Sukuk
In one sentenceCertificates of equal value representing undivided shares in the ownership of assets, usufructs or a project, entitling the holder to a share of their return.
Simply put
Sukuk differ from conventional bonds: a bond is a debt with interest, while a sukuk certificate represents a share in an asset (a leased property, for example), and its return comes from that asset's income, such as rent or profit. They are built on structures such as Ijara, Murabaha and Mudaraba.
If your business buys sukuk, you classify them under IFRS 9 according to its business model and the characteristics of their cash flows, and record the periodic return as income. If it issues them, it usually records the amount raised as a liability.
Worked example
A company bought 100 sukuk at 1,000 SAR each, with an expected return of 5% per year (an assumed rate for illustration) distributed twice a year.
Investment value: 100 × 1,000100,000 SAR
Annual return: 100,000 × 5%5,000 SAR
Each semi-annual distribution: 5,000 ÷ 22,500 SAR
Sukuk income for the year5,000 SAR
Don't confuse it with
BondsA bond is an interest-bearing loan whose principal and interest are repaid from the issuer's obligation, while a sukuk is a share in an asset whose return comes from that asset's income.