A type of wa’ad (promise) that is embedded in, or associated with, an Islamic finance arrangement (contract). By nature, the wa’ad is part of the structure of the transaction and doesn’t stand out by its own. An example is wa’ad bil-shira’a (promise to purchase) that is attached to a Murabaha transaction: the purchase orderer/ potential buyer gives a promise to the seller whereby expressing intention to proceed with the transaction by purchasing the asset, subject matter of the transaction.
In terms of accounting effect, this wa’ad (as opposed to a product wa’ad) does not give rise to any asset or liability as long as it doesn’t result in any actual or potential losses to the seller (that is, unless it transpires to an onerous commitment or turns its host contract to an onerous contract).
Comments