Islamic finance, emerged in modern times, as a religiously or Shari’ah constructed financial method and institution with the objective of providing religio-ethical financial solutions. Due to its different and unique nature, it is considered by that a special accounting system based on Shari’ah that fulfils the particular requests of Islamic finance instruments is required. For this purpose, the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) have been issuing and developing Islamic accounting standards. Nevertheless, those standards are not adopted by most of the Islamic financial institutions (IFIs) that are still reporting with International Financial Reporting Standards (IFRS), which are issued for conventional financial institutions. It is, on the other hand, claimed that IFRS may be irrelevant to the needs of other cultures and people of the world especially for institutions emerged from Islamic worldview, such as Islamic banks and financial institutions due to the nature and working mechanism of these institutions. This study, hence, aims at exploring and critically investigating the main environmental factors influencing the adoption of IFRS to IFIs. This study also aims to investigate empirically the need for special accounting treatments for Islamic financial institutions that is reliable worldview, and in consistent with the values and socioeconomic formation of Muslim society by harmonising or merging with AAOIFI and IFRS. The identified research questions were responded through primary data collected from a survey questionnaire, which, among other things, mainly attempted to explore IFIs in relation to their position as to whether they would prefer to account under IFRS issued by the IASB or under the Financial Accounting Standards or FAS issued by the AAOIFI. This questionnaire, also aimed at exploring the perceptions of the participants regarding accounting practices employed in different Islamic institutions and the issue of considering adopting a particular accounting system that satisfy their needs if it is available. In addition, the questionnaire also aims to investigate the perceptions of the participants on the nature of Islamic finance and whether IFRS is considering its special needs. Furthermore, particular attempt is made to measure the perceptions on rationalising Islamic accounting as a practice and as a paradigm. The study finds that most of the IFIs participated in this study employed IFRS’ as the main accounting system, which resulted in a number of problematic issues in treating Islamic finance transactions and contracts and endogenising other religious elements, such as the prohibition of riba and paying zakat. The findings also indicate that employing IFRS in the IFIs is not applicable within the normative world and the requirements of Islamic finance as aspired by the foundational axioms developed by Islamic moral economy despite the extensive use of it in current times. Therefore, in order to be authentic IFIs require special accounting standards that are different from the IFRSs, such as AAOIFI accounting standards, which may be considered as rationalising the emergence of Islamic accounting as a practice and field, which was the case in history.