PRESENTED BY : NURFAZILAH BINTI MOHD NOR EX02476 CHUN SHO TIN EX02482

1. *THE DEVELOPMENT OF CONCEPTUAL FRAMEWORK* PRESENTED BY : NURFAZILAH BINTI MOHD NOR EX02476 CHUN SHO TIN EX02482

2. Introduction • Users of financial statements need relevant and reliable information • To provide such information, the profession has developed a set of principles and guidelines called Conceptual Framework • The framework is to be the foundation for building a set of coherent accounting standards and rules • Also to be a reference of basic accounting theory for solving emerging practical problems of reporting

3. Overview of the Conceptual Framework • The Framework has three levels : Objectives, elements and criteria • First level consists of objectives to identify goals and purposes of accounting • Second level consists of qualitative characteristics that make accounting information useful and elements of financial statements • Third level incorporates recognition and measurement criteria used in establishing and applying accounting standards, including assumptions, principles and constraints

4. Historical Development of Conceptual Framework in Malaysia • Requirements of “true and fair view” under the Companies Act 1965 • Guidance “true and fair” is based largely on convention rather than on any particular concept • In July 1998, the MASB issued a discussion paper MASB DP1, Framework for the Preparation and Presentation of Financial Statements • This represents a first attempt by Malaysia to set a foundation for the manner in which financial statements should be prepared and presented • It contains guidance that may influence the direction of financial reporting practices in Malaysia

5. Need of Conceptual Framework • arose as a result of weaknesses in accounting and standard setting practices • Among the problems or weaknesses were: 1. Different treatment of like transaction among accountants in practice, resulting in differing financial statements 2. Inconsistencies in the issuance of standard 3.There are certain influences in the standard setting process which go beyond technical consideration 4. The accounting profession was worried that the government will regulate them

6. Users & Information Needs (Key Players) • IASB Framework recognises that the users of financial statements include : • Investors • Employees • Lenders • Suppliers and other trade creditors • Customers • Government and their agencies • Public

7. Objectives of Conceptual Framework • To describe existing practice – need to get an overall picture of what is done in practice and how these concepts are being used in the actual working environment • To prescribe future practice – to give direction or guidelines to future accounting practice • To define key term and fundamental issues – to clarify the basic terms used in accounting and understood the accounting profession

8. Advantages of Conceptual Framework • Guide the FASB in establishing accounting standards • Act as guidance to the standard setting body to be in better position in choosing the alternatives methods available • Provide a frame of reference for resolving accounting questions in the absence of specific promulgated standards • Improve communication among accountants and standard setting bodies and its constituents • Determine the bounds of judgement in preparing financial statements by prescribing the nature, functions and limits of financial accounting and reporting

9. Advantages of Conceptual Framework • Enhance comparability of financial statements by decreasing the number of alternative accounting methods • If standards were derived from a coherent and plausible body of concepts, this will reduce the accountant’s vulnerability to political pressures • Reporting requirement will be more consistent and logical because they will stem from an orderly set of concepts • The need for specific accounting standards will be reduced • The setting requirements will be more economical because issues should not be re-debated from different viewpoints

10. Advantages of Conceptual Framework • Enhance the credibility of financial reporting and in turn help to reduce accounting’s vulnerability to political pressure • Increase users confident and understanding of financial reporting • Provide a measure or bench-mark against which general and specific accounting can be tested in an objective sense • Provide a basis of reason, direction and a basis of appeal in the resolution of disputes • Provide a consistence approach in the making of decisions concerning the choice of accounting practices, methods and in assisting the setting of accounting standards

11. Components of Conceptual Framework • A statement of objectives of financial reporting • A specification of qualities of financial information to be disclosed in the financial statements • A set of definitions of the elements of financial statements • A specification of the criteria for deciding when to recognize the various elements of financial statements • A set of measurements rules • A set of guidelines for presentations and disclosure of information that is useful in fulfilling objectives of financial reporting • Elements of financial statements

12. Latest Development of IFRS • Dato’ Johan Raslan, PwC Malaysia’s Executive Chairman and Chairman of Financial Reporting Foundation “FRF”, explains that : “Malaysia has been adopting IFRS standard by standard, so this step is a progression.” “It is interesting that the US announced their purpose roadmap for usage of IFRS by US companies a few months after Malaysia’s convergence announcement. If this comes to pass, IFRS will indeed become the global language for financial reporting in the world.”

13. Implication of IFRS Convergence on Malaysia • The convergence IFRS means referring the convergence of FRS with IFRS • IFRS being revised as part of the convergence between IFRS and US GAAP • The credit crunch has added pressure to the IASB to make changes to some standards with unprecedented speed • This will lead to further need for Malaysian FRS to change in tandem with IFRS • IFRS is indeed a moving target • Companies need to have a mechanism of changes in place for the waves of accounting standards that are coming through • A permanent and agile implementation committee needs to be establishes and maintained for the next few years so that companies are flexible and able to influence and adapt to changes as they come

14. Thanks you!