Consecutive Partnership Formula

Definition of "Consecutive Partnership Formula"

It is a formula adopted by the Islamic banks for calculating profit-loss shares of depositors. Consecutive partnership formula considers depositors of one financial year as partners in the proceeds of that financial year, regardless of matching between the periods of projects in which their funds were used. Even some proceeds pending from previous years, for which accruals or provisions were made are included in the proceeds of the year in question. On the other hand, some yields corresponding to the said financial year are excluded, if they are not yet due, and left out for a future year.