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ACT 3122

ACT 3122. Mr OOI CHEE KEONG ock903@gmail.com. An Overview of Financial Reporting Framework in Malaysia. The origin cannot be traced First documented financial reporting regulations were in the Companies Ordinance (1940,46 and 56)

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ACT 3122

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  1. ACT 3122 Mr OOI CHEE KEONG ock903@gmail.com

  2. An Overview of Financial Reporting Framework in Malaysia • The origin cannot be traced • First documented financial reporting regulations were in the Companies Ordinance (1940,46 and 56) • Until after independence, an establishment of Companies Act 1965 are made.

  3. The Flow of Financial Reporting Regime: After Independence: Traditional Stewardship Reporting System MICPA MIA (1978 adopt 4 IAS, 1986 adopt 13 IAS) (start issue standard 1987, but basically follow IAS standard and issued MASs)

  4. Early 1990: Full Disclosure Reporting System ( Regulatory authorities play major role) Central Bank of M’sia Securities (BNM/GP8) Commission (93) Malaysian Professional Bodies (Voluntarily Disclosure: to be more relevant and reliable)

  5. New Financial Reporting Regime Financial Reporting Act 1997 (6 March 1997) Financial Reporting Malaysian Foundation Accounting Standard Board (Sec 4 (1): FRA 1997) (Sec 7(1): FRA 1997) (Overseeing bodies of (Issuing accounting MASB activities) standard)

  6. FRS tsunami MASB (FRS) Change names Standard 1 January 2005 changes 1 Jan 2006

  7. Statutory Regulations on Financial Accounting & Reporting • Companies Act 1965 • All companies incorporated in Malaysia under this Act. • Act contains Ninth Schedule, rules and regulation and reporting requirement. • Requirement: kept proper accounting and other records to explain the transactions and the financial position of the company. • Accounting records: P&L and Balance Sheet

  8. Statutory Regulations on Financial Accounting & Reporting • Companies Act 1965 • All companies incorporated in Malaysia under this Act. • Act contains Ninth Schedule, rules and regulation and reporting requirement. • Requirement: kept proper accounting and other records to explain the transactions and the financial position of the company. • Accounting records: P&L and Balance Sheet

  9. Upon AGM present an audited P&L and B/S and Directors report • Follow disclosure requirement in 9th Schedule • On 1st Sept Co’s Amendment Act 1998 Sec 166A: Provision compliance of approved accounting standards in accordance with Sec 2 FRA 1997

  10. Financial Reporting Act 1997 • Deals with compliance with approved accounting standards of the MASB • Approved accounting standard issued or adopted by MASB apply to all companies in Malaysia and overseas subsidiaries and associated corporation i.e. the consolidated account incorporated in Malaysia • Enforcement in all laws such as Co Act, SC, BNM

  11. Income Tax Act 1967 • Concerning the chargeable income and tax payable. • Impact on the company tax expense and dividend • For company the impact between the accounting rules and tax rules • From year 2000 onwards the preceding year basis will be changed to current year basis

  12. Guidelines of Securities Commission 1995 • Public Sector Company established under the Securities Commission Act 1993 • To promote capital market in Malaysia • Concentrate on due diligence and professional responsibilities of corporate advisers, directors and management of public companies and the maintenance of high standards of disclosure and accounting standards • Guidelines: Corporate Disclosure Policy, Post Listing Obligations, Accounting Standard and Valuation/ Revaluation of Asset

  13. Bursa Malaysia (KLSE) Listing Requirement (“BMLR”) • Private Sector body incorporated to regulate companies listed on its exchange • Does not have a legal power to enforce compliance • Rely on power to delist, suspend or publicly reprimand errant • BM requirement: Submission of reports, Additional Disclosure

  14. Accounting Standard Pronouncement Before the New Financial Regime: • All members follow a regulation made by MIA and MICPA but there are no legal power to enforce a compliance. • The standards followed at that time are: - International Accounting Standard (IAS) - Malaysian Accounting Standard (MAS) • Issued technical bulletins and other pronouncement that were considered as part of GAAP.

  15. After the New Financial Regime: • MASB has adopted 24 of the extent IASs and 8 MASs. • Issued new accounting standard, in which the potential topic will be identified by the MASB. • Also issued the technical pronouncement - Statements of Principles (SOP), Urgent Issue Abstracts (UIA), Technical Release (TR) and Guidance Notes (GN).

  16. From January 2005, all standards issued by MASB are call Financial Reporting Standards (FRS) and renumbered. Example: MASB 1 = FRS101 • New standards issued by IASB , like IFRS 1 become FRS1. • Local standards adopted by MASB, like MAS also renumbered but start with “200” like FRS 201 • Refer pg 3 for the list of FRS

  17. Reporting Requirement by Types of Enterprise The reporting requirement depend on the form of business: • Sole Proprietorship • Partnerships • Companies Incorporated under Companies Act - Private Company (Sdn Bhd) - Unlisted Public Company (unlisted Bhd) - Listed Public Company (listed Bhd)

  18. Listed Company • Quarterly financial statement • Interim and periodic financial statement • Final audited financial statements to SC, KLSE, CCM and Director General of IR. • Financial statement that have been drawn up to show a true and fair view and compliance with approved accounting standard.

  19. Private Entities (“PE”) According to CA 1965, where its MOA: • Restrict the right to transfer its shares • < 50 members • Prohibits any invitation to the public to subscribe for any shares or debentures and deposit money with the company ALSO • Not required to prepare or lodge any FS to SC or BNM • Not a SUB, or ASS , or JC by an entity is required to prepare or lodge any FS to SC or BNM

  20. Private Entities • PE are not required to apply FRS but PERS with effective from July 2007 • PERS is more simplified and covers limited area than FRS • Not applicable to entities that are accountable to the public like charities and other sicial bodies • Normally applicable to partnerships and sole proprietors • Refer pg 5 for the list of PERS

  21. INTERNATIONAL PERSEPCTIVE The new objectives under IASB (formerly known as “IASC”) are: • To develop a single set of high-quality, understandable and enforceable global accounting standards (“AS”) • To promote the use and rigorous application of those standards • To bring about convergence of national AS, IASs, and IFRSs to high quality solution

  22. Current State – Of – The – Art Accounting and Reporting Practices • Influence by Companies Act and KLSE Listing (statutes) • In Malaysia stick on the mandatory disclosure and not much in voluntary disclosure • Current view required the companies to follow statues and accounting standard but if not viewed either regulation, the account must be considered as true and fair view.

  23. Future: the financial reporting is more likely influence by the SC’s guidelines. • The relevancy of information is main consideration to which the it is consistent with most accounting frameworks. (IFRS and FRS) • FULL CONVERGENCE WITH IFRS AT 2012 after comply with FRS 139

  24. THANK YOU

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