Malaysian Accounting Standard Board

1.0 Introduction

Malaysian Accounting Standard Board’s (MASB) convergence with International Accounting Standard Board (IASB) was first announced by MASB’s chairman Dato' Zainal Abidin Putih. Subsequently, the former International Accounting Standards (IAS) and the current IFRS would be always followed by Malaysian accounting standards due to colonization effect on Malaysia. Many United Kingdom’s accounting standards would be always adopted by the Malaysia standard setters’ authorities since Malaysia was a British colony up to the year 1957.  On 19 November 2011, the third accounting framework which is IFRS-compliant, which was dubbed as Malaysian Financial Reporting Standards(MFRS) was issued by MASB to proof the Malaysian commitment and to felt the significance of the convergence. The issuance of MFRS also referred as a baseline for all the entities administered by Securities Commission of Malaysia. In line with the convergence, many initiatives were taken by MASB and Malaysian Institute of Accountants (MIA) to educate, train and inform all the relevant parties intended with fast absorption of convergence.

2.0 Nature of convergence

Effective from 1 January 2012, there were three (3) sets of MASB approved accounting framework in Malaysia, namely MFRS framework, Financial Reporting Standards (FRS) framework and Private Entity Reporting Standards (PERS) framework. Except for private entities, all entities are required to comply with MFRS framework for annual periods beginning on or after 1 January 2018. Private entities are private companies incorporated under Companies Act 1965, which did not require to lodge any financial statements under any law applied by Securities Commission of Malaysia and Bank Negara. Moreover, private entities are neither subsidiaries nor associates of or jointly controlled by an entity which is required to prepare or lodge any financial statements under any law administered by the Securities Commission Malaysia or Bank Negara Malaysia   However, Transitioning entities, entities that are in the scope of MFRS 141 for ‘Agriculture’ (equivalent to IAS 41) and IC Interpretation 15 for ‘Agreement for Construction of Real Estate’ are exempted from applying MFRS framework for annual periods beginning on or after 1 January 2012, where the exception is only applicable for one year. In the period of exemption, the entities are given permission to either choose MFRS or FRS framework to outline their financial statements. Annual periods beginning on or after 1 January 2013, will be adopting MFRS framework as their reporting framework.

On the other hand, PERS framework of MFRS framework can be entirely adopt by private entities for annual periods beginning on or after 1 January 2012 and private entities that fall within the scope of Transitioning entities could select either MFRS or FRS framework as a basis to prepare their financial statements.

6.0 Conclusion

In a nutshell, apart from the issues discussed above, Malaysia is steady to converge with IFRS with no major issues of non-compliance with MFRS. To support this, it can be said that Malaysia has inherited strong national accounting policies over time via strong education system. As cited by Dr.Nordin Mohd Said, the Executive Director of MASB, Malaysian education system in the accounting and business sectors is very much aligned with current developments providing us with no lack of local capacity in educating and training the related personnel to enter the job market with huge extent (Said, 2012). In the end, the most vital question is how successful is the MFRS adoption among the entities, therefore reviews after the application are necessary to evaluate the convergence.  To suggest, entities are recommended to invest in their human resources and system infrastructure to smoothens the convergence process whereby they can provide personnel with adequate knowledge on the effect of how convergence will affect them. On the other hand, the entities are highly recommended to perform a gap analysis to accommodate lack of effectiveness in internal systems, processes or people towards adopting MFRS framework. Lastly, appropriate implementation plans will provide an insight for the entity to assess the potential effect of changes in current FRS and IFRS during transition period.

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