|Tue, 19 Apr 2005 |
Malaysia closer to world convergence as MASB finalises more financial reporting standards (FRSs)
The Malaysian Accounting Standards Board (MASB) is currently finalising 21 financial reporting standards, a move that is expected to bring Malaysia closer to world convergence of financial reporting standards to serve the investing community better through transparent financial reporting.
"MASB targets to issue all the 21 standards by November this year. The final standards are expected to be effective from 1 January 2006, subject to approval by the Board," says Dr Nordin Mohd Zain, executive director of MASB, the sole authority to set legally binding financial reporting standards in Malaysia.
He says to facilitate timely dissemination of information, the accounting community, financial controllers and academicians will be able to view these standards on the MASB website (www.masb.org.my) once these standards are approved by the Board beginning May.
The website will also enable them to monitor any amendments to these financial reporting standards from time to time.
MASB is now finalising the first eight of the 21 standards on presentation of financial statements; inventories; accounting policies; events after balance sheet date; property, plant and equipment; foreign exchange; related party disclosure; and non-current assets held for sale. Of these, seven are revisions to the existing standards while one is a new standard.
Dr Nordin explains that the standard on presentation of financial statements (FRS101) contains revisions that eliminate extraordinary items and requires management to disclose the judgments made in applying accounting policies and the assumptions made for estimating the company's assets and liabilities. This would help readers of financial statements to appreciate how managers manage the company.
The standard on inventories (FRS102) contains revision that prohibits the last-in, first-out (LIFO) method to measure inventories. The Board believes the LIFO method does not reflect the proper flow of inventories, a method used for tax purposes more than for accounting. In Malaysia, very few companies use the LIFO method over the first-in, first-out (FIF0) method.
Meanwhile, the standard on accounting policies (FRS108) enhances comparability by removing choices available in the predecessor standard. There is now one method to use on how companies change their accounting policy or correcting prior errors.
The standard on events after balance sheet date (FRS110) was revised to clarify that dividends should not be treated as a liability if a company declares such dividend after its balance sheet date, but prior to the accounts being authorised for issue.
The standard on property, plant and equipment (FRS116) would now require companies to assess the residual value of their property, plant and equipment annually at a balance sheet date. Such assessment may mean changes to the depreciation amount depending on the estimated value of such asset at the end of its useful life.
The revision to the foreign exchange standard (FRS121) introduces functional currency but maintains the requirement to use the ringgit for purposes of presenting the financial statements of companies.
On the standard of related party disclosure (FRS124), he explains that it contains a new requirement to disclose compensations for key management personnel. Disclosure of identity of parties involved in related transaction, a subject of considerable debate on the existing standard, was removed in line with international requirement.
And on the standard on non-current assets held for sale (FRS5), he says it is new and requires a company that has identified its long-term assets for sale to present them as a separate line item on the balance sheet.
Since last year, MASB has been busy producing 21 exposure drafts pertaining to their respective standards, which went through the due process of consultation by parties involved in the financial reporting process.
For enquiries, please contact:
Dr Nordin Mohd Zain
Malaysian Accounting Standards Board
Tel: (03) 2715 9199
Fax: (03) 2715 9212