TOPIC 1

INTRODUCTION TO FINANCIAL
REPORTING REGULATORY
FRAMEWORK IN MALAYSIA

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Learning Outcomes

At the end of this lecture students should be able to:

1. Explain the importance of accounting

2. Explain the different types of businesses

3. Explain the history and development of accounting

in Malaysia

4. Explain the roles of the bodies that regulate the

financial reporting practices in Malaysia

5. Explain the role of IASB and IFRS in the national

and global financial reporting standards

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What is Accounting? Use of money, Should the business Should a bank lend
Language of business? machinery, land, invests money in a money to the
Provide information building etc to project? business?
helpful in making provide business
economic decisions goods and services

Introduction

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 Economic Entity
• All entities keep records of their
activities especially related to
financial matters (i.e. activities that
use money or other resources )
Accounting
• Process of identifying, recording,
processing and monitoring business
transactions in order to generate
financial reports , e.g. profit or loss,
use of resources of for non -profit
organisations .
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1. Individual
2. Profit Making Organisation
• E.g. Sime Darby Bhd, Air Asia Bhd,
KPJ Healthcare Bhd, Tunas Manja,
Pantai Selamat etc
3. Non-profit Making Organisation
• E.g. National Cancer Council Malaysia
(MAKNA), Mercy Malaysia, Yayasan
Salam Malaysia, government
agencies, etc
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Types of Financial Reports
Internal Financial Reporting
• Managerial/Management
Accounting
• Internal users: managers and
other employees
• E.g. managers use the internal
financial reporting for budgeting
purposes
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External Financial Reporting
• Financial Accounting and
Reporting
• External users:
shareholders /owners , investors,
lenders, suppliers, customers ,
government agencies & public.
• E.g. investors use the external
financial reports to decide for
investment purposes.
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 Financial Reporting Systems
Auditors R e por t ing Ent i t y Regulators*

Financial Statements

Users

* M AS B- s t a n d a rd s e t tin g

SC – regulates Malaysian market

BNM – regulates banks and financial institutions

MIA – regulates accountants

P re s entat ion Tit le
Supporting bodies: Professional bodies – monitor their members 6

Reporting Entity
Sole Proprietorship
- Owned by a single owner
- Registered under the owner’s
personal name, such as Zamani
Enterprise or a trade name, such
as Bangi Kopitiam
- Not required to submit
financial reports to any
regulatory bodies
- Owners of sole proprietorships
submit financial statements of
their business to the Inland
Revenue Department to
determine their taxable income
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All enti ties that prepare fi nancial reports and submit to the
regulatory bodies responsible for monitoring their activities .
Partnership Company
- Owned by two or more individuals, - A business owned by two or
but not exceeding twenty more individuals
- G o ve r n s b y t h e P a r t n e rsh ip Ac t - Established as a separate
1961 and typically has a partnership legal entity under the
agreement that sets out the terms C o m p a n i e s Ac t 1 9 6 5
and conditions of the partnership
- A shareholder of a company
- Subjected to minimal rules and has limited liability and the
regulations ownership is transferable
- Owners of a partnership submit - A company is required to
financial statements of their submit its annual report to the
business to the Inland Revenue Companies Commission of
Department to determine their Malaysia and several other
individual taxable regulatory bodies
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Development of Financial Reporting in Malaysia
Period Financial Reporting Development
1965 Ninth Schedule of the Companies Act 1965
• Contains disclosure requirements in the FS of Malaysian companies
• P&L & B/S
• no requirement for companies to comply with any accounting standards.

1967 MIA was established

• Operated largely as a private sector accountancy body
• Concentrated on registration of accountants

1978 MICPA was admitted as a member of the International Accounting Standards

Committee (IASC)
• Adoption of International Accounting Standards (IAS)
• Issue of Malaysian Accounting Standards (MAS)
1987 Operations of the MIA were elevated to that of a national accountancy body
• Began to issue accounting standards
1997 Financial Reporting Act 1997 established Financial Reporting Foundation (FRF) and
Malaysian Accounting Standards Board (MASB)
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Development of Financial Reporting in Malaysia
Period Financial Reporting Development
2004 MASB was admitted as a member of the IASB
• Began convergence (Harmonization)
• Jan 2005, Standards renamed as FRS, e.g. FRS 102 Inventories
2006 TWO TIER REPORTING FRAMEWORK was introduced:
• Private Entities can choose between: The MPERS is similar to the set of mini
- MFRS MFRS standards issued by MASB for small
and medium sized entities known as the
- Malaysian Private Entity Reporting Standards (MPERS) MFRs for SMEs
• Company which are not Private entities will use the MFRS
2012 Full convergence of FRSs with IFRSs
• MASB issued the Malaysian Financial Reporting Standards (MFRS) to replace the FRS beginning 1
January 2012
2016 The Malaysian Accounting Standards Board (MASB) has launched its financial reporting framework for
private entities, Malaysian Private Entities Reporting Standards (MPERS).
The Malaysian Federal Government will move from modified cash basis accounting to accrual basic
accounting beginning 1 January 2016. In support of this move, the Malaysian Public Sector Accounting
Standards (MPSAS) have been introduced.
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MPERS
 New :
Reporting Requirements in Malaysia Companies
Act 2016

• Companies Act 1965 requires companies to comply with

Companies Act 1965 Approved Accounting Standards when preparing the financial
statements
Approved Accounting
Standards • All commercial, industrial and business entities

Income Tax Act • All business entities with assessable income

Securities Commission’s • All public companies

guidelines
Bursa Malaysia Listing • Companies listed on the Bursa Malaysia
Requirements (BMLR)
• Banks and financial institutions licensed under the BAFIA Act
Central Bank’s guidelines 1989
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 Main Accounting Standard Setter In Malaysia
Financial Reporting
Foundation (FRF)

• to oversee the carrying

assists the MASB in out of the functions of the
ensuring and MASB
• to review the
promoting high Malaysian performance of the
quality accounting Accounting MASB
practices in the Standards Board
country (MASB)

Standing MFRS Application

Committee on and
Issues committee Working group
Islamic Financial Implementation
Reporting Committee (MAIC)

assists the MASB in advising the Board as to

ensuring and whether an existing or To consider plays an
Sources : http://www.masb.org.my/pages.php?id=327
promoting high proposed approved application and important role in
quality accounting accounting standard can be implementation the standards-
practices in the made applicable to Islamic issues raised by setting due
country finance transactions. users of the MFRS process

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Roles of IASB and IFRS in the national
IASB
and global financial reporting standards

• International Accounting Standard

Board
• Independent, privately funded body
that develops and approves IFRS
under the oversight of IFRS
Foundation.
• IASB adopted all existed
• IAS and now superseding them with
issuance of IFRS.
• The predecessor of IASB was IASC
• Founded in 1973

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Roles of IASB and IFRS in the national
IFRS
and global financial reporting standards

• International Financial Reporting

Standard
• It is a unique, high quality, easily
understandable global accounting
standards
• Reporting in IFRS could make it
easier to raise capital in global
markets.
• It would make the consolidation
process easier.

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Accounting Profession and the Financial & Reporting
Environment in Malaysia
Ministry of Finance

Accountant Financial Reporting SC CCM

General’s Office Foundation

MIA Central Bank (BNM)

Public Sector
Enterprises MASB
Private Corporate Sector
Auditor General’s
Department
The Accounting Profession
Report to Ministry of Finance
Regulate
Provide accounting, auditing & assurance services

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THANK YOU

Inaliah Mohd Ali

inaliah@uniten.edu.my

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