Research Paper (printed copy)

Sharīʿah Issues in Intangible Assets AUTHORS: Associate Professor Dr. Said Bouheraoua Dr. Shamsiah Mohamad Dr. Noor Suhaida Kasri Dr. Syahida Abdullah
Weight: 350g
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Intangible assets are becoming evident in a number of Islamic financial products. Their acceptance in the Islamic financial market addresses and accommodates the pressing need to diversify the asset pool of the industry. Intangible assets have become an increasingly important part of the economy, and they will continue to increase in importance as they continue to grow in complexity and sophistication. Although they are intangible, they are part of the real economy. As Islamic finance is intended to serve the real economy, it is unsurprising that intangible assets are becoming evident in a number of Islamic financial products. Hence, it is timely that research be undertaken into the concept and legality of intangible assets. Three perspectives will be drawn upon in this research, namely conventional law, the Sharīʿah and accounting.


This paper attempts to address the fundamental question as to whether intangible assets may be considered property. In doing so, a critical and comparative analysis is undertaken. To address this question with respect to conventional law, the common law perspective on property is examined, as well as governing statutes. Relevant case laws are analysed to demonstrate the legal treatment and legal status of intangible assets. The Sharīʿah’s view on the question is approached by appraising the views of classical and contemporary jurists and the recognised international Sharīʿah advisory bodies. With regard to accounting, this study identifies relevant accounting standards and examines their treatment of intangible assets, with special reference to International Accounting Standard (IAS) 38. Based on the analysis from legal, accounting and Sharīʿah perspectives, it is argued that intangible assets are considered property.


The study found a few important Sharīʿah issues related to intangible assets. The issues of concern include gharar (ambiguity in a sale) in the identification and determination of the intangible assets due to their non-physical nature and the probabilistic nature of their future benefits. There are two opposing Sharīʿah views on this point. One view does not recognize probability until the future economic benefit exists in order to ensure the protection of property rights and to avoid dispute among contracting parties. The second view recognizes the probability of future economic benefits based upon the Sharīʿah’s consideration of probability (ghalabat al-ẓann or al-ẓann al-rājiḥ) as evidenced in numerous ḥadīths and Islamic legal maxims.


In trading and financing intangible assets, IAS 38 does not impose restrictions regarding the financing, exchange or tradability of intangible assets. Although the Islamic Fiqh Academy of the Organisation of Islamic Cooperation (IFA-OIC) and the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) have issued some general rulings that permit intangible assets to be traded and used in financing, they have also imposed rules and parameters for doing so. Both the IFA and AAOIFI agree that the trading of receivables, options, futures and non-ḥalāl assets is prohibited. However, the Securities Commission Malaysia holds a different view on options and receivables, allowing them to be traded.


As for the recognition and measurement criteria, zakāh payment on intangible assets is an issue of disagreement among scholars. Muslim jurists hold three opinions regarding zakāh obligations on intangible assets. The first is that there is no zakāh obligation on intangible assets. The argument for this position is that intangible assets, although considered property, do not have the element of growth that is one of the conditions of zakāh payment. The second opinion is that zakāh is obligatory on intangible assets regardless of any other consideration; therefore, the owner has to get expert estimates of their value, combine them with the rest of his property and then pay zakāh annually. The proponents of this view based their argument on the general texts of the Qur’ān and the Sunnah that command the payment of zakāh on property above the minimum limit (niṣāb) without any qualification. The third opinion is based on two possible situations. The first is when intangible assets are part of the company’s overall assets and business and are not meant for trade. In this situation there is no obligation to pay zakāh on these assets, but zakāh is due on the dividends of the company. In the second situation, the intangible assets can be separated from the company’s other assets and are meant for trade.


Zakāh is to be paid on these assets after they have been sold.



Jurists disagree about the method for measuring the value of the intangible assets when calculating the zakāh that is due on them. They agree that if an intangible asset is already sold, we have to consider the selling price in the zakāh payment. However, if it is not sold and it has a cost value and an existing market value, Muslim jurists hold three views. The first is that zakāh should be paid on its cost value. The second view is that zakāh be paid on its market value. The third view differentiates between the trader of intangible assets and the company developing or designing the intangible assets; the former should pay zakāh on its market price while the latter should pay zakāh on the cost price.


Finally, this research concludes that intangible assets are considered property that has financial value with future benefits that can be measured. Moreover, they are tradable and subject to zakāh payment. In addition, this research also concludes that IAS 38 can serve as a reference in measuring intangible assets except on matters that entail Sharīʿah concerns.

Sharīʿah Issues in Intangible Assets