Abstract

The purpose of the study is to examine the feasibility of aligning International Financial Reporting Standards (IFRS) with Sharia financial principles and the potential development of Afghanistan Financial Reporting Standards (AFRS). Grounded in Institutional Theory and accounting harmonization literature, the study examined the influence of the perceived conflict between IFRS and Sharia principles (PCIS), awareness of IFRS (AIFS), understanding of Sharia financial principles (USFP), regulatory support (RS), and institutional readiness (IR) on the IFRS-Sharia alignment feasibility (ISAF) and the feasibility of developing the AFRS (ADF). A quantitative research design based on positivism philosophy was adopted. The primary data were collected through a structured questionnaire. Using purposive sampling, 384 respondents' data were analysed via Stata software. It is found that the perception of conflict between IFRS and Sharia principles has an adverse effect on ISAF, while the awareness and knowledge of IFRS, Sharia financial principles, and institutional readiness have a positive impact on ISAF. Moreover, the IFRS awareness, regulatory cooperation, and institutional readiness have a significant effect on the feasibility of AFRS development. Institutional readiness proves to be one of the most important factors influencing AFRS development feasibility. In conclusion, the research finds that AFRS development as a combined financial reporting system is rather feasible in the context of better institutional capabilities, regulatory cooperation, professional training, and contextual customization of IFRS in the Afghan Islamic environment.

Keywords

IFRS Sharia Accounting Islamic Financial Reporting Afghanistan Financial Reporting Standards Accounting Harmonization