Analysis of Islamic Financial Instruments in Doğuş Group's Finance

This report, a Research and Analysis Project (RAP) for a BSc in Applied Accounting, examines Islamic financial instruments and their impact on the financial statements of the Doğuş Group, a large Turkish conglomerate. The report introduces Islamic finance principles, including Sharia law compliance, and explores various short-term and long-term financial instruments like salam, ijarah, murabaha, istisna, mudarabah, and musharakah. It investigates the research objectives, aim, and questions, including the challenges of evaluating these instruments and recommending solutions. The study employs an inductive research approach to analyze the financial implications of Islamic financial instruments, focusing on the company's financial statements. The report's methodology involves identifying patterns and regularities to draw conclusions regarding the financial implications of Islamic financial instruments. It provides an in-depth understanding of the accounting treatment of these instruments and how they influence the financial statements of an organization.

BSc (Hons) in Applied
Accounting Research and
Analysis Project (RAP)

TABLE OF CONTENTS
PART 1............................................................................................................................................3
INTRODUCTION...........................................................................................................................4
RESEARCH OBJECTIVES............................................................................................................4
RESEARCH AIM............................................................................................................................5
REASON FOR CHOOSING THE TOPIC......................................................................................5
REASON FOR CHOOSING THE COMPANY.............................................................................5
RESEARCH QUESTIONS.............................................................................................................5
RESEARCH APPROACH..............................................................................................................5

INTRODUCTION
The Islamic finance is structured such that it complies with the Sharia law. The main
reason behind usage of Islamic finance is that by highlighting the compliance in respect to the
principles of the Sharia law, the issuers along with the borrowers of the Islamic finance can have
access to the Islamic financial institutions and therefore, expanding the much wider base for the
purpose of investment (Choudhury, Hossain and Mohammad, 2019). The contract mainly
involves the two things which is speculation called maysir and the uncertainty called gharar
which are considered as void under the Islamic law. The Islamic financial system is build on the
two principles which are sharing of the profit or the loss and the second is the prohibition on the
payment and receipt of the interest. The reason is that the due to the unethical ways of collecting
money in the corporate culture which makes it important to make use of the Islamic instrument
in the financial system. The financial instruments mainly consists of the equity and the debt like
instruments.
The fixed claim instruments mainly consist of the salam, ijarah, murabaha and istisna.
Equity instrument involves two types of instrument which are mudarabah and musharakah. The
Sharia law is a very complex combination of the rules and codes which makes it impossible to
cover the entire subject in detail (Riswan, 2017). The Islamic instruments have gained much
popularity in the Muslim world and has also attracted attention and acceptance across the world.
This has resulted into increase in the recognition and usage of the same. In this report,
Doğuş Group which is the largest conglomerate company, headquartered in Şişli, İstanbul,
Turkey, is taken as an organisation. The company is having portfolio of 250 companies across 7
different industries which includes car dealership, constriction companies and retail store. This
report provides an in-depth understanding upon the various types of Islamic financial instruments
based on the short term and long term requirement. Along with that what are the impact of it
over the financial statements of the company.
RESEARCH OBJECTIVES
 To gain an understanding about the various short term and long term financial
instruments.
 To analyse the impact of usage of financial instruments on an organization.
 To analyse different challenges occurs at the time of evaluating Islamic financial
instruments.

 To recommend the best way through which negative impact of evaluating financial
instruments can be managed.
RESEARCH AIM
The aim of the project is gaining an insight about the various types of Islamic financial
instrument short term and long term and in analysing the impact of it on the financial statements
of the organization.
REASON FOR CHOOSING THE TOPIC
This topic is selected for the company as it is the most trending topic in respect to the key
financial treatment of the various financial instruments in the organization and how it will
influence the financial statements of an organization. This is the most interesting topic as it
provides a new perspective in respect to accounting treatment of short term and long term
Islamic financial instrument. But, has not be researched by many and therefore, it creates interest
in understanding and gaining knowledge on this topic. This research will highlight about the key
financial aspect which are required to be taken care of in respect to making use of the Islamic
financial statements. This will involve application of business theories or models in effectively
evaluating the topic and drawing better results from it.
REASON FOR CHOOSING THE COMPANY
The Doğuş Group is selected as an organization as it is the largest conglomerate in
Istanbul which makes use of these financial instrument as it is having a wider portfolio of
business activities (ABOUT US. 2020). This leads to making use of various types of financial
instrument for both short term and long term. By analysing the financial statements of the
company, the impact of it can be identified over the financial statements of the company.
RESEARCH QUESTIONS
 What do you understand by the various short term and long term financial instruments?
 What are the impact of usage of financial instruments on an organization?
 What are the different challenges occurs at the time of evaluating Islamic financial
instruments?
 What is the best way through which negative impact of evaluating financial instruments
can be managed?

RESEARCH APPROACH
Research approaches can be termed as method that are used to collected, analysis and
interpretation of data so that particular outcome can be find out. There are two types of
approaches inductive and deductive that are used to analysis and understand data. There are three
stages in inductive approaches such as observation, observe a pattern and develop a theory
(Woiceshyn and Daellenbach, 2018). It normally starts with question, aim and objectives that
wants to be achieved in specific research process. On the other hand, deductive is an approach in
which set of hypotheses that are used in dissertation are either accepted or rejected that is known
as deductive approach. Therefore, it includes four main steps such as theory, hypothesis,
observation/test and confirmation or rejection.
The inductive approach is basically in relation to the qualitative research and the most
common inductive approach which is being utilized in the research study is the grounded theory
which was proposed by Glasser and Strauss. This approach creates a necessity for the scholar to
begin the research with an open mind and this helps in developing a new theory of the data
collected (Azungah, 2018). For effectively implementing the inductive research it is important
for the researcher to firstly identify the core purpose of the research and second is identifying the
method which is best suited for the effectively testing the hypothesis and exploring the new areas
in the respected field. Therefore, for carrying out the qualitative research, inductive research
approach will be used which will help the researcher in effectively gathering the relevant data
resulting into extensive investigation into the topic and consequently leading to generating
desired outcome.

REFERENCES
Books and Journals
Choudhury, M. A., Hossain, M. S. and Mohammad, M. T., 2019. Islamic finance instruments for
promoting long-run investment in the light of the well-being criterion
(maslaha). Journal of Islamic Accounting and Business Research.
Riswan, R., 2017. THE EFFECTIVENESS OF ISLAMIC FINANCE INSTRUMENTS OF THE
SHARIA BANK “X” JAWA TENGAH, INDONESIA. Jurnal RAK (Riset Akuntansi
Keuangan), 2(1), pp.89-96.
Woiceshyn, J. and Daellenbach, U., 2018. Evaluating inductive vs deductive research in
management studies. Qualitative Research in Organizations and Management: An
International Journal.
Azungah, T., 2018. Qualitative research: deductive and inductive approaches to data
analysis. Qualitative Research Journal.
Online
ABOUT US. 2020. [Online]. Available Through:< https://www.dogusgrubu.com.tr/en/about-us>.
In this research inductive approach have been used as it does not involve formulation of
hypotheses thus began to detect regularities and pattern. This approach finally end up with
conclusion or finding that have been identified for specific research.