Transcript Recent Changes to MASB Standards

Changes Unfolded and Still Are …
Widening the Knowledge Gap
Dr Nordin Mohd Zain
National Accountants Conference
23 November 2005
1
Agenda
A closer look at changes
 Continuing changes
 Widening knowledge gap
 Opportunities for Managers of Value

 opportunities
abound
 opportunities missed
2
State of Play of Change
1973
2001
2001 - 2005
1972
1973 - 1997
1997 - 2001
2001 - 2005
Post 2005
3
Changes Unfolded



Financial Reporting Act passed by Parliament in
March 1997
Formation of Financial Reporting Foundation and
Malaysian Accounting Standards Board
New to Malaysia and the region
Dedicated independent body responsible for developing
accounting standards
 The first time accounting standards has the force of law
 Enforcement bodies include other regulatory bodies

4
Compliance with FRS

Mandatory for:




Public Listed Companies under Exchange– 1,000
Companies registered with the Registrar – 701,000
Financial Institutions under Central Bank – 23
Encouraged for:


Government agencies
Cooperatives
5
Malaysian Accounting Standards Board
Philosophies:
 International harmonisation
 Wider representation on the Board and
Foundation
 Consultative Process with Interested
Parties



Opportunities to express views via draft documents
Dialogues
Seminars
6
Due Process
Discussion
Paper
prepared
IAS
1
MASB
Review
of DP
2
Review
of DP
3
Working
Group
Finalise DP
into
Exposure
Draft
4
MASB
Public
Exposure
5
FRF
Public
MASB
6
Approval of
FRS
FRS
issued
10
Final
review
9
Review of
comments
8
7
9-15 months
Public
MASB
FRF
MASB
Working
Group
7
Reviewers of Standards - Working
Group (57 WGs)


Chairman – Board member
Project Manager


Partners of Big-4
Members (10)



Auditors (Partners)
Preparers (affected parties)
Regulators


Associations


MIA, SC, BNM, Bursa
FPLC, FMM, ABBM,
Academicians
8
Statistics





Exposure Draft sent to = 1,200 cos.
Target respondents = CFOs
Comment period = 3 months
Average number of responses = 6
Response rate = 0.5%
9
Big Change

Reconstitution of the
International Accounting
Standards Board (IASB)

1 April 2001

New mission
New structure
New thinking


10
New Structure
Trustee (19)
IASC
Foundation
Delaware, USA
1 Mar 2001
IASC
IFRIC (12)
IASB (14)
London, 1 Apr 2001
Reconstituted
SAC (49)
Membership
links with
national
standard-setters
Worldwide representation,
independence of members,
and technical expertise
19 Pax Trustee
6 North America
6 Europe
4 Asia Pacific
3 Others
Mission
• To develop a single set of highquality, enforceable global
accounting standards
• To co-operate with national
standard-setters to achieve
convergence of national
standard with international
accounting standards
11
Significant Changes

New ideas


Historical cost
Fair Value
New deals


I FR S
New concepts


I A S
Country specific
Global language
New focus

Harmonisation
Convergence
12
Why Convergence?

Need for common understanding


Comparability enhanced


Similar treatment for similar transactions
Cost savings


Ease of communication
No need to reconcile accounts
Facilitate cross-border listings

Encourage capital flows
13
Widespread Change - World Recognition
of IFRS by Countries 1.1.2005
IFRS required
IFRS permitted
Total
71
21
92
14
Changes are Unfolding
2005
1
2
3
4
5
6
7
8
Feb-05
FRS101 - Presentation of Fin Stmt
FRS102 - Inventories
FRS108 - Accounting Policies
FRS110 - Events After B/S Date
FRS116 - PPE
FRS121 - Forex
FRS124 - Related Party Disclosures
FRS5 - Non Current Assets Held For Sale
9 FRS3 - Business Combination
10 FRS136 - Impairment of Assets
11 FRS138 - Intangible Assets
Mar-05
Apr-05
May-05
Jun-05
Jul-05
Aug-05
Sep-05
Oct-05
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Standard
Standard
12 FRS140 - Investment Properties
Standard
13 FRS2 - Share Based Payment
14 FRS132 - Financial Instruments - Disclosures
Standard
15
16
17
18
19
20
FRS1 - First Time Adoption
FRS117 - Leases
FRS127 - Consolidation
FRS128 - Investment in Associates
FRS131 - Joint Ventures
FRS133 - EPS
Standard
Standard
Standard
Standard
Standard
Standard
21 FRS139 - Financial Instruments - R&M
Standard
Standard
Nov-05
Co-terminous effective date 1 Jan 2006
Financial Reporting Standards Jan-05
Planned for Issuance in 2005
2006
15
Catching up with Changes
WORLD
MALAYSIA
21 Standards in 2005
5 are new
16 are improvements
12 Old Standards
__
37 Standards
33 Excluding 5 local
standards
Catching game
Behind in
implementation
16
Nomenclature Change
17
Approved Accounting Standards 1 Jan 2006
18
Financial Reporting Standards

Format

Subscripts

Strikethroughs

Cut out pages
19
Future Changes







Performance Reporting
Non-financial liabilities
Management commentary
Framework
SME
Islamic
More opportunities?
20
Implications of Changes


Clean start
Opportunities abound
21
Opportunities Abound




Body of knowledge has changed
Advisory
Management upscale
Knowledge building
Due process
 Expression of views


Education
22
Are We Ready to Change?

Should be
Where’s
the goal post?
 Never completely be

But this is where the
opportunities are created, or
missed
23
How To Benefit From Change


Deeper technical knowledge
Broader level of knowledge expected


Valuation, finance, economics and actuarial science
Widening gap creates opportunities
Technical
 Managerial
 Advisory

24
Conclusion






Accounting landscape worldwide has
changed
So does the body of knowledge in
accounting
Understand changes, embrace them
Plan forward
Explore opportunities
Result = D & E
25