Murabahah Profit Recognition Method

One of the most used products in Islamic Financial Institutions (LKS) today is Murabaha. Murabahah is a contract of sale of goods at a selling price equal to the acquisition price plus an agreed profit and the seller must notify the buyer of the acquisition price. Murabahan Profits are commonly called Margins, and are usually stated as a percentage of acquisition cost.
What are the provisions for the amount of margin in Islam? There is no argument that fixes the amount of murabaha margin must be 20 percent, 30 percent and so on. All depends on the agreement between the seller and the buyer without coercion.
But what is still being debated is the MURABAHAH PROFIT RECOGNITION METHOD.
According to AAOIFI:
Sharia Financial Institutions are not prohibited from using methods accepted (permitted) by sharia and ‘urf in calculating profits (murabahah) according to the financing period, including methods of calculating profits based on a percentage of the total price / financing in one year, during the financing period (Tariqah al-Hisab Allati ta’tamidu ‘ala tahdid al-ribh nisbatan’ ala kamil al-mablagh sanawiyan li kamil al-muddah), or the method of counting downward (tariqah al-hisab al-tanazuliyah), namely the calculation of profits based on the remaining financing is the customer’s responsibility in accordance with the installment schedule. In both methods, the total sale price must be stated in nominal terms. (al-Ma’ayir al-Syar’iyah li al-Muraja’ah al-Islamiyah, Mi’yar No. 47, Hai’ah al-Muraja’ah wa al-Muhasabah al-Islamiyah, Bahrain, p. 63)
In the DSN MUI Fatwa No. 84 of 2012 concerning the Method of Recognition of Profit Tamwil bi al-Murabahah (Murabahah Financing) in Islamic Financial Institutions it is explained that there are TWO METHODS for Recognition of Murabahah Profits:
PROPORSIONAL METHOD (Tariqah Mubasyirah)
“Recognition of profits made proportionally to the amount of receivables (sale price, tsaman) successfully collected by multiplying the percentage of profits against the amount of receivables successfully collected (al-atsman al-muhashshalah)”;
ANUITY METHOD (Tariqah al-Hisab al-Tanazuliyyah / Tariqah al-Tanaqushiyyah)
“Recognition of profits made proportionally to the amount of remaining principal price that has not been invoiced by multiplying the percentage of profits to the amount of remaining unpaid principal price (al-atsman al-mutabaqqiyah)”;
So which method can you use? Proportional or Annuity?
The method of recognizing the benefits of Murabahah and Murabahah Financing MAY BE done proportionally and in annuity by following the following conditions:
Recognition of murabaha profit in business carried out by traders (al-tujjar), i.e. Proportionally allowed to be done as long as in accordance with ‘urf (customs) prevailing among traders;
Recognition of the profits of al-Tamwil bi al-Murabahah in business conducted by Islamic Financial Institutions (LKS) may be carried out Proportionally and in Annuity as long as in accordance with ‘urf (customs) prevailing among the LKS;
The choice of the method of acknowledging the benefits of al-Tamwil bi al-Murabahah in the worksheet must pay attention to the benefits of the worksheet for healthy growth of worksheets;
The method of acknowledging the advantages of at-Tamwil bi al-Murabahah that was ashamed during the growth period of the LKS was the Annuity method;
In the event that the LKS uses the annuity method of recognition at-Tamwil bi al-Murabahah, the portion of the profit must be available during the installment period; profit at-tamwil bi al-murabahah (murabahah financing) may not be recognized in full before the repayment of murabahah financing receivables ends.
While in PSAK 102 Murabahah Accounting (Revised 2013, adjusting to Fatwa no. 84 of 2012) in paragraph 23 point (b), the methods of recognition of murabahah profits used are:
Gains are recognized when submitting murabahah assets. This method is applied to tough murabaha where the risk of cash collection from murabahah receivables and the burden of managing receivables and billing is relatively small.
Profits are recognized proportionally to the amount of cash collected from murabahah receivables. This method is applied to tough murabahah transactions where the risk of uncollectible receivables is relatively large and / or the burden of managing and collecting these receivables is relatively large as well.
Profits are recognized when all murabahah receivables are collected. This method is applied to tough murabahah transactions where the risk of uncollectible receivables and the burden of managing receivables and billing is quite large. In practice, this method is rarely used, because murabahaah tough transactions may not occur if there is no adequate certainty of the cash collection.
(24) Recognition of profits, in paragraph 23 (b) (2), is carried out proportionally on the amount of receivables successfully collected by multiplying the percentage of profits against the amount of receivables successfully collected. The percentage of profit is calculated by comparison between the margin and the acquisition cost of murabahah assets.
If you read the explanation between DSN MUI Fatwa No. 84 with PSAK 102 it can be concluded that the DSN MUI Fatwa tends to advocate the use of the Annuity method in recognition of the benefits of the Murabahah, while PSAK 102 prefers the Proportional Method.