With respect to istisna’a, it is a method which is used by Islamic banks and financial institutions to recognize istisna’a revenue and profit margin. According to this method, a part of the contract price commensurate with the percentage of work completed during each period (a year for example) within the istisna’a term (say, three years) is recognized as revenue for that specific period. In turn, a portion of istisna’a profit margin recognized during that period will be added to a standalone account (the istisna’a work-in-progress account). The balance of this account reflects, at a given point in time, the amount of profit recognized so far minus any expected losses on the contract.
December 14, 2024
