The Malaysian Accounting Standards Board (MASB) today announced the issuance of a further two exposure drafts for public comment.
In a statement issued today, Chairman of the MASB (MASB) Raja Datuk Arshad Raja Tun Uda said the new exposure drafts are:
MASB ED 22 Segment Reporting
MASB ED 23 Business Combinations
The main features of MASB ED 22 Segment Reporting are:
It defines a business segment as a distinguishable component of an enterprise that is engaged in providing related products or services (with similar risks and rewards) whereas a geographical segment is when an enterprise provides products or services within a particular economic environment.
It requires an enterprise to report as its primary segment, either business or geographical segments. The remaining information is then treated as secondary segments.
Relative to previous requirements, this exposure draft enhances the disclosures with respect to primary segments, however, considerably less information is required for secondary segments.
It provides guidance on the measurement of segment assets and liabilities, revenue and expenses.
The main features of MASB ED 23 Business Combinations are:
It defines an acquisition as arising when one enterprise obtains control over the net assets and operations of another enterprise whereas a merger is a business combination in which the shareholders of the combining enterprises combine control over the whole of their net assets and operations in such a manner that neither party can be identified as the acquirer.
Sets extensive criteria that must be satisfied before a business combination can be recognised as a merger.
Provides guidance on the relevant accounting treatments for acquisitions and mergers including recognition of the date of acquisition and measuring the cost of an acquisition.
Sets down the minimum disclosure requirements in the event of a business combination. Chairman's Statement
Upon issuance of MASB ED 22, Segment Reporting, the MASB Chairman said, "The issue of a new standard on segment reporting continues the MASB's role of putting in place a quality set of financial reporting standards that will enhance Malaysian annual reports.
This new exposure draft requires enterprises to improve the quality and quantity of segment disclosures. For the report user this is an important change as the requirement to report on the basis of primary and secondary segments provides a strong focus for analysis. Report users will now be better able to assess the concentrations of risk and rewards of diversified enterprises. Such information, which will allow assesessment of risks and its management, is perceived as being very useful information by financial analysts."
With regard to MASB ED 23, MASB Chairman Raja Datuk Arshad Raja Tun Uda said, "The issue of this new exposure draft represents one of the most significant proposals that the MASB has made to date. It potentially will have far reaching implications for Malaysian corporate reporting. The manner by which business combinations are effected can have a significant impact upon the performance of an enterprise due to the different values that may arise. What the MASB is proposing with respect to accounting for business combinations is in line with international best practice and represents a significant change to the previous rules. At this point, the MASB has developed stringent criteria for a combination to adopt merger accounting."
The MASB Chairman further explained that, "However, in going forward, the MASB notes the global trend to consider abolishing merger accounting altogether. This is on the premise that in practice, a true merger will almost never exist and permitting an enterprise to avail itself or merger accounting provides an opportunity for inaccurate reporting." Accordingly, the Board has posed the question whether Malaysia should also be thinking on the same line.
The MASB Chairman urged interested parties that, given the nature of the change and the implications of them, they make a special effort to respond to this new exposure draft on business combinations.
The Chairman urged interested parties to avail themselves of the opportunity to study and forward any relevant comments to the MASB by 5 June 2000. Copies of the exposure drafts are available free of charge at:
Malaysian Accounting Standards Board
Suite 5.01 Â 5.03, Fifth Floor, Wisma Maran,
338, Jalan Tuanku Abdul Rahman,
50100 Kuala Lumpur
Tel: 03 Â 466 9199
Fax: 03 Â 466 9212