Shari'ah Issues in Intangible Assets

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Intangible assets are becoming evident in a number of Islamic financial products. Their acceptance in the Islamic financial market addresses and accommodates the pressing need to diversify the asset pool of the industry. Intangible assets have become an increasingly important part of the economy, and they will continue to increase in importance as they continue to grow in complexity and sophistication. Although they are intangible, they are part of the real economy. As Islamic finance is intended to serve the real economy, it is unsurprising that intangible assets are becoming evident in a number of Islamic financial products. Hence, it is timely that research be undertaken into the concept and legality of intangible assets. Three perspectives will be drawn upon in this research, namely conventional law, the Shari'ah and accounting.


This paper attempts to address the fundamental question as to whether intangible assets may be considered property. In doing so, a critical and comparative analysis is undertaken. To address this question with respect to conventional law, the common law perspective on property is examined, as well as governing statutes. Relevant case laws are analysed to demonstrate the legal treatment and legal status of intangible assets. The Shari'ah’s view on the question is approached by appraising the views of classical and contemporary jurists and the recognised international Shari'ah advisory bodies. With regard to accounting, this study identifies relevant accounting standards and examines their treatment of intangible assets, with special reference to International Accounting Standard (IAS) 38. Based on the analysis from legal, accounting and Shari'ah perspectives, it is argued that intangible assets are considered property.  


The study found a few important Shari'ah issues related to intangible assets. The issues of concern include gharar (ambiguity in a sale) in the identification and determination of the intangible assets due to their nonphysical nature and the probabilistic nature of their future benefits. There are two opposing Shari'ah views on this point. One view does not recognize probability until the future economic benefit exists in order to ensure the protection of property rights and to avoid dispute among contracting parties. The second view recognizes the probability of future economic benefits based upon the Shari'ah’s consideration of probability (ghalabat al-?ann or al-?ann al-raji?) as evidenced in numerous ?adiths and Islamic legal maxims.  


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