Chapter 1 : An Overview of the financial reporting in Malaysia a) To provide its view to MASB on any matters that MASB

.: A Historical Perspective :. seeks to undertake or implement in relation to the MASB’s

1. Companies Ordinance 1940 , 1946 and 1956 function of issuing, reviewing,developing app acc standard
2. Malaysian Companies Act 1965 b) Review the performance MASB
c) Be responsible for all the financing arrangement for the
Malaysian operation of MASB including approving budget MASB
Companies Act d) Perform other function as Minister of Finance may
1965 prescribe by order published in the Gazette
- Function of MASB :
a) Issue new accounting stand as app acc stand
established the Ninth Schedule- b) Review,revise,adopt as app acc stand, existing acc
reporting specifies disclosure stand
requirement,rules requirement in c) Issue statement of principle for financial reporting
and regulation on financial statement d) Sponsor/undertake development of possible acc stand
accounting e) Conduct such public consultation as may be necessary
in order to determine the contents of acc concepts, principles &
- Providing information that is useful to users in making economic standards
decision f) Develop a conceptual framework for the purpose of
3. Malaysian Institute of Certified Public Accountants (MICPA) 1958 evaluating proposed acc stand
- Private sector accountancy body that carry title certified public g) Make such changes to the form and content of proposed acc
accountant (CPA) stand as it considers necessary
- First accounting guidance in 1968 h) Perform such other function as minister of finance may
- 1978 MICPA adopt International Accounting Standards (IASs) prescribe by order published in the Gazette
after be member of Internationall Accounting Standard .: Statutory Regulations on Financial accounting and Reporting :.
Committee (IASC)  Financial Reporting Act 1997
- 1978 (IASs 1 to 4) were adopted - Financial statements are required to be prepared or lodge under
- 1984 issued Malaysian Accounting Standard (Mas1) on ‘Earning any law administered by the SC, Central bank or Registrar
Per Share’ Companies & app accounting standard have been issued or
- Proses adopting IASs & Develop MASs continued until 1997 adopted by MASB
when MASB established  .Companies Act 1965
4. Malaysian Institute in Accountants (MIA) 1967 under Accountant - For proper accounting record , account must be recorded and
Act 1967 kept :
- Private sector accountancy body , and its regulations cover the ~ in such manner to make them easy to audit
practices of the whole accounting profession in Malaysia ~ within 60days of completion of transaction to which they relate
- 1987 MIA were elevated to that of a national accountancy body ~ for 7 years after the completion of the related transaction/
& begin issue accounting standards operation
5. Securities Commission Malaysia (SC) established on 1/3/1993 ~ at registered office
under SC Act 1993 - Local parent company must ensure within 2years after any
- Has investigative and enforcement power corporation become subsidiary, the financial year of that
- SC’s ultimate responsibility is protecting the investor subsidiary coincide with financial year
- SC encourages and promotes the development of the securities - First annual general meeting of shareholders should held not
and futures markets in Malaysia later than 18months after date of incorporation
.: The Current Financial Reporting Regime :. - Annual general meeting must held once in every calendar year &
- 1996 Malaysian Government announced to establish new not more than 15months from the last annual general meeting
financial aacounting & reporting - Directors of every company must present this statement:
- 6/3/1997 Financial Reporting Acr 1997 was gazette ~ audited profit & loss acc
- Two body established : ~ audited balance sheet
i) Financial Reporting Foundation FRF ~ director’s report on the state of affairs of company & group must
ii) Malaysian Accounting Standards Board MASB accompany the financial state
- Function FRF set in section 4(1) FRA : - Audited financial state&auditor’s report must sent to all
shareholder not less than 14days b4 annual general meeting
 - 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 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 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 berdaftar
- AOB ad kuasa utk pantau program on registered auditor to asses
extent of their compliance with recognized auditing&ethical 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 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)
- 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 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 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, IFRS-
compliant 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 paper MASB DP1, 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 formulation of 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 & 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 – 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 from 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
- 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
the entity’s future return on its economic resources
.: Financial performance reflected by Accrual Accounting :.
- AA show effect of transaction&other event&circumstance on a
reporting entity’s economic resources&receipt&payment occur in
diff period
- AA provide better basis for assessing the entity’s past and 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 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 aspect of 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 include all info 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
 There are no error or omission in description of phenomenon&
process used to produce reported info
.: Step Applying fundamental qualitative characteristic :.
Identify economic phenomenon that has potential to be useful to
user of reporting entity
Identify the type of info about the phenomenon that most relevant
if it available and can be faithfully represented
Determine whether info is available and can be faithfully
represented
 Comparability
Info can is more useful if can be compared with similar info in
same entity & similar info in other entity for another period
Can compared with other company
Characteristic comparability is achived when financial state
present in consistent way
 Verifiability
Help user that info faithfully represent the economic phenomena
it purpose to represent
It mean , diff knowledgeable&independent observer can agree
Direct : counting cash to verify amount of depicted
Indirect : checking input to a valuation model&recalculating the
output using same method
 Timeliness
Having info available to decision-makers in time to be capable of
influencing their decision
 Understandability
Financial info can be read and understood by user
Ta bermakna benda complex tayah tunjuk dlm financial info , jd
tugas reader utk make sure depa ada acc skill utk paham
~ ada arising yg ta masuk income state tp masuk equity (gain
arising from revaluation of fixed asset)
Expenses
~ decrese in economic benefit during the accounting period in the
form of outflow or depletion of asset
~ expenses arise in ordinary course of busines(cost of good sold)
~loses realize or unrealized
Capital Maintenance and adjustment
~ revaluation of asset and liabilities give rise to increase or
decrease income state
.: recognition of the element of financial state :.
- Concerned with ‘what’ an entity discloses as item in the
statement of financial position or income state
- Recognition criteria :
It is probable that any future economic benefit associated with
the item will flow to or from entity
The item that has cost or value that can be measured with
reliability
.: measurement of the elements of financial statement :.
- Concerned with ‘how much’ an entity allocate to amount
recognized as elements in the statement of financial position or
income state
- Proses of determining the monetary amount at which the
element of financial state are to be recognized and carried in
income state

- Element of financial position

Assets
~ A resouces controlled by the entity as a result of past events
and from which future economic benefits are expected to flow to
the entity
~ beli kereta secara installment . kereta milik bank tp sbb kita ad
control so kereta tu asset kita
~ past event ( transaction mesti dh buat baru dikira asset)
~ Future economic benefit ( potential to contribute benefit )
Liabilities
~ present obligation of the entity arising from past transaction
Equity
~ Residual interest in the assets of an entity after deducting all its
liabilities ( asset-liability=equity)
- Element of Performance
Income
~ an increase economic benefits during the accounting period in
the form of inflows or enhancement of asset .
~ revenue arising from ordinary course of bisnes (sales)
C3 : PPE
.: Introduction :.
- PPE : long-term assets which arise from investment decidion of
reporting entities
- PPE classified as tangible when :
Use in production , supply of goods or service , rental to other ,
administrative purpose
Use more than one period
.: Recognition of PPE :.
- PPE recognized as asset if :
It is probable that future economic benefits associated with the
item will floe to the entity
The cost of the item to the entity can be measured reliably
- Classification PPE depend on nature and use of the item
.: Measurement at Recognition :.
PPE purchased for cash
Initial cost :
Purchased price XXXX
(-) : Trade discount (XX)
Initial Price XXX
(-) : Cash Disconut (X)
Import duty XX
Delivery fees XX
Electrical Installation cost XX
Maintenance cost XX
Training cost XX
Pre-production testing XX
Cost of the ….. XXX
.: Subsequent Cost on PPR :.
- It is an expenditure on asset after it is brought into use
C4 : INVENTORY
Assets
~ A resouces controlled by the entity as a result of past events
and from which future economic benefits are expected to flow to
the entity
- PPE classified as tangible when :
Use in production , supply of goods or service , rental to other ,
administrative purpose
Use more than one period
.: Recognition of PPE :.
- PPE recognized as asset if :
It is probable that future economic benefits associated with the
item will floe to the entity
The cost of the item to the entity can be measured reliably
Definition inventories :