Standard Setting In Malaysia

Learning Objectives
i. Understand the development of accounting standards in Malaysia.
ii. Describe the structure and objectives of Malaysian Accounting Standards Board.
iii. Describe the structure and objectives of the International Accounting Standards
Board.
iv. Eplain the issues related to convergence of accounting standards.
v. Eplain the relationship bet!een Malaysian Accounting Standards Board to
International Accounting Standards Board in relation to convergence of accounting
standards.
1.0 Introduction
Accounting standards refer to a set of standards stating how particular types of transactions
and other events should be reflected in financial statements. These standards are issued by
accounting standard setters. The application of accounting standards in the preparation and
presentation of financial statements is generally govern by regulatory bodies and/or
professional accounting bodies in a particular country.
The emergence and development of multinational concerns and the growth of international
financial markets, among other factors, are influencing the preparation of financial statements
beyond national borders. Many countries around the world that are using their national
Generally Accepted Accounting Principles GAAP! are adopting the "nternational #inancial
$eporting %tandards "#$%! in the preparation and presentation of their financial statements.
The "#$%s are issued by "nternational Accounting %tandards &oard "A%&! and the adoption
of "#$%s is having a growing influence on national accounting re'uirements and practices.
This chapter discusses the adoption of "#$%s and other aspects of standard(setting
environment in Malaysia.
2.0 Development of inancial !eporting in Malaysia
The demand for corporate information by capital providers and other stakeholders, such as
employees, suppliers, customers and other agents has shaped the financial reporting
environment in Malaysia. These parties re'uire corporate information in making their
economic decisions. The provision of corporate information to these users has been initiated
by the )inth %chedule of the *ompanies Act +,-. re'uiring companies to disclose minimum
information. #inancial reporting environment has evolved since then and currently companies
are disclosing more comprehensive information as a result of considerable efforts by various
bodies. #igure + depicts the timing of significant events related to the development of
financial reporting in Malaysia.
Roshayani Arshad/Accounting Theory Page 1
igure 1" #imeframe Depicting Significant $vents !elated to t%e Development of
inancial !eporting In Malaysia.
&eriod inancial !eporting Development
+,-. )inth %chedule of the *ompanies Act +,-.
( Minimum disclosure of specific information
+,/, $epresentation on the "nternational Accounting %tandards *ommittee "A%*!
( Adoption of "nternational Accounting %tandards "A%!
( "ssue of Malaysian Accounting %tandards MA%!
+,,/ #inancial $eporting Act +,,/ established #inancial $eporting #oundation #$#!
and Malaysian Accounting %tandards &oard MA%&!
( #$#, a trustee body responsible for the oversight of MA%&0s operations
( MA%& is responsible for standard setting in Malaysia
( MA%& issue standards called MA%&, e.g. MA%& 1 Inventories
122. MA%& standards renamed as #$%, e.g. #$% +21 Inventories
12+1 *onvergence of #$%s MA%&! with "#$%s as issued by "A%&!
The provision of corporate information in Malaysia was first mandated by the *ompanies Act
+,-. re'uirements. %chedule , of the *ompanies Act +,-. re'uires all registered companies
in Malaysia to disclose specific information in their financial statements. 3owever, the format
and content of financial statements are not prescribed by %chedule , of the *ompanies Act
+,-.. As such, only minimum disclosure re'uirements are prescribed by the legislation.
The disclosure of corporate information beyond the minimum statutory disclosure
re'uirements in Malaysia began in +,/, when Malaysia was represented on the "nternational
Accounting %tandards *ommittee "A%*!. The "A%* was set up in +,/4 and was responsible
for the setting of "nternational Accounting %tandards "A%!. The guidelines issued by the
"A%* were called %tanding "nterpretations *ommittee %"*!. %oon after its representation on
the "A%*, Malaysia began adopting the "A%s. 5hile the adoption of "A%s lead to more
comprehensive disclosure of corporate information, it was not able to meet some local
reporting re'uirements. Accounting and reporting re'uirements for transactions and events in
relation to specific industries such as a'uaculture and insurance were not addressed by the
"A%s. "n meeting the local reporting re'uirements, accounting standards known as Malaysian
Accounting %tandards MA%s! were issued 6ointly by two professional accounting bodies in
the +,72s. These bodies were represented by Malaysian "nstitute of Accountants M"A!,
Malaysian Association of *ertified Public Accountants MA*PA!, now known as Malaysian
"nstitute of *ertified Public Accountants M"*PA!. 89amples of these standards are MA% +
Earnings "er Share, MA% - Accounting for #ood!ill and MA% 7 Accounting for "re$
%ropping %osts.
2.1 Malaysian 'ccounting Standards (oard )M'S(*

The standard setting role by M"A and MA*PA was superseded by Malaysian Accounting
%tandards &oard MA%&! in +,,/. MA%& is established under the #inancial $eporting Act
+,,/ #$A +,,/!. The Act was ga:etted on - March +,,/. "n addition to MA%&, the Act also
Roshayani Arshad/Accounting Theory Page 2
created #inancial $eporting #oundation #$#!. The overall responsibility of the #$# is to
oversee the operating activities of the MA%&.
The #$# comprises of nineteen +,! members who are appointed by the Minister of #inance.
( seven members are e9(officio representing the Minister of #inance, the *entral &ank,
the %ecurities *ommission, the *ompanies *ommission of Malaysia, the &ursa
Malaysia &erhad, the M"A and the MA%&, and
( twelve members representing a broad spectrum of interest groups ( principal officers
of public listed companies, senior partners of public accounting firms and persons with
other relevant e9perience and background.
The responsibilities of the #$# as provided under the #inancial $eporting Act +,,/ are as
follows;
i. To provide views to the MA%& on matters which the MA%& seeks to undertake or
implement with respect to the development and issue of accounting standards and
conceptual framework<
ii. To review the performance of MA%&<
iii. To be responsible for the financing arrangements and operations of the MA%&<
iv. To approve the MA%& budget<
v. To engage or to employ persons and determine the conditions of such appointments as
are necessary to assist the #$# and MA%& perform their functions under the Act<
vi. To administer the fund established to finance the ongoing operations of #$# and
MA%& including management of funds not e9panded on operations during any period<
vii. To maintain proper accounts and prepare an annual statement of accounts of the #$#<
viii. To forward annual statement of accounts and audit report to the Minister of #inance,
and report on the activities of the #$# and MA%& at the end of each financial year,
and
i9. To perform such other functions as prescribe by the Minister of #inance prescribe.
The functions and powers of the MA%& as provided under the Act are to;
issue new accounting standards as approved accounting standards and to review,
revise or adopt e9isting accounting standards as approved accounting standards<
issue statements of principles for financial reporting<
sponsor or undertake development of possible accounting standards<
conduct public consultation as necessary<
develop a conceptual framework for the purpose of evaluating proposed accounting
standards<
make such changes to proposed accounting standards as considered necessary<
seek the view of the #$# in relation to new and e9isting standards, statement of
principles, and changes to proposed standards<
determine scope and application of accounting standards< and
to perform such other function as the Minister of #inance may prescribe.
The functions of the MA%& as formulated in its mission statement are as follows;
i. to develop and promote high 'uality accounting and reporting standards that are
consistent with international best practices for the benefit of users, preparers, auditors
and the public in Malaysia, and
Roshayani Arshad/Accounting Theory Page 3
ii. to contribute directly to the international development of financial reporting for the
benefit of users, preparers and auditors of financial reports.
"n fulfilling the above functions, MA%& sets out the following ob6ectives;
to develop high 'uality, clear and enforceable national accounting standards for
financial reporting that benefit users<
to bring about harmonisation of national accounting standards with international
accounting standards<
to promote the use and application of those standards by way of communication with
and education of users, preparers, auditors and the public<
to actively contribute to the development of accounting standards internationally,
including, "slamic(based accounting standards< and
to promote and support research in the area of financial reporting, in particular, for
emerging markets and "slamic markets.
The members of MA%& are appointed by the Minister of #inance and comprises of the
following members;
( a chairman,
( the Accountant General,
( advisors representing the %ecurities *ommission, *ompanies *ommission of Malaysia
and M"A, and
( si9 other members with e9pertise in accountancy, law, business and finance. "t should
be noted that the #$A +,,/ specifies that at least five of these members are members
of M"A.
%ection 1/ of the #$A +,,/ re'uires all companies incorporated under the *ompanies Act to
comply with accounting standards issued and adopted by the MA%&. Accounting standards
are defined by #$# as statements of standard accounting practices used for the preparation of
financial statements. The MA%& established a committee called "ssues *ommittee and
5orking Groups in dealing with standard(setting related matters.
2.1.1 Issues +ommittee
"ssues *ommittee was established in May 1221, replacing its predecessor, the "nterpretation
*ommittee. The change of name reflects the e9panded scope of the committee which goes
beyond interpretations of approved accounting standards. "n addition to reviewing accounting
issues that have received or are likely to receive divergent views in interpretation, "ssues
*ommittee also deals with other accounting related issues where there is no e9isting
accounting standard.
The committee comprises representatives from the accounting profession, commerce, the
academia as well as an analyst and a solicitor. =bserver representatives from M"A, %ecurities
*ommission, &ank )egara Malaysia and *ompanies *ommission of Malaysia also form part
of the committee.
2.1.2 ,or-ing .roup
The MA%& has established numerous 5orking Groups which are assigned with different
pro6ects. 8ach working group is responsible for reviewing and undertaking detailed studies of
Roshayani Arshad/Accounting Theory Page 4
the assigned pro6ect, taking into accounts any statutory and regulatory reporting re'uirements
as well as its practical implications. A 5orking Group must be chaired by a member of the
MA%&. =ther group members include a pro6ect manager and representatives from the
accounting profession, commerce, academia as well as regulatory authorities.
The works undertaken by 5orking Groups play an important role in the development of the
MA%& standards. The MA%&0s due process for developing a standard is summarised in
#igure 1.
igure 2" M'S( Due &rocess
+. MA%& "dentifies "A% for review.
1. 5orking Group Prepares >iscussion Paper >P!.
4. MA%& $eview >P.
?. #$# $eview >P.
.. MA%& #inalises >P into 89posure >raft 8>!.
-. Public Public e9posure of 8>.
/. 5orking Group Prepare report on feedback received on 8>.
7. MA%& $eview feedback on 8>.
,. #$# #inal review of feedback on 8>.
+2. MA%&
Approval of MA%& standard followed by issue of MA%&
standard.
Prior to the creation of MA%&, Malaysia has already adopted the "A%s issued by the "A%*
and MA%s issued by the *ouncil of M"A and M"*PA. @pon its creation, MA%& adopted most
of these standards which gave these standards the status of approved accounting standards.
These standards were referred to as MA%& standards. 5ith the e9ception of the adopted
MA%s, the MA%& standards were in substance similar to the "A%s.
"n April 122+, the international standard setting role of "A%* was superseded by the "A%&
and subse'uently the "A%& began issuing "nternational #inancial $eporting %tandards "#$%!.
At this point in time, all "A%s issued by the "A%* remained in force until amended or
withdrawn by the new "#$% issued by "A%&. "n line with this development, MA%& standards
have been renamed to #inancial $eporting %tandards #$%! in 122.. The numbering of the
#$%s corresponds to the "#$%s issued by the "A%&. #or e9ample, #$% + in Malaysia is
e'uivalent to "#$% +. #$% with a +22 prefi9 corresponds to its e'uivalent "A%s. Thus #$%
+2+ is e'uivalent to "A% +. #$% with a 122 prefi9 represents locally developed %tandard with
no e'uivalent "nternational %tandard.
"n addition to the accounting standards, the "A%& has also issued the #ramework for the
Preparation and Presentation of #inancial %tatements. The MA%& adopted similar #ramework
known as the #$% #ramework. "n )ovember 12++, the MA%& issued a new approved
accounting framework, the Malaysian #inancial $eporting %tandards M#$% #ramework!.
*ompliance with M#$% #ramework is effective on + Aanuary 12+1. The M#$% #ramework is
Roshayani Arshad/Accounting Theory Page 5
to be applied by all 8ntities =ther Than Private 8ntities, with the e9ception of entities that are
within the scope of M#$% +?+ Agriculture M#$% +?+! and "* "nterpretation +. Agreements
for %onstruction of &eal Estate "* +.!, including its parent, significant investor and venturer.
The accounting standards under the new framework is known as M#$% standards. The list of
M#$% standards effective on + Aanuary 12+1 are shown in #igure 4 below.
igure /" List of M!S Standards
#itle of M!Ss
M#$% + #irst(time Adoption of "nternational #inancial $eporting %tandards
M#$% 1 %hare(based Payment
M#$% 4 &usiness *ombinations
M#$% ? "nsurance *ontracts
M#$% . )on(current Assets 3eld for %ale and >iscontinued =perations
M#$% - 89ploration for and 8valuation of Mineral $esources
M#$% / #inancial "nstruments; >isclosures
M#$% 7 =perating %egments
M#$%, #inancial "nstruments
M#$% +2+ Presentation of #inancial %tatements
M#$% +21 "nventories
M#$% +2/ %tatement of *ash #lows
M#$% +27 Accounting Policies, *hanges in Accounting 8stimates and 8rrors
M#$% ++2 8vents After the $eporting Period
M#$% +++ *onstruction *ontracts
M#$% ++1 "ncome Ta9es
M#$% ++- Property, Plant and 8'uipment
M#$% ++/ Beases
M#$% ++7 $evenue
M#$% ++, 8mployee &enefits
M#$% +12 Accounting for Government Grants and >isclosure of Government Assistance
M#$% +1+ The 8ffects of *hanges in #oreign 89change $ates
M#$% +14 &orrowing *osts
M#$% +1? $elated Party >isclosures
Roshayani Arshad/Accounting Theory Page 6
M#$% +1- Accounting and $eporting by $etirement &enefit Plans
M#$% +1/ *onsolidated and %eparate #inancial %tatements
M#$% +17 "nvestments in Associates
M#$% +1, #inancial $eporting in 3yperinflationary 8conomies
M#$% +4+ "nterests in Aoint Centures
M#$% +41 #inancial "nstruments; Presentation
M#$% +44 8arnings per %hare
M#$% +4? "nterim #inancial $eporting
M#$% +4- "mpairment of Assets
M#$% +4/ Provisions, *ontingent Biabilities and *ontingent Assets
M#$% +47 "ntangible Assets
M#$% +4, #inancial "nstruments; $ecognition and Measurement
M#$% +?2 "nvestment Property
M#$% +?+ Agriculture
"n addition to the above standards, the MA%& started a pro6ect on "slamic financial reporting
in +,,/. "n 122+, the board issued MA%& i(+ later re(numbered #$% i(+!, "resentation of
'inancial Statements of Islamic 'inancial Institutions. 3owever, this standard was
subse'uently withdrawn as the MA%& ceased its policies of issuing "slamic accounting
standards. The MA%& is of the opinion that such standards are largely similar to the current
standards in issue. "n line with this, the MA%& issued %tatement of Principles i(+ %=P i(+!,
#inancial $eporting from an "slamic Perspective on +. %eptember 122,. %=P i(+ affirm% that
MA%& approved accounting standards shall apply to %hariah compliant financial transactions
and events, unless there is a %hariah prohibition.
2.1./ #ec%nical &ronouncements
"n addition to issuing standards, the MA%& may also issue technical pronouncements such as
%tatement of Principles %=P!, Technical $eleases T$! and "nterpretation &ulletin. The
purpose of a technical pronouncement is to provide guidance on the application of generally
accepted accounting principles. "n some instances, the issue of a pronouncement represents an
interim measure prior to the issue of a particular standard. "t should be noted that the technical
pronouncements do not amend or overide MA%& %tandards or other statements issued by the
MA%&.

89amples of technical pronouncements that have been issued are as follows;
#itle $ffective Date Summary
T$ 1 The Dear 1222 "ssue ; Accounting and >isclosure 4+ Auly +,,7
Roshayani Arshad/Accounting Theory Page 7
T$ 4 Guidance on >isclosures of Transition to "#$%s 4+ >ecember 12+2
T$ i ( + Accounting for Eakat on &usiness + Auly 122-
T$ i ( 1 "6arah + Auly 122-
T$ i ( 4
Presentation of #inancial %tatements of "slamic
#inancial "nstitutions
+ Aan 12+2
T$ i ( ? %hariah *ompliant %ale *ontracts + Aan 12++
/.0 International 'ccounting Standards
=n + August 1227, MA%& issued a statement with regards to its plan for full convergence of
#$%s applicable in Malaysia with "#$%s issued by "A%& by the year 12+1 for all entities
other than private entities. #ull convergence refers to full compliance with "#$% as a basis for
financial reporting system in Malaysia. "n moving towards full convergence, MA%&
participates actively in the "A%&0s due process at an early stage of standard development. This
is important in ensuring that the standards adopted are consistent with international best
practice as well as regulatory re'uirements in Malaysia. Active participation by MA%& started
since "A%& began its international due process in 122+.
/.1.1 #%e International 'ccounting Standards (oard )I'S(*
The "A%& is an independent and privately(funded accounting standard(setting body. The
standard setting responsibilities was assumed from its predecessor the "A%* in 122+,
following the restructuring of the "A%*. The "A%* oversees the operations of the "A%& and
promotes adoption of "#$%s around the world. 3owever, the technical aspects related to the
"#$%s lies with the "A%&. The "A%& is responsible for the development and publication of
"#$%s, including the "#$% for %M8s and for approving "nterpretations of "#$%s as developed
by the "#$% "nterpretations *ommittee formerly called the "#$"*!. To bring about
convergence of national accounting standards and "#$%s, the "A%& engages closely with
stakeholders around the world. The various stakeholders include investors, analysts,
regulators, business leaders, accounting standard(setters and the accounting profession.
The ob6ectives of the "A%& as set out in its constitution;
to develop, in the public interest, a single set of high 'uality, understandable and
enforceable global accounting standards that re'uire high 'uality, transparent and
comparable information in financial statements and other financial reporting to help
participants in the world0s capital markets and other users make economic decisions<
to promote the use and rigorous application of those standards<
in fulfilling the ob6ectives associated with a! and b!, to take account of, as
appropriate, the special needs of small and medium(si:ed entities and emerging
economies< and
to bring about convergence of national accounting standards and "#$%s to high 'uality
solutions.
The main features of the "A%& structure are as follows;
Roshayani Arshad/Accounting Theory Page 8
i. The "A%* #oundation also known as "#$% #oundation! has two main bodies,
the Trustees and the "A%&. The overall ob6ective of the "A%* #oundation is to
develop a set of high 'uality, understandable, enforceable and globally
accepted financial reporting standards through its standard setting body, the
"A%&.
ii. The "A%& is responsible for setting accounting standards.
iii. %tandards Advisory *ouncil and "#$% "nterpretations *ommittee are two other
bodies within the "A%& structure.
The structure of the "A%& is as shown in #igure ?.
igure 0" Structure of I'S(

#rustees
Members of the trustees must be selected from the Asia/=ceania region si9 members!,
8urope si9 members!, )orth America si9 members!, Africa one member!, %outh America
one member! and the remaining parts of the world two members!. The trustees are
accountable to the Monitoring &oard of public authorities and are entrusted with the
governance and oversight of the activities undertaken by the "A%* #oundation and "A%&.
The "A%& strategy will be reviewed and assessed annually by the trustees. The trustees are
also responsible for safeguarding the independence of the "A%&, ensuring the financing of
the organisation and the appointment of the "A%& members. Members of the "A%&
comprise of e9perts with an appropriate mi9 of recent practical e9perience of standard(
setting, or of the user, accounting, academic or preparer communities. At the same time, the
Roshayani Arshad/Accounting Theory Page 9
IASC Foundation
IASB
tandard Advisory
!ounci" #nter$retation !o%%ittee
&or'ing (rou$
)ey
A$$oints
Re$orts to
Advises
Trustees o* #A! +oundation
,onitoring -oard
o* $u."ic authorities
trustees promote the work of the "A%& and the application of "#$%s. 3owever, they are not
involved in the technical aspects of the matters relating to accounting standards as these
aspects are the responsibilities of the "A%&. =ther responsibilities of the trustees also
include amending the operating procedures, consultative arrangements and due process for
the "A%&, the "nterpretations *ommittee and the Advisory *ouncil<
#%e I!S Interpretations +ommittee
The "#$% "nterpretations *ommittee formerly called the "#$"*! is the interpretative body of
the "A%&. The members are appointed by the Trustees and drawn from a variety of countries
and professional backgrounds. The *ommittee provides timely guidance on accounting issues
that have arisen within the conte9t of current "#$%s and to provide authoritative
guidance )"#$"*s! on those issues.
Standards 'dvisory +ouncil
Members of the *ouncil comprise groups and individuals with diverse geographic and
functional backgrounds. They advise the Trustees and "A%& on all ma6or pro6ects.
I'S( Due &rocess
The due process, which involves interested individuals and organisations from around the
world comprises of si9 stages. These stages are;
+. %etting the agenda. The main consideration of the "A%& in deciding whether a
particular item is to be included in its agenda is based on whether such item will add
value to the needs of the investors.
1. Planning the pro6ect. =nce a new agenda is established, the "A%& will consider
whether the pro6ect will be conducted alone or with other standard(setter. At this stage,
a working group will be established.
4. >eveloping and publishing the discussion paper. The development and publication of
the discussion paper can arise from an active agenda pro6ect of the "A%& or a research
pro6ect conducted by another standard setter. 8ven though the discussion paper is not
mandatory, it is usual for "A%& to publish it as its first publication with the ob6ective
of e9plaining the issue and solicit views from various constituents. "ssues in the
discussion paper are discussed in the "A%& meeting. %ubse'uently, any technical
issues in the discussion paper are discussed in the public session.
?. >eveloping and publishing the e9posure draft. "n contrast to discussion paper, the
development and publication of the e9posure draft is mandatory step in the due
process of the "A%&. The development of a particular e9posure draft takes into
account various issues, comments and suggestions received from various parties. =nce
these matters are resolved at the "A%& meeting, an e9posure draft will be drafted. "t
sets out a proposed standard or amendment to an e9isting standard and this will be
issued for public comments.
.. >eveloping and publishing the standard. =nce the "A%& received the views from the
public on a particular e9posure draft, a meeting will be held and the "A%& will
consider whether a re(e9posure is necessary. "f all the issues raised are concluded
satisfactorily, the "A%& will instruct its staff to draft the relevant "#$%.
-. After the standard is issued, the "A%& will hold regular meetings with various parties
in order to understand issues related to the practical implementation of the "#$% and
any impact of the "#$%. 8ducational activities are also carried out by the "A%*
#oundation in ensuring consistent application of the "#$%. After certain period has
elapsed, the "A%& will initiate review of the application of the "#$% in order to
Roshayani Arshad/Accounting Theory Page 1/
identify whether there is a need to revise the e9isting "#$% and as such will be a new
item on the "A%& agenda.
0.0 &rivate $ntities
Private entities in Malaysia are e9empted from applying #$% starting from the year 122-.
These companies may continue to apply the MA%& standards referred to as Private 8ntity
$eporting %tandards P8$%!. These standards were issued subse'uent to the establishment of
MA%& in +,,/ and they are called MA%&. The list of P8$% is shown in #igure ..
Private entity is a private company incorporated under the *ompanies Act +,-.. This
company;
is not re'uired to prepare or lodge any financial statements under any law administered
by the %ecurities *ommission or the &ank )egara Malaysia< and
is not a subsidiary or associate of, or 6ointly controlled by, an entity which is re'uired
to prepare or lodge any financial statements under any law administered by the
%ecurities *ommission or the &ank )egara Malaysia.
A private company is defined in %ection +.+! of *ompanies Act +,-. as a company having a
share capital and incorporated as a private company. At the same time, its memorandum or
articles of association states the following;
i. restricts the right to transfer its shares<
ii. limits to not more than fifty the number of its members counting 6oint holders of
shares as one person and not counting any person in the employment of the company
or of its subsidiary or any person who while previously in the employment of the
company or of its subsidiary was and thereafter has continued to be a member of the
company!<
iii. prohibits any invitation to the public to subscribe for any shares in or debentures of the
company< and
iv. prohibits any invitation to the public to deposit money with the company for fi9ed
periods or payable at call, whether bearing or not bearing interest.
"n preparing its financial statements, an entity may only be treated as a private entity in
relation to such annual periods or annual periods through out which it is a private entity.
Private entities shall apply either P8$% in their entirety or #$% in their entirety in the
preparation and presentation of their financial statements.
igure 1" List of &$!S
Standard #itle $ffective Date
MA%& + Presentation of #inancial %tatements + Auly +,,,
MA%& 1 "nventories + Auly +,,,
Roshayani Arshad/Accounting Theory Page 11
MA%& 4
)et Profit or Boss for the Period, #undamental 8rrors and
*hanges in Accounting Policies
+ Auly +,,,
MA%& ? $esearch and >evelopment *osts + Auly +,,,
MA%& . *ash #low %tatements + Auly +,,,
MA%& - The 8ffects of *hanges in #oreign 89change $ates + Auly +,,,
MA%& / *onstruction *ontracts + Auly +,,,
MA%& , $evenue + Aan 1222
MA%& +2 Beases + Aan 1222
MA%& ++
*onsolidated #inancial %tatements and "nvestments in
%ubsidiaries
+ Aan 1222
MA%& +1 "nvestments in Associates + Aan 1222
MA%& +? >epreciation Accounting + Auly 1222
MA%& +. Property, Plant F 8'uipment + Auly 1222
MA%& +- #inancial $eporting of "nterests in Aoint Centure + Auly 1222
MA%& +, 8vents after the &alance %heet >ate + Auly 122+
MA%& 12 Provisions, *ontingent Biabilities F *ontingent Assets + Auly 122+
MA%& 14 "mpairment of Assets + Aan 1221
MA%& 1. "ncome Ta9es + Auly 1221
MA%& 1/ &orrowing *osts + Auly 1221
MA%& 17 >iscontinuing =perations + Aan 1224
MA%& 1, 8mployee &enefits + Aan 1224
MA%& 42 Accounting and $eporting by $etirement &enefit Plans + Aan 1224
MA%& 4+
Accounting for Government Grants and >isclosure of
Government Assistance
+ Aan 122?
MA%& 41 Property >evelopment Activities + Aan 122?
"A% 1. Accounting for "nvestments + %ept +,,7
"A% 1, #inancial $eporting in 3yperinflationary 8conomies + Aan 1224
MA% . Accounting for A'uaculture + %ept +,,7
"&(+ Preliminary and Pre(operating 89penditure + Aan 122+
1.0 +onvergence of 'ccounting Standards
Roshayani Arshad/Accounting Theory Page 12
*urrently, the top global capital markets that re'uire or permit the use of "#$% are;

a! @nited Gingdom<
b! #rance<
c! Germany<
d! 3ong Gong<
e! %pain<
f! %wit:erland<
g! Australia.

"n Malaysia, all entities that are re'uired to comply with approved accounting standards under
the #inancial $eporting Act +,,/ will be re'uired to prepare and present their financial
statements in accordance to the "#$%s, e9cept for private entities. #ull compliance begins on
or after Aanuary +, 12+1. "n moving towards this, the MA%& issued a new MA%& approved
accounting framework, the Malaysian #inancial $eporting %tandards M#$% #ramework! in
)ovember 12++. The new famework is effective on + Aanuary 12+1 and it comprises
new/revised accounting standards issued by the "A%& that was effective after + Aanuary 12+1.
#inancial statements prepared in compliance with this framework is a fully "#$%(compliant
framework and e'uivalent to "#$%s.
1.1 (enefits of +onvergence
The benefits of convergence based on the benefits to various users of financial statements can
be summarised as follows;
i. "nvestors
( "ncrease comparability of financial information across borders as well as among
companies nationally in making investment decisions.
( "ncrease transparency.
( Greater understandabiliy.
ii. Multinational companies
( &etter access to foreign capital markets.
( "ncrease credibility of domestic capital markets to foreign capital providers.
( #acilitate compliance with reporting re'uirements of foreign stock e9changes,
( #acilitate preparation and presentation of financial statements as companies are only
re'uired to maintain one set of books prepared in compliance with "#$%s.
( Bower cost of capital to companies.
iii. $egulatory bodies
( 8ase of regulation of securities market as convergence increases regulatory
acceptability of financial information provided by market participants.
( $educed costs of national standard setters.
( #acilitate calculation of ta9 liability for companies receiving income from
international sources.
( Transfer of accounting staffs across borders as similar accounting practices e9isted
worldwide.
( Promote economic growth within region practicing common accounting practices.
1.2 +%allenges of +onvergence
Roshayani Arshad/Accounting Theory Page 13
The challenges of convergence include;
( Application of similar "#$%s may not be appropriate as the purpose of financial
reporting differs across countries. #or e9ample, in countries where the legal system is
based on $oman Baw, the financial statements are prepared for ta9 assessment while
in other countries the information is for investor decision(making.
( >ifferent legal system can hinder development of certain accounting practices.
( >ifferent in culture may affect variations in ob6ectives of accounting systems.
( Back of professional e9pertise due to lack of strong accountancy bodies in certain
countries.
( >ifferent emphasis on user groups. #or instance, investors and creditors are important
in the @%A, employees are important in 8urope while in many 8ast Asian countries
where corporate ownerships are more concentrated, there are lower investor
protection.
( >evelopment of standards and principles in developing countries are not at par with
the developed countries. This could slower the rate of full convergence in some
countries.
( )ational standards in some countries are not based on a conceptual framework of
accounting while "#$%s are.
2.0 Summary
$eliable and transparent financial reporting is paramount to support the decision(making by
investors, lenders and regulatory authorities. "n meeting the needs of various users, there is a
need to develop and issue accounting standards that are of high 'uality, transparent and
comparable in the preparation of financial statements. The current move is through the
adoption of "#$%s by countries around the world. The "A%& is responsible for setting and
issuing the "#$%s. "n ensuring the success of full convergence, the work of national standard
setters and the "A%& should be integrated. "n Malaysia, the MA%& actively participates in the
"A%&0s due process at an early stage of standard development. "n line with the MA%&0s
convergence effort in 12+1, the board issued a new MA%& approved accounting framework,
the Malaysian #inancial $eporting %tandards M#$% #ramework! in )ovember 12++. The
new famework is effective on + Aanuary 12+1 and it comprises new/revised accounting
standards issued by the "A%& that was effective after + Aanuary 12+1. *ompliance with this
framework facilitates companies in Malaysia to prepare their financial statements in
accordance to "#$%s as the new framework is a fully "#$%(compliant framework and
e'uivalent to "#$%s.
3uestions
+. 89plain the development of accounting standards in Malaysia.
1. >escribe the structure and ob6ectives of Malaysian Accounting %tandards &oard.
4. 5hat is the difference between "nternational Accounting %tandards and "nternational
#inancial $eporting %tandardsH
?. Bist some of the benefits and challenges to convergence.
Roshayani Arshad/Accounting Theory Page 14
.. "n some countries, income reported to investors differ from income prepared for ta9
calculations. >iscuss whether these income should be identically determined through the
application of "nternational #inancial $eporting %tandards.
-. %tandard setting approaches in countries may differ. >iscuss how these difference affect
the acceptance of compliance with "nternational #inancial $eporting %tandards.
Roshayani Arshad/Accounting Theory Page 15