Abdul Kader, Mufti (2017) Purging of impure income: a comparative study of the existing purging methodologies. Purging of impure income: a comparative study of the existing purging methodologies, 9 (1). pp. 62-80.
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Text (Purging of impure income: a comparative study of the existing purging methodologies)
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Abstract
Purpose – The purpose of this paper is to study the concept of purging and present a comparative study of
the existing purging methodologies prevailing in the market with a view to evolving a more effective method
of capturing the entire impure income to be purged.
Design/methodology/approach – To illustrate the present discussion, a case study of purging based on
numerical examples has been included. The argument has also been supported with empirical data related to
the universe of Sharīʿah-compliant stocks listed on Indian stock exchanges.
Findings – During the study, it was found that the existing purging methodologies of calculating
impure income to be purged have conceptual and practical shortcomings.
Research implications/limitations – The scope of the current research is limited to calculation of
impure income which accrues on account of Sharīʿah non-compliant investments directly or indirectly.
It does not try to quantify the benefit which may be imputed in the form of capital gains made in trading
of the investee company shares due to higher market value of the shares as a result of the impure income
earned by the investee company. The paper has focused on identifying and calculating the impure
income on account of interest. Impure income earned from specific Sharīʿah non-compliant products or
services has not been considered directly. The reason for this is that companies dealing in such products
or services are generally excluded at the business screening stage itself. In the case of those companies
which derive a relatively small proportion of their total income from such activities and pass the
business screening stage, the quantum of the impure income is not generally reported separately in
company accounts.
Practical implications/limitation – The result of adopting the proposed methodology will lead to
complete purging of impure income (to the extent that is possible under present Company Law and
stock exchange reporting regulations). Implementation of the proposed method requires a proper
understanding of the working of listed companies and either a sound mathematical background or
access to a software application to calculate the impure income to be purged.
| Item Type: | Article |
|---|---|
| Subjects: | H Social Sciences > HB Economic Theory |
| Divisions: | Fakultas Syariah > Perbankan Syariah |
| Depositing User: | S1 SYARIAH IKHAC |
| Date Deposited: | 20 Nov 2020 01:41 |
| Last Modified: | 20 Nov 2020 01:41 |
| URI: | http://repository.ikhac.ac.id/id/eprint/726 |
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