FAR210

CHAPTER 1
HISTORICAL PERSPECTIVE

1. The first documented financial reporting regulation were those of the Companies Ordinance of 1940, 1946 and 1956, before Malaysia achieve independence
on 31 August 1957.
2. Malaysia Companies Act 1965, Financial Statement must contain a profit and loss account, a balance sheet, a statement of source and application of funds,
and accompanying notes to the accounts
3. In 1998, Companies tend to use the Companies Act 1965 as the absolute disclosure requirement rather than as minimum requirement.
4. In April 2016, the Companies Bill 2015 was approved in Parliament to introduce a new Companies Act 2016 to replace the original Companies Act 1965.
-The key features of the Companies Act 2016 is the requirement for reporting companies to comply with approved accounting standards issued by MASB.
5. MICPA was established in 1958 as a company limited by guarantee.
-The first accounting guidance was in 1968.
6. In 1978, MICPA was admitted as a member of the IASC.
7.The MIA was established in 1967 under the accountant act 1967
-The MIA operated as a large private sector accountancy book and its regulation covers the practice of the whole accounting profession in Malaysia.
-It remained inactive and concentrated mainly on the registration of accountants in Malaysia, then in 1987 it was elevated to a national accounting body.
THE CURRENT FINANCIAL REPORTING REGIME

1. The Function of FRF

-To provide its view to the MASB.
-To review the performance of the MASB.
-To be responsible for all the financial arrangement for the operation of MASB.
-To perform as the Minister of Finance.
2. The FRF serves as an overseeing body of the operation and activities in MASB.
3. The Function MASB
-To issues new accounting standards
-To review, revise or adopt as approved accounting standards
-To issues statement of principles for financial reporting.
 1.4.1 The Financial Reporting Act 1997

STATUTORY 1. Section 27 of the Financial Reporting Act FRA

deals with compliance with approved accounting
REGULATIONS standards of Malaysia Accounting Standards
Board (MASB).
ON 2. There are 4 Standards of Accounting Boards

FINANCIAL -International Accounting Standards Boards

-Financial Accounting Standards Boards, USA
ACCOUNTING -Accounting Standards Board, UK

AND -Australian Accounting Standards Boards,

Australia

REPORTING 3.All 140 countries include UK and Australia have

converged their reporting standards to those of
the IASB.
 -The Companies Act 2016 was approved by
parliament in April 2016 to replace the original

1.4.2 THE
Companies Act 1965.
-Every Company incorporated must comply
COMPANI with Companies Act 2016
1. Compliance with approved Accounting
ES ACT Standards

2016 -Section 244(1) of the Act requires the

Financial Statement of a Company must
comply with the approved accounting
standards issued by the MASB.
2. True And Fair View over-ride -Section 244(3) of the Act
provides for directors of a
company or holding shall not
be required to ensured the
Financial Statements
-Section 244(4) of the Act
requires that if the Financial
Accounting is not made
according to approved
accounting standards, the
company directors shall:
a. Disclose by a way of Note on b. Give Particulars in the note
the Financial Statements of the quantified Financial
effect on the Financial
Statements .
3. Compliance with other Law Of Authorities
-Section 244(5) of the Act specifies that the Financial Statements prepared in accordance with the approved accounting
standards are subjects to any specifications, guidance or regulation as may be issued by the authorities.
4. Conflict Between The Act And Approved Accounting Standards
-Section 244(7) of the Act Clarifies that if a conflict or inconsistency arise between the provisions of an applicable
approved accounting standards and the Act in their respective application of the Financial Statements of a company.
5. Accounting And Other Records To Be Kept
-The Act requires every company to keep proper Accounting and other records to sufficiently explain the transaction and
the financial position of the company to truly see fair profit and loss.
-For proper Accounting records, the account must record and kept:
a. Enable them to be conveniently and properly audited
b. Within 60 days of the completion of the transaction which it relate
c. For seven years after completion of the related transaction and operation
6. System Of Internal -The directors of public a. The assets of the b. All Transaction are fully 7. Accounting Periods of -Section 247(1) requires
Control and subsidiary of public company are safeguarded authorized, and that the Companies within the that a local parent
company will have a against loss from transaction are recorded same group company must ensure that
system of internal unauthorized use. as necessary to enable the within two years after any
controls: preparation of true fair companies becomes its
and value. subsidiary
1.4.3 THE INCOME TAX ACT
1967
1. Taxation is considered a business expense that needs to be reflected in the income statements
2. This Act requires company to keep sufficient record to enable the profit and loss from the
business for the basis period of any year.
3.When paying dividend, company needs to keep a record the dividend net of income tax
4.The actual Tax Payable could only be confirmed after the Inland Revenue Board(IRB).
5. Section 110 of the Act allowed the recipients shareholder to set off against its own tax liability,
the tax that the paying company had deducted and paid over the tax authority.
1.4.4 Regulation by the Securities
Commission
1. The securities Companies is a public sector establish under the
securities act 1993.
2.The Securities Companies place great importance on diligence and
professional responsibilities of corporate adviser.
3.In 2007, The Capital Markets And Service Act 2007 was enacted in
Parliament to consolidated the Securities Industries 1983.
1.4.5 THE AUDIT OVERSIGHT BOARD
1. The Audit Oversight Board is under the Securities Commission Act 1933.

2.The AOB mission is to assist the securities Commission in overseeing the auditors of
public interest entities and to protect the interest of investors.

3.The AOB requires all auditors of public interest in entities to be registered

4.The AOB has the power to conduct inspection and monitor programmed on registered
auditors to assess the extend of there compliance.
1.4.6 THE REGULATION
BY BURSA MALAYSIA
1. The Bursa Malaysia in an exchange Holding Company
incorporated under section 15 of the CMSA 2007 to
regulated companies listed on its exchange.
2.The Bursa Malaysia Listing Requirements contain some
provision relating to financial accounting and reporting.
They are:
a. Submission Of Reports
-The printed annual report shall be issued to the
company shareholders within a period not exceeding six
months.
b. Interim Reporting Requirements
-Is reporting about the Balance sheet, Income Statement,
Equity Statement, Cash Flow Statement, and Explanatory
Notes
 1. Bank Negara Malaysia has issue two guideline on Financial reporting
practice of financial institutions established under the Banking And
Financial Institutions Act 1989:

1.4.7 a. BNM/GP3: Classification of Non-Performing Loans and Provision for

substandard, Bad and doubtful Debt
b. BNM/GP8: Guidelines of Financial Reporting For licensed Institutions

REGULATI 2. The main provision of BNM/GP3 were as follows:

-Where a loan is classified as non-performing, interest accrued should be

ON BY suspended and credited to interest-in-suspense account.

3. Three specimens accounts of financial institutions, namely Model Bank

BANK
Berhad, Modal Merchant Bank Berhad and Model Finance Company
Berhad had been prepared as guidance for standard practice on basis of
following criteria:

NEGARA -Classification of assets and liabilities

-Liquidity of Assets and liabilities

MALAYSIA -Maturity analysis of assets and liabilities

-Concentration of assets and liabilities
1.5.1 PRONOUNCEMENT BEFORE THE
CURRENT FINANCIAL REPORTING
1.The standards were formulated in the
approved accounting standards and ACCOUNTING
comprised: STANDARDS
a. International Accounting Standards (IAS) PRONOUNCEME
adopter for operation in Malaysia.
NT IN
b. Malaysia Accounting Standards (MAS)
MALAYSIA
2. As of 31 December 1996, the extant
approved accounting standards of the
profession consisted of 24 and eight MAS.
 1. Due process of the MASB after 2013

- Stage 1, MASB seeks public comment on IASB draft

1.5.2 technical Pronouncement

PRONOUNCEME -Stage 2, Deliberation at the working group level on

NT UNDER THE IASB draft pronouncement
CURRENT
FINANCIAL -Stage 3, Deliberation at the MASB Board
REPORTING
REGIME -Stage 4, Issuance of Standard by IASB

-Stage 5, Issuance of Standard by MASB

STAGE 1
1. The IASB issued draft technical
pronouncement, which may include Discussion
Papers, Exposure Drafts and Request for views.
2. The MASB disseminate that draft
pronouncement together with an invitation to
comment to local constitutions by publishing in
the MASB website.
3.The due date to submit to the MASB is
usually one month.
4.Public forums may be organized if an IASB
draft pronouncement represent a major
change or shift from current practice.
STAGE 2
1. The IASB draft pronouncement are
deliberated in WG meetings to
provide comments and
recommendations to the issues in
the draft pronouncement for the
MASB Boards consideration
STAGE 3
1. The public comments received and
the WG command and
recommendations are tabled at the
MASB Board for deliberation and
consideration
2. The MASB Board considers all
comments received
3. A comment letter received is
prepared and submitted to the MASB
STAGE 4
1.Following the pronouncement of
the final standard (IFRS) by the IASB.
The WG further deliberates on the
change made to the original draft
pronouncement
2.The WG then makes
recommendation on the IFRS,
including possible issuance for the
MASB Board
STAGE 5
1. The MASB Board considers the
WG recommendation and after due
deliberations, approved the IFRS for
adoption as FRS.
2. A copy of the FRS is presented to
the FRF members for there
comments before the FRS is issued
as an approved accounting standard
in Malaysia
PROCESS OF FRS
AND IC
INTERPRETATIO
NS FROM THE
MASB WEBSITES
1.5.3 FUTURE
PRONOUNCEME
NT-IFRS-
COMPLIANT
FINANCIAL 1. Process align with the board timeline to 2. The Board also requires that financial

REPORTING that of IASB with the aim of putting the new

or amended standards in place for adoption
and application within a timely manner.
statement simultaneously assert
compliance with IFSR as issued by the MASB
dual statement compliance.
STANDARDS
DIAGRAM:
DEVELOPMENT OF
FINANCIAL
ACCOUNTING AND
REPORTING