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MASB issues revisions to eleven accounting standards (24 Sep 2004)

The Malaysian Accounting Standards Board (MASB) will be issuing proposed revisions to 11 MASB Standards by year-end.

These revisions are exposed in 3 batches, beginning with 4 revisions in July, 4 in September and another 3 by December as part of its effort to converge with the latest revised Standards issued by the International Accounting Standards Board (IASB).
 
In July 2004, MASB issued revisions to 4 existing MASB Standards, namely, MASB 2 Inventories, MASB 8 Related Party Disclosures, MASB 15 Property, Plant and Equipment, and MASB 19 Events After the Balance Sheet Date. The proposed Standard is open for comment until 26 October 2004.
 
Today, the MASB issues two more documents: ED 38 and ED39. ED 38 covers revision to 3 Standards, namely MASB 1 Presentation of Financial Statements, MASB 3 Net Profit or Loss, Fundamental Errors and Changes in Accounting Policies, and MASB 6 The Effects of Changes in Foreign Exchanges Rates. ED 39 is identical to International Financial Reporting Standards 5 (IFRS 5) Non-current Assets Held for Sale and Discontinued Operations, which was issued by the IASB. If adopted, the proposed Standard would replace MASB 28, Discontinuing Operations.
 
3 other revisions will be issued before year-end. They are revision to the Standards on Leases, Business Combinations and Impairment of Assets. 
 
In addition, two new proposed Standards will be issued before year-end. They are: (i) IAS 38 Intangible Assets; and (ii) IFRS 2 Share-Based Payments.
 
By first quarter of 2005, MASB expects to revise MASB 11 Consolidated Financial Statements and Investments in Subsidiaries, MASB 12 Investments in Associates, MASB 13 Earnings Per Share, MASB 16 Financial Reporting of Interests in Joint Ventures, MASB 24 Financial Instruments: Disclosure and Presentation. The MASB will also issue revised proposed Standard on Financial Instruments: Recognition and Measurement as well as proposed Standard on Investment Property. 
 
The MASB maintains its policy of convergence with the IFRSs where future MASB Standards will be closely modelled after IASB Standards. Modifications will be made only if it is absolutely necessary. 
 
Interested parties are welcome to give comments on ED 38 and ED 39 to the MASB by 27 December 2004. Copies of the proposed Standards are available free of charge at:
 
Malaysian Accounting Standards Board
Suites 5.01-5.03, 5th Floor
No. 338, Jalan Tuanku Abdul Rahman
50100 Kuala Lumpur
Tel: 03-2715 9199
Fax: 03- 2715 9212
E-mail address: masb@masb.org.my
 
Alternatively, the proposed Standards are also available on MASB website at www.masb.org.my/masbdp_edonline.asp. The public may also provide their comments electronically through ED Online on our website.


Notes to Editor:
 
Some of the main changes to the existing MASB Standards proposed in ED 38 are as follows:

MASB 1 (revised):
  • Requires disclosure of the critical judgements made by management in applying accounting policies.
  • Requires disclosure of the key assumptions about uncertainties made by management that could cause material adjustment to the carrying amounts of assets and liabilities in the financial statements.
  • Prohibits disclosure of 'extraordinary items' in financial statements.

MASB 3 (revised):
  • Requires retrospective application of voluntary changes in accounting policies and retrospective restatement to correct prior period errors. It removes the allowed alternative in the previous version of MASB 3.
  • Eliminates the concept of a fundamental error and thus the distinction between fundamental errors and other material errors.
  • Requires, rather than encourages, disclosure of an impending change in accounting policy when an entity has yet to implement a new Standard that has been issued but not yet come into effect.

MASB 6 (revised):
  • Replaces the notion of 'reporting currency' with two notions:
     
    • Functional currency - the currency of the primary economic environment in which the entity operates; and
    • Presentation currency - the currency in which financial statements are presented.
  • Revises the requirements in the previous version of MASB 6 for distinguishing between foreign operations that are integral to the operations of the reporting entity, and foreign entities. Such requirements are now among the indicators of an entity's functional currency.
  • Removes the limited option in the previous version of MASB 6 to capitalise exchange differences resulting from a severe devaluation or depreciation of a currency against which there is no means of hedging.

About ED 39
ED 39 proposes:
  • that assets meeting the criteria to be classified as held for sale, and the assets and liabilities included within a disposal group classified as held for sale, are presented separately on the face of the balance sheet.
  • that for assets to be classified as held for sale, the assets must be available for immediate sale in its present condition and its sale must be highly probable. 
  • that assets or disposal groups that are classified as held for sale are carried at the lower of carrying amount and fair value less costs to sell. Such assets or disposal groups are not depreciated.
  • withdrawal of MASB 28 Discontinuing Operations, replacing it with the following:
     
    • change the timing of the classification as a discontinued operation. MASB 28 classifies an operation as discontinuing at the earlier of (a) the entity entering into a binding sale agreement and (b) the board of directors approving and announcing a formal disposal plan. ED 39 classifies an operation as discontinued at the date the operation meets the criteria to be classified as held for sale or when the entity has disposed of the operation.
    • present the results of discontinued operations separately on the face of the income statement.
    • prohibit the retroactive classification as a discontinued operation, when the discontinued criteria are met after the balance sheet date.