The Implementation of Psak 105 as Profit-Sharing Recognition; The Implementation Financing Mudharabah Islamic Banks

Abstract

This study aims to examine and determine the extent to which profit-sharing from Mudharabah financing is recognized in Islamic commercial banks, with a particular focus on Bank Jabar Banten Sharia. A qualitative descriptive method is employed using a case study approach and a phenomenological perspective. Data is gathered from both primary and secondary sources. The recognition of operating income from Mudharabah financing at Bank BJB Sharia is not fully aligned with the guidelines set out in PSAK No. 105. According to paragraph 22 of PSAK No. 105, the recognition and measurement of operating income should be based on realized income, not projections. In practice, however, profit-sharing income is recorded based on reports of realized profits submitted by the Fund Manager. Islamic banks are not permitted to recognize income based on projected profits. The study finds that, generally, Islamic commercial banks in Indonesia, including Bank Jabar Banten Sharia, do not fully comply with PSAK 105 in recognizing revenue from Mudharabah arrangements. Fund customers (as Fund Managers) distribute profits to Islamic banks (as Fund Owners) based on actual business results, but these are often projected as fixed monthly amounts. This practice may not reflect actual performance, as it depends on the Fund Manager’s monthly income. In practice, profit-sharing is reported monthly based on the actual operational income realized by the Fund Manager. At Bank Jabar Banten Sharia, there is no requirement to recognize income based on projected earnings, and fixed monthly recognition is not emphasized. Operationally, the profit-sharing income is determined from the Fund Manager’s accounting records, which are maintained separately and reported monthly to the Fund Owner—Bank Jabar Banten Sharia. This ensures transparency and compliance with the actual financial performance rather than estimated figures. This paper analyzes the gaps in the existing literature on Mudharabah financing in Sharia banks in general and in particular in Bank Jabar Banten Sharia. It is hoped that this will provide useful information for policymakers and sharia bankers in developing objective and fair financing products. In addition, these recommendations are outlined in the paper to improve the current Mudharabah financing product so that it is fair and just for the contracting parties.