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MASB issues four new standards [ MASB 25 to MASB 27, MASB i-1] (12 Dec 2001)

The Malaysian Accounting Standards Board (MASB) today announced the issuance of four new Standards. These relate to income taxes, interim financial reporting, borrowing costs, and Islamic accounting. 

The proposed Standard applies if an enterprise is required or elects to publish an interim financial report in accordance with MASB Standards. 
The first three Standards are part of the core standards which the MASB has aimed to issue by the end of the year 2002. 
 
The new Islamic accounting standard for Islamic financial institutions will render a more comprehensive disclosure of Islamic-based transactions and performance, and will allow comparability of financial position of these institutions. 
 
The new MASB Standards are: MASB 25 Income Taxes, MASB 26 Interim Financial Reporting, MASB 27 Borrowing Costs, and MASB i-1 Presentation of Financial Statements of Islamic Financial Institutions. 
 
MASB 25 (Income Taxes) deals with deferred tax assets and liabilities. Besides a different conceptual approach there will be a lot more disclosure requirements to be complied with. 
 
MASB 26 (Interim Financial Reporting) prescribes the minimum content of an interim financial report as well as the accounting recognition and measurement principles. MASB 26 applies if the enterprise is required or elects to publish an interim financial report in accordance with MASB standards. MASB 26 requires a balance sheet, income statement, a statement of changes in equity, a cash flow statement and selected explanatory notes. 
 
MASB 27 requires borrowing costs to be expended in the period they are incurred. As an allowed alternative treatment, borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset should be capitalised as part of the cost of that asset. However, capitalisation should cease when substantially all the activities necessary to prepare the qualifying asset for its intended use are complete. 
 
There are companies which capitalise borrowing costs as part of the cost of assets and continue to capitalise borrowing costs even after the activities necessary to prepare the assets for their intended use, are substantially complete. When MASB 27 is effective, such accounting practice will not be allowed. 
 
After a lengthy deliberation with interested parties, the MASB was of the view that this Standard is also applicable to government privatised projects. The key reasons being: 
 
(a) the exclusion of GPP from the scope of the Standard would be inconsistent with the principles advocated in the MASB's Framework; 

(b) to date, there is no such departure allowed in other jurisdictions;
 
(c) there are no compelling reasons to accord special treatment for borrowing costs incurred on government privatised projects; 
 
(d) fair presentation of financial statements will not be achieved as required under MASB 1, Presentation of Financial Statements;
 
(e) IAS 23 (MASB 27 equivalent) is one of the 30 IASs that the Securities Commission has made a commitment to the IOSCO that Malaysia will comply; and 
 
(f) to attract global funds and foreign investors, the financial statements of Malaysian companies must be comparable with others. 
 
MASB i-1 on Presentation of Financial Statements of Islamic Financial Institutions is the first Islamic accounting standard ever issued by MASB. 
 
This Standard is to streamline the accounting procedures of Islamic Financial Institutions and to ensure comparability of financial performance of Islamic banks and conventional banks that participate in Islamic Banking Scheme. The issuance of this Standard is just a beginning. MASB will continue to develop the Islamic Accounting Standards in the near future and currently has established a working structure to ensure a smooth implementation of this new and challenging area. In developing the Standard, MASB was guided by the rules and regulations governing Islamic Financial Institutions issued by BNM as well as the accounting standards issued by Accounting and Auditing Organisation for Islamic Financial Institutions, and is working closely with the authorities in Shariah law and practitioners. MASB aims towards paving the way for a successful development of Islamic capital market.