Accounting for Corporations / Companies

1. Accounting for Corporations / Companies

2. Learning outcomes • Explain the concepts and the environments associated with companies (C2, A1) • Distinguish the different classification of companies (C2, A2) • Explain the financial reports of companies (C2)

3. The Corporate Form of Organization An entity separate and distinct from its owners. • Classified by Ownership • Publicly held (Berhad) • Privately held (Sendirian Berhad) • Classified by Purpose • Not-for-Profit • For Profit • National Council of Social Welfare & Social Development Malaysia • Peace Malaysia - Malaysians For Peace • Petronos Berhad • Takaful Malaysia Berhad • Khazanah National Berhad • Malaysia Milk Sdn. Bhd. • Darussalam Holdings Sdn. Bhd.

4. Company • Definition: Companies are legal entities incorporated under the Companies Act (CA)1965. • CA 1965 requires all businesses to be registered with the Companies Commission of Malaysia (CCM) which was established in 2002. • The provisions of the CA1965 govern the rules for the formation, conduct and regulations of companies.

5. Characteristics of a Corporation Characteristics that distinguish corporations from proprietorships and partnerships. • Separate Legal Existence • Limited Liability of Stockholders • Transferable Ownership Rights • Ability to Acquire Capital • Continuous Life • Government Regulations (CCM, BM) • Additional Taxes • Corporate Management Advantages Disadvantages

6. Characteristics of a Corporation (Separation of ownership and management) Stockholders Chairman and Board of Directors President and Chief Executive Officer General Counsel and Secretary Vice President Marketing Vice President Finance/Chief Financial Officer Vice President Operations Vice President Human Resources Treasurer Controller

7. Classification of Companies • Public Company (Berhad) • Private Company (Sdn. Bhd.) -- Max. 50 • Exempt Private Company -- Max. 20 • Foreign Company -- Incorporated outside Malaysia • Investment Company

8. Cont. • Public company • Minimum number of members is 2 and no limit on the maximum number. • Berhad (Bhd.) • There are public companies listed in Bursa Malaysia – listed companies. But not all public companies are listed in BM. • Private company • Is prohibited from inviting the public to subscribe any of its shares. • Number of shareholders – maximum of 50. • Usually-family owned companies. • SendirianBerhad (Sdn. Bhd.)

9. Malaysia Conditions • Activities under control & supervision of Companies Commission of Malaysia (CCM) • Activities subject to Bursa Malaysian Listing requirements • Must prepare financial report that comply: -- Schedule 9 of Companies Act 1965 -- FRS (MASB) approved accounting standard

10. Forming a Company Memorandum of Association (MA) • Initial legal document, represents the initial agreement between the people forming the company • regulates the company relation with outside person i.e. external affair of the business • Contents: • The name, location of the company • Activities in which the company may legally operate • Statement that the liability of the members is limited or unlimited • The amount of authorised capital for each class of shares and the nominal value of each share

11. Cont. Article of Association (AA) • set out the rules covering the internal affairs of the company such as the right of shareholder and the power and the duties of management • Contents: • The rights of different classes of shareholders • The duties, powers and proceedings of directors • Notice and proceedings of meetings

12. Cont. The Prospectus Any offer or invitation by a company to issue shares must be accompanied by a registrable prospectus It contains all such information as: i. assets, liabilities, financial position and prospects of the company ii. The rights attached to the securities being issued

13. Preparing companies’ financial statements • Two main statutes governing financial reporting by companies • Companies Act 1965 • Financial Reporting Act (FRA) 1997 • Section 166(A) CA 1965 requires companies to prepare financial statements in accordance with all approved financial reporting standards in compliance with the requirements of the FRA1997.

14. Cont. • Malaysian Accounting Standard Board (MASB) • Under FRA1997, MASB was set up to issue accounting standards as approved standards. • Other functions – to review, revise or adopt as approved the existing accounting standards. • Bursa Malaysia (BM) • Listed companies have additional disclosure requirements required by BM. • E.g.: to issue half-yearly reports on performance within 3 months following the end of the half-year.

15. Annual report • Must be sent to shareholders 14 days before the AGM. • The annual report may comprise: • The chairman’s statement • Corporate governance statement • The audit committee report • Statement on internal control • Social responsibility statement • Financial statements

16. FRS 101 • FRS101 Presentation of Financial Statements (revised) • Statement of financial position at the end of the period (Balance Sheet) • Statement of comprehensive income for the period (Income Statement) • Statement of changes in equity • Statement of cash flows • Notes, comprising a summary of significant accounting policies and other explanatory notes

17. Statement of financial position at the end of the period (Balance Sheet) • Statement of comprehensive income for the period (Income Statement) • Statement of changes in equity • Statement of cash flows • Exhibit • GOLDEN LAND BERHAD 2010