GROUP PROJECT FAR658

PRESENTATION & DISCLOSURE OF ZAKAT PRACTICE

 Acknowledgement

Alhamdulillah, first of all we would like to thank God as finally we were able to finish our
assignment that have been given by zakat accounting’s lecturer to us. This task had been done
with all effort by group members even though a little bit problem were happened among us while
doing this assignment. Luckily, all the problems can be settle down and we were able to adapt
properly and wisely.

Besides that, big thank we address to our lecturer Dr. Marziana Madah Marzuki because
without her guide our project cannot be done properly like this. She always give us supports and
guide to us how to do our assignment in purpose to produce a good outcome from research that
been studied. Topic that been chosen by our group are regarding the study of understanding
MASB Tri-1 on the presentation and disclosure of zakat practice in Malaysian Shariah-Listed
Companies. From this project we all manage to understand more about the studies on zakat
accounting that including about the obligation of payment, how to compute the zakat amount and
etc.

Finally, thank to our beloved friend that always stick together and also work hard to produce
a good assignment with accountably. Hope that the times we share on the study of zakat
accounting will be the best memory in university life. Million thank also we wish to all our classmate
because they also help us in doing our group. They always give us ideas, suggestion and supports
on our project so that we can improve our project in many ways.

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PRESENTATION & DISCLOSURE OF ZAKAT PRACTICE

 Question 2

Choose annual financial statements of any 15 Shariah compliant listed companies (7 paid zakat,
8 unpaid zakat) and comment on the presentation and disclosure of the Zakat practice and
compare the practice with MASB Technical Release i-1: Accounting for Zakat on Business.

 Answer

Zakat is one of the fundamental obligations in Islam. Its principal objectives are to develop
balanced socio economic growth and to purify one's soul and wealth. A type of zakat is zakat on
business.

The Board recognises that there is a need to issue an accounting pronouncement for zakat
on business for the following reasons:

(a) There is a lack of guidance on the recognition, measurement and presentation and
disclosure of zakat by entities that pay zakat, and an accounting pronouncement would
improve the comparability of reported financial information on zakat;

(b) The issuance of an accounting pronouncement is welcomed by zakat authorities in

Malaysia; and

(c) Recently approved tax incentives for zakat on business may lead to more entities to pay
zakat. Thus, an accounting pronouncement for zakat on business would be timely.

Arising from this, a working group on zakat was formed. Based on the research of the working
group, this Technical Release was prepared. The Board has decided to issue the pronouncement
in the form of a Technical Release to provide guidance on the accounting treatment for zakat on
business.

MASB Technical Release i-1 Accounting for Zakat on Business (TR i-1) is set out in
paragraphs 1-19 and Appendix A. It should be noted that TR i-1 deals only with financial reporting
issues related to zakat on business. An entity shall refer to the relevant State Islamic Religious
Council or its relevant zakat authorities for any issues relating to zakat on business, e.g. zakat
chargeability of an entity, calculation of zakat, determination of zakat base, and zakat eligibility of
assets and liabilities.

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PRESENTATION & DISCLOSURE OF ZAKAT PRACTICE

In accordance to the question required about the presentation and disclosure of the zakat
practice, it was stated on the paragraph 15 (Presentation) and paragraph 16 & 17 for (disclosure)
in MASB Technical Release i-1: Accounting for Zakat on Business. Below are the requirement
needs under that paragraph.

Presentation

15. The amount of zakat assessed for the current period shall be presented as a line item on
the face of the income statement.

Disclosure

16. An entity shall disclose in the notes accompanying the financial statements the following:

(a) Method used in the determination of zakat base;

(b) Its responsibility towards payment of zakat on business; and

(c) Major components of zakat.

17. Components of zakat may include:

(a) Current zakat expenses;

(b) Zakat payment;

(c) Zakat liability; and

(d) Any adjustments recognised in the period for zakat of prior periods.

From the research we did about the presentation and disclosure of zakat practice, we defined that
there were some of shariah compliant companies that follow the requirement as stated above.
Despite, there were also disclose a few part as required in Paragraph 16 & 17 of MASB Tri-1.
Meanwhile, there were also some companies that doesn’t paid zakat or disclose about the related
information of zakat because on certain reasons. Below are the information was get from the
research of several shariah compliant listed companies that paid zakat in annual report of 2015.

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PRESENTATION & DISCLOSURE OF ZAKAT PRACTICE

 TABLE OF THE CHOSEN SHARIAH LISTED COMPANIES THAT PAY ZAKAT IN MALAYSIA.

Affin Bank Axiata Bank CIMB Pos Syarikat Telekom Tenaga

Bhd Bhd Islam Group Malaysia Takaful Malaysia Nasional
Malaysia Bhd Malaysia Bhd Bhd
Bhd Bhd
Presentation
15 Amount of zakat shown in
/ / / / / / /
income statement

Disclosure
16 Disclose in the notes to FS
a) Method of zakat base / / /
b) Obligation of payment zakat / / / / /
c) Major Components

17 Components of Zakat
a) Zakat expenses / / / / / / /
b) Zakat payment / / / / /
c) Zakat liability / / / /
d) Adjustment of zakat of prior
periods

Shariah Committee/ Shariah

/ / / /
Advisory Body
CSR / /

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*since all the shariah companies listed (as stated in diagram before) was involved in presentation
zakat, we would like to comment on disclosure of zakat practices.

NO. COMPANIES COMMENT

1. Affin Bank Bhd. States that ‘Zakat represents business zakat payable by the Group
to comply with the principles of Shariah and as approved by the
Shariah Committee. The Bank’s subsidiary, AFFIN Islamic Bank
Berhad only pays zakat on its business and does not pay zakat on
behalf of depositors. Zakat provision is calculated based on 2.5775%
of the prior year’s net asset method.’

 It means that the depositors needs to pay zakat on the dividend

their received in (zakat on individual),
 The computation of zakat was calculate by using net working
capital approach
 This business was valid and legal based on Islamic principles,
since there is existence of shariah committee
 Shariah committee will review and guide on all shariah matter
including zakat (on how being obligate and computation).

2. Axiata Bhd. From this company, it just discloses only the zakat expenses and
zakat payment. It shows in the Financial Statement (FS) amounted
to RM 263, 000 for both. From this we would like to comment that:

 The calculation of zakat might be compute on 2.5% of the profit

before tax based on percentage Muslim shareholders.
 There no disclosure on obligation of zakat payment, that the
company pay zakat might be for the reduction in tax purpose.
 In addition, the company also doesn’t have any shariah
committee/ shariah advisory body that can guide and review on
the shariah matter (including zakat).

3. Bank Islam According to information in notes to FS, the presentation of zakat in

Holdings Berhad income statement ‘represents business zakat. It is an obligatory
amount payable by the Group and the Company to comply with the
principles of Shariah.’

 It’s become an obligation since the business was comply with

shariah that including only halal assets (doesn’t have any

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element prohibited in shariah) and legal based on Islamic

principle.
 Although there is no disclosure on the method used in
determination of zakat based, there were a guidance and
activities’ review by the shariah committee.
 BIMB also state the component of zakat payment.
 Apart from that, BIMB also organize zakat-related Corporate
Responsibility activities such as by doing Majlis Iftar in
Ramadhan, contribute in giving beneficiaries to Pusat Jagaan
Darul Fikrah, Persatuan Orang Cacat Penglihatan Malaysia
(PERTIS) and others body.
 The bank also has contributed for ‘Ibadah Korban’, ‘Buka
Puasa’ Food and development of Tertiary Education.
 However, this welfare funds used are not included in zakat
computation.

4. CIMB Group Bhd. Presentation of provision for zakat under liabilities from Statement
of Financial Position. The obligation and responsibility for payment
of Zakat lies with the Muslim shareholders of the Group.

 There is Board Shariah Committee under the notes of the

company annual report.
 Board of Directors is ultimately responsible and accountable
for the oversight and management of Shariah matters in the
operation of the Group’s Islamic banking and finance
activities.
 The computation of zakat is not stated by the company which
means the company is using either from the two method
stated in the MASB Technical Release i-1.

5. Pos Malaysia Bhd. Pos Malaysia Bhd disclose that ‘zakat expense is calculated based
on certain percentage of the net current asset or profit after
taxation. Zakat is recognised as other operating expense in profit or
loss.’ From this information, it shows that:

 Pos Malaysia are using the net working capital method.

However, this company doesn’t have shariah committee that
can guide them in computation, so they also use another
method by using certain percentage of profit after taxation.
 This method (profit after tax) doesn’t recognised under Zakat
Accounting Standard in Malaysia.
 In obligation of payment, there is no information in notes to FS.
 Although there is no disclosure about it, the activities in
business are services base that intended for business. Thus, it
is being obligate to pay zakat on business.

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6. Syarikat Takaful States that zakat is computed at 2.5% of zakat base of the
Malaysia Bhd. company, which is computed using the ‘adjusted growth method’
and the board has the discretion to pay additional zakat above the
obligatory amount payable.

 Existence shariah committee will guide and review the

computation and obligation of zakat.
 Prove that the business are valid and legal based on Islamic
principles.
 The Company recorded a growth in profit after zakat and
taxation for the Group and Company at 18% and 4%
respectively from last year.
 The growth in profit is showing one of the impacts of paying
zakat.

7. Telekom Malaysia States the amount of zakat under the notes for taxation and zakat.
Bhd The zakat amount is RM5.7 million.

 Also state the zakat payment under the notes for cash flows
from operating activities.
 There are no statements about the calculation of zakat.
 The company also do not have any shariah committee from
the annual reports.

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 SHARIAH LISTED COMPANIES THAT NOT PAY ZAKAT IN MALAYSIA.

AHMAD ZAKI RESOURCES BERHAD

Ahmad Zaki Resources Berhad is an investment holding company, which is engaged in the civil
and structural works contracting and provision of management services. It operates through the
following segments: Engineering and Construction, Oil and gas, Plantation and Property. This
company is a Shariah compliant company but there is no presentation and disclosure of zakat
payment in the company. As an investment company, Ahmad Zaki Resources Berhad will receive
investment from the non-Muslims investor. And the investment made by them are doubtfully came
from halal resources.

ASTRO MALAYSIA HOLDING BERHAD

Astro Malaysia Holding Berhad is a Malaysian media and entertainment holding company that
began as a paid digital satellite radio and television service. The company did not disclose and
present any zakat payments or zakat related transaction in their financial statements. Therefore,
it can be concluded that the company did not pay zakat. This is because, Astro Malaysia Holding
Berhad is not a shariah compliant company. We can see clearly that, most of the shows which
the company is currently broadcasting are not satisfy with Islamic Law. Other reason for why the
company did not pay zakat is, majority of the company’s directors are non-Muslim and they also
own a large number of ordinary shares. Only a few of the directors are independent Muslims.

ISKANDAR WATERFRONT CITY BERHAD

Iskandar Waterfront City Berhad is an investment holding company, which engages in the
property development and construction. The company’s shares are shariah compliant shares.
Even though the shares are shariah compliant, company is not paying zakat on business and on
behalf of the shareholders, hence there is no need to disclose and present the zakat transaction
in the financial statement. The company did not pay zakat because, the directors who hold
majority of the shares are non-Muslims. Even the in management team, most of them are non-

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Muslim. Zakat payment is not imposed on the non-Muslims and for the reason, the company is
not paying zakat.

PERAK CORPORATION BERHAD

Perak Corporation Berhad (PCB) is an investment holding company key subsidiary of
Perbadanan Kemajuan Negeri Perak (PKNP Group). Its key activities are to support PKNP Group
as primary driver of economic development in Perak. PCB’s main activity are streamlined into
three core business namely property development, ports and logistics as well as hospitality and
tourism. As for now, PCB is not paying zakat for business neither on behalf of its shareholder as
there is no disclosure and presentation of zakat payment in its financial statements. As been
mentioned before, PCB is an investment company, the reason why PCB is not paying zakat also
lies on the source of the investment. The investment may come from a non-halal resources as
the company will receive investment from a non-Muslim investor.

PETRONAS DAGANGAN BERHAD

PETRONAS Dagangan Berhad (PDB) is the principal marketing arm of Petroleum Nasional
Berhad (PETRONAS). PDB offers a wide range of international-recognised high quality petroleum
products. In relation to the payment of zakat, PDB does not disclose and present any zakat
payment in its financial statements or any other statements. It can be concluded that, PDB does
not pays zakat. PDB may not yet to recognise the need to pay zakat on business. And because
of PDB is an international company, the board of director of the company consist of multinational
people and they usually are non-Muslims which is why PDB does not pay zakat on business.

SIME DARBY BERHAD

Sime Darby Berhad is a major Malaysian-based multinational conglomerate involved in five core
sections which are plantations, property, industrial, motors and logistics. In relation to the zakat
payment, Sime Darby Berhad does not disclose and present any of the zakat payment in its
financial statements or in any other statements. The company also did not mention any
transaction in relation to zakat. The reason behind this is because the company had no knowledge

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about zakat on business that they have to pay. This issue does not happen to Sime Darby Berhad
only but also to many other business organisations.

AEON CO. (M) BERHAD

Aeon Co. (M) Berhad is leading retailer in Malaysia with a total revenue of RM3.51 billion. It
operates all the AEON Retail Stores (formerly known as JUSCO supermarkets) directly in
Malaysia. In relation to zakat payment, the company did not pay any zakat business or zakat on
behalf of its shareholder. This is because, the company is direct subsidiary to AEON Group which
is a Japanese company based in Japan. AEON Group is not a shariah compliant company.

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 Conclusion

For conclusion, there are still many companies in Malaysia that do not pay zakat. Even the
company that pay zakat did not fulfil the entire requirement stated in MASB Technical Release i-
1. The Malaysian companies still does not realize the important and the good impact of zakat.
Several initiatives should be used to make all of them realize about this and pay zakat in the
future.

The government can provide a subject which related to zakat accounting. The government
also need to strengthen the law for encouraging zakat payment among Malaysian companies.
Some punishment or penalty can be given to the company that do not pay zakat. Tax deduction
on zakat payment can be increase from 2.5% to 10%. From the increment, it will less burden the
Muslim entrepreneur and encourage more Malaysian companies to pay zakat.

Non-Government Organization (NGO) can do a talk or symposium on zakat accounting

throughout the whole country. Do a campaign via mass media like advertisement and brochure
to give more understanding about zakat and the benefit of it. In the campaign, the organizer can
give more explanation on tax exemption if paid zakat.

Although the initiatives are not easy to be done, we should try our best to make this happen.
We really hope that one day all the companies in Malaysia including muslim and non-muslim
company will pay zakat after realised the important of it. We also hope that the MASB Technical
Release i-1 will change from a guideline to a standard which can be applied by all the companies
in Malaysia.

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