The Law for Usury Free Banking" was enacted in Iran in 1983 and has been effective ever since. Notwithstanding, the accounting standard setters have not designed appropriate and sound accounting system, standards and procedures to give effect to its mandate and to assess the level of accountability called for by the Law. Some experts believe that the accounting policies and procedures set by the Auditing Organization of Iran meet the requirements of the Law in as much they relate to "fixed rate" contracts; but the prevailing policies and procedure fall short of complying with the mandate of the Law and accounting for "Mosharekah Contracts" which have no predetermined and fixed element of profit, and thus application of current accounting systems and standards pose serious questions and doubt on the accuracy and appropriateness of income recognized by banks and its appropriation to different stakeholders.
The accounting standard setting organization and other professional bodies have not addressed these shortcomings and accordingly the author has felt the need to conduct this research with a view to overcome, to the extent possible, such deficiencies, by gathering and analyzing the views of 96 accounting and other experts as well as by applying the "Delphi Method". In addition and for the purpose of this research, the author has considered the relevant aspects of "Fund Theory" and "Fund Accounting" in line with the "Accountability Based Conceptual Framework". It is hoped that the outcome of this research has identified and addressed certain key issues pertaining to financial reporting by banks in compliance with the requirements of the Law to lay grounds for design and application of an appropriate accounting and reporting model to recognize the income and measure the resources of banks with accordance to Usury Free Banking Law.