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Chap. 5

Chap. 5. Accounting Development in Malaysia. Influential factor. Accounting development in Malaysia Role played by state Along the economic growth Economic growth & accounting development Economic growth. Stages of Economic Growth. Background. The colonial impact Economic structure

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Chap. 5

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  1. Chap. 5 Accounting Development in Malaysia

  2. Influential factor • Accounting development in Malaysia • Role played by state • Along the economic growth • Economic growth & accounting development • Economic growth

  3. Stages of Economic Growth

  4. Background • The colonial impact • Economic structure • Agriculture to export (timber & tin) & import consumer goods • Encourage immigration of labour minuscule • Problems: • Basic manufacturing base • Little development of local commerce & industry • Unbalanced occupational distribution • Increase involvement in business & commerce • Shortage of local trained staff (audit & account) • Foreign recruitment • Foreign qualification

  5. Post colonial – 5-year plans • FFP – 1956-1960 • Development: • Political perspective - Independence • Economic • rubber replanting • Who’s benefited? Foreigner • Structural change in manufacturing sector • Handicraft Industries: • Rattan • Atap • clothing • Capital-intensive Industries: • Biscuits & soft drinks • cement • Wood-work

  6. FFP – 1956-1960 • Marked prominent role of private sector & • Supportive role of state • State – see more individual development instead of foreign business sector • But – difficult to change colonial practice • colonial practice : • Minimal taxation • Avoidance of deficit • Unprotected market • Facing opposition on tariff protection • Break away from direct business pressure – deficit budget

  7. FFP – 1956-1960 • 1958 – MACPA was incorporated under the Companies Ordinance 1940-46 • Self-regulatory accountancy body • Enhance theory & practice of accounting

  8. SFP – 1961-1965 • Significant role of state • Major objective – rural development • Urban development • Urban infrastructure development • Rural development • Agriculture development • Rural infrastructure development • Social service – health, education

  9. SFP – 1961-1965 • Significant role of state • Major objective – rural development • Urban development • Urban infrastructure development • Rural development • Agriculture development • Rural infrastructure development • Social service – health, education • 1961 - MACPA with UK counterparts • training local students • instituted 1st MACPA examination

  10. SFP – 1961-1965 • Increasing attention at financial reporting practice • Used UK accounting pronouncement • Colonial • Establishment of major international accounting firms Establishment of local Bumiputra accounting firms • 1965 – Company Act

  11. SFP – 1961-1965 1965 – Company Act • Companies Ordinance, 1940 • Minimal disclosure • Sch 9 • Mandated disclosure requirements for P&L & BS items • Specified investment & FA methods Government acceptance of obligation to disclose financial information to shareholder

  12. FMP – 1966-1970 • State involvement –Engaging in direct commercial & individual activities • Private sector • Responsible for manufacturing operations • Government • Maintain favourable investments climate • Establishment of Bank Bumiputra & MARA • Provide commercial loan • aspire Malay Entrepreneur

  13. FMP – 1966-1970 • restrained role by state • Why? • British dependency – military • Left plantation & mining concerns to British • Economic diversifation • Primary commodity – industrial • Foreign investment – foreign sectors • Strengthen the free enterprise system • Act of Parliament

  14. FMP – 1966-1970 • Act of Parliament • Income Tax Act, 1967 • Accounting policies to be adopted in the accounts • Accountants Act, 1967 • Established MIA • Complement functions of MACPA

  15. Era of NEP • The 2nd Malaysian Plan (1971-75) • The 3rd Malaysian Plan (1976-80) • Foreign & Chinese dominant • Racial tensions • Greater involvement by the State • Provide viable & equitable participation of all races in socio-economic development • New Economic Policy - 30% ownerships – foreign & Bumiputra

  16. Era of NEP • Initial step - 1972 –MACPA issued Statement No 1 “Recommendations on the Presentations of Accounts” • 1974 – KLSE published 1st monograph – Corporate Financial Reporting in Malaysia • 1978 – MACPA adopted IAS 1 – 4 • 1973 – several foreign companies listed on the KLSE • Non-listed companies = subsidiaries of multinational com. • 1979 – adopted IAS 5-10 • 1979 – 1986 – 13 IAS were adopted

  17. Era of NEP • 1979 – MACPA formed insurance committee • Clarify technical problems on auditing & accounting stds in the insurance industry • 1980s – regulated by Central Bank • Accounting profession – solely represented by MACPA • Organising seminars, talks • Supported by top leaders • Close rapport with government & its agencies

  18. 4th MP • 4th Malaysian Plan (81-85) • Background –economy slowdown • Recession (79-80) • Annual growth dropped • Public investment grew • Ride out of recession – contribute to the development of more advanced industries (85 –production of national car) • Budget deficits • Called for more participation of private sector • corporatisation & privatisation • Reduce financial & administrative burden of government • 81- MACPA established the MACPA Educational Trust Fund – promoting & advancing education & research in accountancy

  19. 4th MP • 82-84 – MACPA issued 5 Technical Buletins – areas not governed by IAS • Suggested further disclosure • 1984 – Companies Act 1965 –amended • definition of ‘accounts’ • = P&L & BS • Including notes & statements • 1984 – issued MAS 1-Earnings per share • MAS – Malaysian context

  20. 4th MP • 1985 – MACPA & MIM organized the 1st Malaysian Annual Corporate Reports Award Competition

  21. 5th MP • 1986-90 • Increasing privatization • 1986 –ROC (MACPA) amended Companies Act, Sch 9 • Incorporate all IAS • Introduced Statement of Changes in Financial Position • 1987 –MIA was activated

  22. 5th MP • 1987 –MIA was activated • Track down ‘bogus’ accountants • Set up MAAT – respond to shortage of accountants issue • 1990 – MAAT – incorporated • 2nd-tier accountancy body • Provide a pool of accounting technicians to support MIA’s members • Provide qualification & organization • MIA adopted all std adopted by MACPA

  23. 5th MP • MACPA – continued issue guideline & std • 1988 – issued 1st auditing guideline (MAG1) – Auditors’ Reports: Forms & Qualifications

  24. 6th MP • 1991-95 • Emphasized on balanced development • Policy – NDP = NEP • Enable participation of all in the mainstream activities • Ensure political stability • National unity • After all – eradicate poverty & restructure society

  25. 6th MP • Accelerating industrial restructuring • Move towards capital-intensive & technological sophisticated industries • Produce better Q & more competitive products • Development of Capital Market • Increasing share of the investment funds for public & private sector • Public & private debt securities • Corporate stock & shares

  26. 6th MP • 1993 - Establishment of Securities Commission to strengthen regulatory framework of CM. • The Future Industry Act, 1993 provided legal framework to safeguard investor • All listed companies were required to establish Audit Committees to ensure financial integrity of companies

  27. 6th MP • Important role of insurance industry • MIA & MACPA issued MASs for insurance • Corporation between public & private sector • 1992 – issued MACPA Guideline for Accounting in the public sector • 1991- MIT was incorporated under Companies Act, 1965, Sec16(4) • Provide organisation for person concern with Malaysian taxation • Advances the status & interests of the taxation profession

  28. Conclusion • Role of state in accounting development • Related to stages of economy developmet • 1956- 1995 • 7th – 9th MP – group presentations

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