Chapter 1 : An Overview of the financial reporting in Malaysia .: A Historical Perspective :. 1. Companies Ordinance 1940 , 1946 and 1956 2. Malaysian Companies Act 1965
Malaysian Companies Act 1965
established the reporting requirement,rules and regulation on accounting -
Ninth Schedulespecifies disclosure requirement in financial statement
Providing information that is useful to users in making economic decision 3. Malaysian Institute of Certified Public Accountants (MICPA) 1958 - Private sector accountancy body that carry title certified public accountant (CPA) - First accounting guidance in 1968 - 1978 MICPA adopt International Accounting Standards (IASs) after be member of Internationall Accounting Standard Committee (IASC) - 1978 (IASs 1 to 4) were adopted - 1984 issued Malaysian Accounting Standard (Mas1) on ‘Earning Per Share’ - Proses adopting IASs & Develop MASs continued until 1997 when MASB established 4. Malaysian Institute in Accountants (MIA) 1967 under Accountant Act 1967 - Private sector accountancy body , and its regulations cover the practices of the whole accounting profession in Malaysia - 1987 MIA were elevated to that of a national accountancy accountancy body & begin issue accounting standards 5. Securities Commission Malaysia (SC) established on 1/3/1993 under SC Act 1993 - Has investigative and enforcement power - SC’s ultimate responsibility is protecting the investor - SC encourages and promotes the development of the securities and futures markets in Malaysia .: The Current Financial Reporting Regime :. - 1996 Malaysian Government announced to establish new financial aacounting & reporting - 6/3/1997 Financial Reporting Acr 1997 was gazette - Two body established : i) Financial Reporting Foundation FRF ii) Malaysian Accounting Standards Board MASB - Function FRF set in section 4(1) FRA :
a) To provide its view to MASB on any matters that MASB seeks to undertake or implement in relation to the MASB’s function of issuing, reviewing,developing app acc standard b) Review the performance MASB c) Be responsible for all the financing arrangement for the operation of MASB including approving budget MASB d) Perform other function as Minister of Finance may prescribe by order published in the Gazette Function of MASB : a) Issue new accounting stand as app acc stand b) Review,revise,adopt Review,revise,a dopt as app acc stand, existing acc stand c) Issue statement of principle for financial reporting d) Sponsor/undertake development of possible acc stand e) Conduct such public consultation as may be necessary in order to determine the contents of acc concepts, principles & standards f) Develop a conceptual framework for the purpose of evaluating proposed acc stand g) Make such changes to the form and content of proposed acc stand as it considers necessary h) Perform such other function as minister of finance may prescribe by order published in the Gazette .: Statutory Regulations on Financial accounting and Reporting :. Financial Reporting Act 1997 - Financial statements are required to be prepared or lodge under any law administered by the SC, Central bank or Registrar Companies & app accounting standard have been issued or adopted by MASB .Companies Act 1965 - For proper accounting record , account must be recorded and kept : ~ in such manner to make them easy to audit ~ within 60days of completion of transaction to which they relate ~ for 7 years after the completion of the related transaction/ operation ~ at registered office - Local parent company must ensure within 2years after any corporation become subsidiary, the financial year of that subsidiary coincide with financial year - First annual general meeting of shareholders should held not later than 18months after date of incorporation - Annual general meeting must held once in every calendar calendar year & not more than 15months from the last annual general meeting - Directors of every company must present this statement: ~ audited profit & loss acc ~ audited balance sheet ~ director’s report on the state of affairs of company & group must accompany the financial state - Au Audited dited financial state&auditor’s report must sent to all shareholder not less than 14days b4 annual general meeting
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Every company must lodge its annual return with the Commissioner of Companies within 1month or 2month if branch register outside Malaysia after annual general meeting - Particular in ann.return of companies having a share/not should up to date of general g eneral meeting/date not late than 14day after meet Income tax Act 1967 - Income tax payable is tax expense & charged in income statement - Extent unpaid is current liability in balance sheet - Recipient shareholder record dividend income at gross mount & taxed on the gross income Regulation by The SC - Capital Markets and Services Act 2007(CMSA) enacted to secure Securities Industry Act 1983&Futures Industry Act 1993 to regulate&sediakn matter brkaitn aktvt,markets& intermediaries in capital market&consequential&incidental thereto - CMSA has to submit ~ copy of audited annual acc within 2weeks from date ~ interim&periodic report segera lps figure available ~ listed corporation&director should kept such acc report ~ corporation shall retain the record for 7years after completion of transaction The Audit Oversight Board - AOB established under part 111A of SC Act Act 1993 - Mission: bantu SC overseeing auditor of public interest entities & protect interest investor by promote confidence in quality & reliability of audited financial state of public interest entities - AOB suruh semua auditor auditor berdaftar - AOB ad kuasa utk pantau program on registered auditor auditor to asses extent of their compliance with recognized auditingðical stand Regulation by Bursa Malaysia - Exchange holding co. incorporated under Section15 CMSA2007 to regulate co. listed on its exchange - Not have legal power to enforce compliance - Page 14 Regulation by Bank Negara Malaysia - BNM/GP3: classification classification of non-performing loan & provision for substandard,bad & doubtful debt - BNM/GP8: guideline on financial reporting for licensed institution - GP3 dikenalkan 1985 to streamlining method of income recognition and loan loss provisioning for the purpose of financial reporting by financial institution - GP8 dikenalkan dec1988 to standardize format of financial report for bank & finance co. .: Accounting Standard Pronouncement in Malaysia :. Pronpuncement b4 current financial reporting regime - Before MASB, MIA and MICPA diorang blh control member diorang je - Diorang follow International Acc Stand (IASs) & Malaysian Acc Stand (MASs)
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MIA ,MICPA conduct review of financial state prepared & audit by their member Two professional body stop issue acc stand after financial reporting act gazette in March 1997 Pronouncement under current financial reporting regime ~ Due Process MASB b4 2004 ~ Due Process MASB after 2003 MASB start convergence work in2004 to align its stand with IASB MASB stand rename Financial Reporting Stand(FRSs) in 2004 & FRS represent FRS Framework Aug2008 FRF&MASB announce plan to bring Malaysia Malaysia to full convergence with IFRS 1Jan2012 (Stage 1: seek public comment on IASB) Due date for public to submit comment on MASB one month before IASB comment deadline to allow MASB working grou & MASB Board consider the comment before submit to IASB (Stage 2: deliberation on WG level on IASB draft pronoun) Pronoun deliberated in WG meeting to provide comment& recommendation to issue raise in pronoun MASB (Stage 3: Deliberation at MASB) The comment tabled at MASB for deliberation & consideration , after that comment letter prepared&submit to IASB (Stage 4: Issuance of Stand by IASB) WG deliberate on changes made if any & make recommendation on IFRS . (Stage 5: Issuance of standard by MASB) MASB consider WG recommend & after a fter delibration app IFRS adopt as FRS Copy FRF present to FRF members for comment b4 FRS issued as app acc stand in MAS Private entity reporting Stand 2006 MASB announce their private entity in MAS need not comply with FRSs PERS is a set of acc stand issue or adopt by MASB for application by all private entity. The private entity for this purpose is company incorporated under CA1965 : ~ not required prepare or lodge any financial state under any law administered by SC or BNM ~ not subsidiary or jointly controlled by an entity which is required to prepare or lodge any financial state under any law administered by SC or BNM Future Pronoun-IFRS-compliant Financial Reporting Stand MASB issue an omnibus Exposure Draft MASB EB75, IFRScompliant financial reporting stand (FRSs)
C2: CONCEPTUAL FRAMEWORK…. .: Reason need acc Framework :. - Provide starting point - Formulation of high-quality & consistent reporting stand - Identify a foundation for financial reporting - Identify objective of financial reporting - Identify desirable qualitative characteristic of FR - Serve reference point for resolving acc issue - Make preparer&other users understand better of FR .: MASb’s Conceptual Framework for FR :. - July 1998, MASB issue discussion discussion paper MASB DP1, framework framework for preparation&presentation of FS. - July 2007 discussion paper finalized as MASB Framework - Purpose of Framework : Help MASB develop future MFRS &its review of existing MFRS Help prepare financial state in applying MFRS& dealing with topic that have yet to form the subject of an MFRS Help auditor forming opinion as to whether financial state follow the MFRS Help user of financial state interpret info contained in financial state prepared Provide info about the the formulation of MFRS MFRS to who are interested in work of MASB - The framework deals with Objective of financial state Qualitative characteristic that determine usefulness of info in financial state Definition,recognition Definition,recognition & measurement of element from which financial state are constructed Concept of capital & capital maintenance .: The objective of General Purpose of Financial Reporting :. - To provide information to follow law & regulation - Provide info to all users including meeting the social need of society - Provide info to specific groups of users .: Economic Resources and Claims :. - Economic Resources – Resources – asset asset - Claims : Equity and Liabilities - The info help user to identify the strength and weakness of entity’s financial , help use assess the reporting’s liquidity and solvency - Info about priorities&payment requirement of existing claim help user predict how future cash flow will be distributed among those with claim against the reporting entity .: Changes in ER&C :. - Changes result fr om om entity’s financial performance & other transaction - Info financial performance help user understand the return that entity produced on its economic resources - Provide indication how well management discharged its responsibilities
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Info variability and components of return important in assessing the uncertainty of future cash flow - Info reporting entity’s past financial performance&how its management discharged its responsibilities is helpful in predict pr edict the entity’s future return on its economic resources .: Financial performance reflected by Accrual Accounting :. - AA show effect effect of transaction&other transaction&other event&circumstance event&circumstance on a reporting entity’s economic resources&receipt&payment occur in diff period - AA provide better basis basis for assessing assessing the entity’s past past and future future performance than info solely about cash receipt&payment during period - It explain that changes in reporting entity’s economic resources and claims other than obtaining additional resources directly from capital providers are useful in assessing that entity’s enti ty’s past and future to generate net cash flow .: Financial performance reflected by past cash flow :. - Help user to assess the entity’s ability to generate future net cash inflow - Help user understand a reporting entity’s operations, evaluate its financing&investing activities, asses liquidity or solvency and interpret other info about FP .: Changes in ER&C not resulting from FP :. - Issuing additional ownership share - Info this type of change is necessary to inform user why the reporting entity’s ER&C changed & the effect of changes .: Qualitative Characteristic of useful Financial Info :. - Fundamental Qualitative How information affect the decision making process of users Info is relevant when it influence the economic decision by help them evaluate past,present&future event,corfim,correct their past Financial info has predictive value if it can be used as an input to processes employed by user to predict future outcome Confirmatory value it provide feedback about previous evaluation Judgement need to decide the info is relevant to user or not Materiality An entity-specific entity-specific aspect of relevance relevance base on nature or magnitude or both of items to which the info relate in contect of an individual entity’s financial report Completeness A complete depiction depiction include all info necessary necessary for user to understand the phenomenon including the descripyions and explainations Neutrality Without bias in selection presentation of financial info Info should be not bias so user can free make their judgement Info should base on fact and supportive evidence rather than personal opinion Free from error
