The Effect of Inflation on Financial and Accounting Data's Ability to Reflect Profitable Gains Reported by Financial Statements

The purpose of the proposed study is to answer the question what are the ways through which inflation affects Islamic banks' financial and accounting data's ability to reflect profitable gains reported by financial statements. This is because studies documenting inflation's effects are mainly linked to economic indicators and little is done to assess how they are related to corporate indicators. Also, several studies fail to acknowledge that inflation has huge implications on financial and accounting data, and the study proposes to empirically address these issues. Secondary data was collected from a random total of 8 Islamic banks in Kurdistan and used to analyze the effects of inflation on financial and accounting data. The study results showed that the Islamic banks' earnings per share, liquidity, and operational costs had positive effects on bank performance. Additionally, inflation resulted in inflationary adjusted pricing and caused an increase in bank performance as reflected by the financial statements. However, an increase in the banks' size negatively affected their capacity to service more customers leading to a decrease in bank performance.