the topic that ultimately help him/her in getting good grades.

In short student need to assess following aspects in selection of organisation for RAP.

  • Student’s own interest related to overall business of the organisation;
  • Accessibility of information from primary sources (extremely important in topic 5);
  • Accessibility of information from secondary sources;
  • Knowledge of overall operations of the organisation (extremely important in topic 5);
  • Knowledge of overall associated sector of the organisation;
  • Availability of time from concerned officials of selected organisation (extremely important in topic 5);
  • Basic idea of requirements of selected topic and their applications on proposed organisation in inception of RAP.

*Feedback from project mentor is essential to get good grades in RAP.

Suggested approach for this topic

Under this topic, student must plan properly from inception so that he/she can complete all tasks effectively in proper manners. First of all, student must  gain excellent understanding of major requirements of this topic and he/she need to critically assess all aspects of requirement by defining detailed strategy.  Student need to assess that what process that he/she actually follow to meet all requirements that only possible through detailed planning in inception of RAP.

Student need to  prepare overall content of RAP under topic 5 that describes logical sequence of all tasks that need to adhere by the student. This content will also help student to keep on right track from inception and at the same time student can also assess time factor against planned vs. actual tasks through considering his allocated time for complete preparation of RAP.

After finalization of overall content of RAP under topic 5, student need to start working logically from gathering of information as per requirement of topic. Student need to assess all gathered information very critically through consultation from mentor. Mentor feedback on key areas of RAP is very essential so student should share his/her thoughts with project mentor regularly to get efficient guidance in time accordingly.

In short, there is no 100% suggested approach for topic 5 as keeping broader level approach (described above) , detailed approach under topic 5 varies due to student’s perception that he conceived from requirements of the topic along with available information of selected organisation. Whatever, the approach you will follow , keep getting guidance from project mentor at every step so that you can meet all requirements of topic and get good grades.

*Feedback from project mentor is essential to get good grades in RAP.

Availability of Information

Student have to complete his/her RAP based on provision of information directly from management of the organisation (i.e. primary sources of information) along with vast information available through different mediums (internet, newspaper, books, etc.) under secondary sources of information.  Availability of information from primary sources under topic number 5 is very essential as this topic cannot complete at all without getting specific information of the selected organisation. Student need to ensure that he has access of vast information from management of the selected organisation and there is no confidentiality concerns by them as well.

In short, student need to assess very critically before opting this topic for RAP as all requirements of this topic only meet if student have enough information about selected organisation. If there is any doubt on provision of required information during perpetration of RAP then student should not select this topic for RAP as it impact on overall evaluation of information and overall grades of RAP.

*Feedback from project mentor is essential to get good grades in RAP.

Important Links

Business Analysis Section of RAP

Reference Generator Link

Others

 

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