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MASB to make final decision for Transitioning Entities by end August 2014 (25 July 2014)

The International Accounting Standards Board (IASB) has recently revised the accounting requirements for bearer plants and revenue recognition particularly in respect of the real estate industry. These new requirements are contained in Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) and IFRS 15 Revenue from Contracts with Customers which were issued on 30 June and 28 May respectively.

These new requirements have a direct implication on the convergence with IFRSs by Transitioning Entities (TE). While convergence with IFRS took place in 2012 for a substantial number of entities in the capital market, the TE (i.e. entities in the agriculture and real estate industries) were allowed to defer adoption of the Malaysian Financial Reporting Standards (MFRS) Framework in view of the impending change to the agriculture and revenue standards by the IASB.

The Board is conscious that the TE would like to know the Board’s position as to when they should adopt the MFRS Framework. The Board wishes to inform that it will issue a fuller press statement by end August 2014 on the status of TE after conducting its internal process and consulting with stakeholders.

About the new requirements

The issuance of the bearer plants amendmentsand IFRS 15 are the culmination of more than four years of work by the Board to get those Standards amended. The Board is pleased to note that:

(1) the bearer plants amendments are principally based on the Board’s Issues Paper on IAS 41 which suggested a possible amendment acceptable to our local constituents; and

(2) the new revenue recognition criteria for long-term contracts have taken into consideration the Board’s concerns on the accounting for sale of real estate under construction previously covered by IFRIC 15 Agreements for the Construction of Real Estate.

The Board is also very grateful to the IASB for publicly acknowledging its efforts in the IASB’s press release of the bearer plants amendments. In that press release, Hans Hoogervorst, chairman of the IASB, said:

“This is an important amendment for those jurisdictions with large agriculture industries. I would like to thank those constituents who helped us to identify this issue through their feedback during the IASB’s agenda consultation and the Malaysian Accounting Standards Board, Asian-Oceanian Standard-Setters Group (AOSSG) and Emerging Economies Consultative Group for their valuable input.”

Furthermore, in the ACCA Accounting and Business Malaysia 7/2014 article titled Power Play, the IASB had praised the MASB’s way of tackling the two issues. In the article, the IASB chairman said:

Malaysia sets an excellent example by actively engaging with the IASB throughout the standard-setting process ... During the process of developing both of these standards, we received significant input from the MASB. In particular, the MASB provided a great deal of inputs into the drafting of the section dealing with real estate and we are immensely grateful for their contribution. ... As well as submitting very high quality comment letters to the IASB, it makes important contributions through its participation in the AOSSG. ...

The Board however acknowledges that its efforts would not have come to fruition if it was not greatly assisted by our local constituents as well as national standard setters from around the world, especially members of the AOSSG,in pursuing its case.

For the IASB press release, please visit:

(a)http://www.ifrs.org/Alerts/Publication/Pages/IASB-issues-amendments-to-IAS-16-and-IAS-41-for-bearer-plants-June-2014.aspx

(b)http://www.ifrs.org/Alerts/ProjectUpdate/Pages/IASB-and-FASB-issue-converged-Standard-on-revenue-recognition-May-2014.aspx

About the MASB

The Malaysian Accounting Standards Board (MASB) is established under the Financial Reporting Act 1997 (the Act) as an independent authority to develop and issue accounting and financial reporting standards in Malaysia.

The MASB, together with the Financial Reporting Foundation (FRF), make up the frameworks for financial reporting in Malaysia. These frameworks comprise an independent standard-setting structure with representation from all relevant parties in the standard-setting process, including preparers, users, regulators and the accountancy profession.

The MASB's mission is to develop and promote high quality accounting and reporting standards that are consistent with international best practices for the benefit of users, preparers, auditors and the public in Malaysia. In a wider context, the MASB seeks to contribute directly to the international development of financial reporting for the benefit of users, preparers and auditors of financial reports.