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MASB publishes amendments to FRSs, 2 new Interpretations & 2 Technical Releases (15 July 2010)

The Malaysian Accounting Standards Board (MASB) today issued two amendments to Financial Reporting Standards (FRSs), two new Interpretations, and two Technical Releases. The amendments to FRSs and the new Interpretations are word for word to those issued by the International Accounting Standards Board (IASB) and are already effective internationally. These pronouncements are:


Amendments to FRSs

  • Additional Exemptions for First-time Adopters (Amendments to FRS 1)
  • Group Cash-settled Share-based Payment Transactions (Amendments to FRS 2)


Interpretations

  • IC Interpretation 4 Determining whether an Arrangement contains a Lease
  • IC Interpretation 18 Transfers of Assets from Customers


Technical Releases

  • Technical Release 3 Guidance on Disclosures of Transition to IFRSs
  • Technical Release i-4 Shariah Compliant Sale Contracts


About the Pronouncements

Additional Exemptions for First-time Adopters (Amendments to FRS 1)

The amendments are aimed at assisting entities in the oil and gas industry and those with leasing contracts applying FRSs for the first time so as to avoid undue cost or effort in the transition process to FRS.

Oil and gas entities using the full cost method are exempted from retrospective application of FRSs for its oil and gas assets.

Entities with existing leasing contracts are exempted from reassessing the classification of those contracts in accordance with IC Interpretation 4 when application of the previous accounting practice produces the same result.


Group Cash-settled Share-based Payment Transactions (Amendments to FRS 2)

FRS 2 prescribes the accounting treatment for share-based payment transactions, e.g. share-options granted to employees.

The amendments clarify that an entity that receives goods or services in a share-based payment arrangement must account for those goods or services no matter which entity in the group settles the transaction, and no matter whether the transaction is settled in shares or cash. In other words, regardless of how group transactions are structured at the subsidiary level, FRS 2 is applicable for group consolidated financial statements unless the transaction is clearly for a purpose outside the scope of FRS 2. 

The amendments also incorporate guidance previously included in IC Interpretation 8 Scope of FRS 2 and IC Interpretation 11 FRS 2 – Group and Treasury Share Transactions. As a result, both these Interpretations shall be withdrawn on application of Amendments to FRS 2.


IC Interpretation 4 Determining whether an Arrangement contains a Lease

The Interpretation aims to provide guidance for determining whether certain arrangements are, or contain, leases that should be accounted for in accordance with FRS 117 Leases; it does not provide guidance whether such a lease should be classified as a finance lease or an operating lease. It clarifies that an arrangement, although does not take the legal form of a lease, is a lease when the fulfilment of the arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset.

This is the case if the purchaser has the right to operate or direct others to operate or control physical access to the asset. Another condition is that it is remote parties other than the purchaser will take more than an insignificant amount of the asset’s output and the price is neither fixed nor at current market price.


IC Interpretation 18 Transfers of Assets from Customers

This Interpretation is applicable to entities that receive items of property, plant and equipment (PPE) from their customers. In some industry, for example utilities and IT outsourcing, an entity may receive a fixed asset from its customers that must be used to provide the customers with ongoing access to a supply of goods or services.

The Interpretation is also applicable in cases where the entity receives cash from the customer that must be used to construct or acquire a PPE which then must be used by the entity to supply its customers with ongoing access to a supply of goods or services.


The transferor, in some cases, may or may not be the recipient of the goods or services.

The Interpretation clarifies that if such PPE meet the definition of an asset, it shall recognise it in accordance with FRS 116 Property, Plant and Equipment. The asset shall be measured initially at fair value and corresponding revenue shall be recognised in accordance with FRS 118 Revenue.


Technical Release 3 Guidance on Disclosures of Transition to IFRSs (TR 3)

Technical Release 3 Guidance on Disclosures of Transition to IFRSs (TR 3) is issued to provide guidance to entities in narrative disclosures in their annual reports on the changeover to International Financial Reporting Standards (IFRSs) in 2012 during the transition period towards the application of IFRSs. The objective is to help investors and other users of financial statements to better understand the transition process. TR 3 was exposed for public comments in December 2009 and respondents were generally supportive of the proposals contained in TR 3.

TR 3 contains several recommendations whereby entities that are required to apply IFRSs in 2012 are encouraged to provide users with appropriate and useful information during the transition phase from MASB Financial Reporting Standards (FRSs) to IFRSs for annual reports with financial periods ending on or after 31 December 2010. It prescribes the different milestones in the transition process and encourages entities to disclose the plans management would undertake in achieving successful transition and the impact of adoption of IFRSs in 2012.


Technical Release i-4 Shariah Compliant Sale Contracts

Technical Release i-4 Shariah Compliant Sale Contracts (TR i-4) is issued in response to requests for clarification on recognition and derecognition of the subject item in a Shariah compliant sale contract. Additionally, TR i-4 also provides guidance on the treatment of a financing element that may arise, and how to account for a Shariah compliant sale contract that is part of a series of transactions.

In a nutshell, TR i-4 requires entities to look at the provisions of MASB approved accounting standards for guidance on the treatment of Shariah compliant sale contracts. The Technical Release is effective for annual periods beginning on or after 1 January 2011 and earlier application is encouraged.

Note: Technical Releases are developed within the framework of the law and MASB approved accounting standards to provide additional guidance on the application of MASB's pronouncements.

The new pronouncements are available from MASB website (http://www.masb.org.my) or can be purchased in booklet form from MASB office.

Click here for the Notice of Issuance.


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For enquiries, please contact:
Malaysian Accounting Standards Board
Wisma UOA Pantai
Suites 5.02, Level 5
No. 11, Jalan Pantai Jaya
59200 Kuala Lumpur
Tel: 03-2240 9200
Fax: 03-2240 9300
Email: masb@masb.org.my