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MASB issues 3 standards and 2 interpretations (17 November 2008)

MASB today announced the issuance of 3 new Financial Reporting Standards (FRSs) and 2 Interpretations related to financial instruments.

The new FRSs and Interpretations are FRS 4 Insurance Contracts, FRS 7 Financial Instruments: Disclosures, FRS 8 Operating Segments, IC Interpretation 9 Reassessment of Embedded Derivatives and IC Interpretation Interim Financial Reporting and Impairment. The documents, identical to international standards, were exposed to the public between 2006 to 2007 and will take effect from 1 January 2010 except for FRS 8 which will be effective on or after 1 July 2009.
 
In a statement issued today, MASB executive director Dr. Nordin Mohd Zain said, "This is the first series of standards issued after the announcement of Malaysia's convergence plan with IFRS in 2012. There are a number of IASB documents which will be effective 2009 internationally and we plan to progressively expose and adopt them in Malaysia between now and 2012 deadline."
 
In August this year, the MASB together with its trustees, the Financial Reporting Foundation, announced its plan to bring Malaysia to full convergence with International Financial Reporting Standards (IFRS) by 1 January 2012. This move will help place Malaysia's capital market and companies on the same level playing field with the international markets.
 
"Four out of the five documents are closely linked to FRS 139 Financial Instruments: Recognition and Measurement (FRS 139) and consequently the Board decided they should have the same effective date as FRS 139, which is 1 January 2010", said Dr Nordin, explaining the reason of the chosen date.
 
With regard to FRS 4, Dr Nordin explained that it is an interim standard before the IASB completes Phase II in 2011.
 
FRS 7 and FRS 8 are standards that will enhance transparency in ways companies manage their resources as well as their management of risks in financial instruments, said Dr Nordin. With enhanced disclosures, investors will be able to make informed judgement about the risks and returns in an entity and will be able to see an entity through the eyes of management. FRS 8 is expected to reduce cost of reporting segment information as it uses information that is internally available and generated for management's use, noted Dr Nordin. FRS 101 Presentation of Financial Statements is amended to introduce requirements for disclosures about an entity's capital.
 
IC Interpretation 9 addresses the questions of whether an embedded derivative has to be reassessed after initial recognition. The interpretation concluded that reassessment is forbidden unless the instrument terms changed and affects its cash flows significantly.
 
IC Interpretation 10 addresses the issue of whether or not an entity could subsequently reverse impairment losses on goodwill and investments in equity instruments and financial assets carried at cost recognized in an interim period. It concluded that an entity shall not reverse such impairment losses. Dr Nordin explained, "Reversal of impairment losses on goodwill is not allowed because of the complex nature of the item itself. Moreover it is often difficult to separate the increase of goodwill as recovery of impairment losses from increase in internally generated goodwill. As for investments in equity instruments and financial assets carried at cost, the IASB could not find an acceptable way to differentiate reversals of impairment losses from other increases in fair value. Therefore, prohibiting reversals was the only appropriate solution."
 
The new FRSs and Interpretations are available from MASB website (http://www.masb.org.my) or can be purchased in booklet form from MASB office.
 
END
 
For enquiries, please contact:
Dr Nordin Mohd Zain
Executive Director
Malaysian Accounting Standards Board
Wisma UOA Pantai
Suites 5.2, Level 5,
No. 11, Jalan Pantai Jaya
59200 Kuala Lumpur
Tel: 03-2240 9200
Fax: 03-2240 9300
Email: masb@masb.org.my