Question 1

Section A

A municipal water desalination plant is seeking to raise capital in compliance with Islamic finance principles. They wish to issue financial instruments that represent an ownership interest in the underlying desalination assets, generating a return from the asset's performance rather than paying interest.

Which Islamic finance instrument is being described?

Accepted Answer

Identify the Islamic equivalent of a bond. Sukuk represents ownership in an asset, whereas conventional bonds represent a debt obligation.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Confusing Sukuk with Murabaha (which is cost-plus financing used for purchasing assets).

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FM — Financial Management Practice Exam 6

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