Nevertheless, the principles of Islamic finance, such as the prohibition of riba and gharar as well as the link to the real economy emphasize transparency in Islamic banking transactions. This leads to a lack of transparency of all important financial and non-financial information, lack of disclosure in the balance sheet such as bankruptcy and the real characteristics of traded financial instruments. This deficiency is caused by the lack of the determination of the rate of change of interest and the variable interest loans, the securitization and the sale of the debt. By examining the traditional accounting standards for transparency, namely IAS 1, IAS 24, IFRS 7 along with the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards, we have highlighted that despite the fact that the conventional banking strives to achieve transparency there is a lack of optimal transparency in conventional banking products. This study examines the criteria of transparency and disclosure in Islamic banking and compares them to conventional banking. This study expected to benefits the accounting standards setting bodies and the interested parties as an input for them to make decision whether all standards provided by IFRS is applicable for Islamic Financial Institutions(IFIs) or not. However continuous dialogue and consultation between International Accounting Standards Board (IASB) and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is needed to harmonize and minimize the difference between two frameworks. As the existence of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is still relevant and essential for the development of Islamic financial institutions. Therefore a separate accounting framework for Islamic products and transactions is required. This study concludes that the adoption and application scenarios of IFRS in banking sector is satisfactory level and adoption of IFRS offered various benefits but a complete implementation of IFRS by Islamic banks have been proven to genuinely violate the shariah principles. Using exploratory analysis the study identifies and compares adoption and application scenarios of IFRS in traditional and Islamic banking sector as well as identifies major benefits and problems in adoption and application of IFRS in both sector.

The study employs literature based method which is a kind of qualitative research approach. The purpose of this study is to comparatively analyze adoption and implementation of International Financial Reporting Standards (IFRS) in banking sector of Bangladesh both traditional and Islamic banking.

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