|
15th August 2008 Disclaimer The MASB's primary role is to develop accounting and financial reporting standards. It is the MASB's operating procedure that generally precludes the MASB or its staff from giving advice to any individuals or corporations or to individual cases nor to act as an arbitrator regarding any issue. Resolutions to matters concerning accounting application should be addressed by the respective independent accountants, or auditors. Likewise the MASB's resources do not allow for it to respond to students' individual requests for help in completing their assignment. Here are some of the questions that the staff frequently receives from preparers, auditors and users with regard to the recent announcement on MASB convergence plan. The answers to the following questions have been prepared by MASB staff and do not in any way represent the official position of the MASB. Frequently Asked Questions on Malaysia's Convergence with IFRS in 2012 1) What is the IFRS Convergence Plan all about? The convergence plan unveils a roadmap towards achieving convergence with IFRS by 1 January 2012. It maps out a series of broad steps over the next few years to ensure that Malaysia's financial reporting standards will be in line with IFRS, both in content and timing of implementation. 2) What does convergence with IFRS mean? Convergence with IFRS means full compliance with IFRS as a basis for financial reporting system in Malaysia. 3) What are the benefits to convergence? Investors would have better understanding of financial statements prepared by companies in Malaysia and in making comparisons between companies worldwide. Convergence will enhance national reputation of Malaysia as being in compliance with International Accounting Standards. The need to establish this profile is imperative to ensure Malaysia is not left out from the globalisation wave, especially since more than 100 countries are converging or have converged with IFRS. 4) Which are the top capital markets that require or permit the use of IFRS? The top global capital markets that require or permit the use of IFRS are: (a) United Kingdom; (b) France; (c) Germany; (d) Hong Kong; (e) Spain; (f) Switzerland; (g) Australia. Other top capital markets that are considering converging with IFRS are the United States of America and Japan. Korea, Canada and India have announced their plans for convergence by 2011. 5) Who will be affected by this convergence plan? All entities that are required to comply with approved accounting standards under the Financial Reporting Act 1997 will be affected except for private entities. 6) What about private entities? Private entities that apply PERS will continue to do so until such time the Board decides otherwise. 7) Why 2012? The year 2012 was decided based on feedback to allow sufficient time for companies to have in place the requisite systems and resources to prepare for the changeover. A firm date also provides a focus for action in preparing Malaysia to be compliant with IFRS. Entities can now plan for the changeover with certainty. Although it may be a challenge for some, it will be made far more manageable if business leaders prepare early. The state of readiness is important for entities to migrate to the IFRS framework and the extant IFRSs. In view of this, 2012 is decided so as to give constituents enough time to prepare for the changeover. 8) What do you mean by convergence in January 2012? The changeover date is for annual financial statements beginning on or after January 1, 2012. 9) Will FRS 139 be effective in 2012 as well? FRS 139 will be effective 1 January 2010. FRS 139 was issued in 2006 and the effective date was deferred in view of the feedback that entities were not ready to comply with FRS 139. We have discussed with the stakeholders and believe that 2010 would give entities fair preparation time. 10) Why 2010 for FRS 139 and 2012 for other IFRSs? Staged implementation would ease the burden of a 'big bang' in the year 2012. Besides, FRS 139 has been issued since 2006. FRS 139 is an important standard in the FRS series as it has linkages to many other standards and interpretations. To defer FRS 139 to 2012 would mean delaying a host of other standards related to FRS 139. 11) What is MASB's plan in ensuring companies are ready to converge by 2012? Education on IFRS and roadshows or seminars to create awareness, assessment and training will be conducted nationwide. These are expected to be jointly organised by various bodies, such as MIA, MICPA, regulators and other interested organizations. 12) How different will the accounting standards be when we move to the IFRS regime in 2012? The current FRSs are identical to the respective IFRSs. There are a number of IFRSs and IFRIC Interpretations that MASB has yet to adopt. The differences will lie in those standards and interpretations that MASB has not adopted. To date, the IFRSs and IFRIC Interpretations yet to be adopted are as follow: IFRSs in effect internationally (i) IAS 41 Agriculture (ii) IFRS 4 Insurance Contracts (iii)IFRS 7 Financial Instruments: Disclosures IFRSs effective from 1 January 2009 (iv) IAS 1 (revised) Presentation of Financial Statements (v) IAS 23 (revised) Borrowing Costs (vi) IFRS 3 (revised) Business Combinations (vii)IFRS 8 Operating Segments Amendments to IFRSs Amendments to IFRSs effective from 1 January 2009 (viii) IAS 27 Consolidated and Separate Financial Statements (ix) IAS 32 Financial Instruments: Presentation - Puttable Financial Instruments and Obligations Arising on Liquidation (x) IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items (xi) IFRS 2 Share-based Payments - Vesting Conditions and Cancellation (xii) Annual Improvements to IFRSs 2007 (covering 20 IFRS) (xiii) Amendments to IFRS 1 and IAS 27: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate IFRIC Interpretations (i) IFRIC 4 Determining whether and Arrangement contains a Lease (ii) IFRIC 9 Reassessment of Embedded Derivatives (iii) IFRIC 10 Interim Financial Reporting and Impairment (iv) IFRIC 11: IFRS 2 Group and Treasury Share Transactions (v) IFRIC 12 Service Concession Arrangements (vi) IFRIC 13 Customer Loyalty Arrangements (vii) IFRIC 14: IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (viii) IFRIC 16: Hedges of Net Investments in Foreign Operations
IFRIC Interpretation effective from 1 January 2009 (ix) IFRIC 15: Agreements for the Contruction of Real Estate
13) What is going to happen to those IFRS that MASB has not adopted? Standards that have yet to be adopted will likely be implemented on a phased approach between now and 2012. 14) What is going to happen to the local technical pronouncements, namely FRS 201 to FRS 204, FRS i-1, SOP and technical releases at the changeover date to IFRS? A task force comprising accountants with expertise in both Malaysian GAAP and IFRS would likely be set-up to assist MASB to review all locally developed technical pronouncements and to consider whether: (a) these documents are relevant; and (b) the issues can be addressed by IFRIC through and interpretation, or for IASB to amend a standard through the annual improvements process.
15) What are required of entities before changing over to IFRS? Among others, entities will need to: (a) learn about IFRS and assess how these accounting standards will affect them. Such knowledge will help entities facilitate the need for appropriate internal reporting, information systems and training to accommodate their particular circumstances; and (b) invest in their human resources and systems infrastructure. In addition, entities should establish the appropriate implementation plans and assess the potential impact of changes in current FRS and IFRS during the transition period. 16) What if an entity is not ready to converge by 2012? Entities are currently given more than 3 years of advanced notice on the convergence plan and hence, should have ample time to put in place the necessary resources to ensure they are ready for the changeover in 2012. 17) What will MASB's role be after the changeover to the IFRS framework? MASB will continue to actively participate in the IASB's due process while the proposals for the standard are at their early stages. This is already in motion since the IASB started its international due process in 2001. This participation is critical to ensure that standards adopted are consistent with international best practice as well as laws applicable in Malaysia.
|
