MASB: FRS Now Optional for Private Companies (23 February 2006)

Financial Reporting Standards are now optional for private companies with the announcement of two sets of accounting standards by the Malaysian Accounting Standards Board (MASB). This will bring cheer to a few thousands of small and medium sized entities (SME) in Malaysia.

The two sets of standards are Financial Reporting Standards (FRS) and Private Entity Reporting Standards (PERS). FRS are for companies such as publicly listed companies, their subsidiaries, associates, or companies jointly controlled by them. PERS are for private entities.
In a statement issued today, Dato' Zainal Abidin bin Putih, Chairman of MASB said, "PERS are meant primarily for private companies incorporated under the Companies Act 1965. The Board recognised that privately-run companies have different information needs. The Board is also sensitive to the burden of compliance by these companies if they were to comply with international financial reporting standards." 
"It was a conscious decision by the Board to have two separate sets of accounting standards, one exclusively for private entities", he added.
Elaborating on the Board's position, Dr Nordin Mohd Zain, Executive Director of MASB, said, "Essentially, PERS are MASB Standards issued by the Board prior to 1 January 2005 except for the removal of certain Standards. In addition, PERS include an amendment regarding the applicability and compliance with the standards effective 1 January 2006." 
"With PERS, private entities are not affected by the revisions and the requirements of the new standards issued under the FRS regime," he added.
"Instead, private entities are given the option to use FRS, which is equivalent to International Financial Reporting Standards, or to use PERS. If an entity chooses FRS or PERS, it must comply with the full set of FRS or PERS respectively in their entirety." 
Dr Nordin also indicated that the Board has embarked upon a more comprehensive review of the reporting needs of private entities in line with the review by the International Accounting Standards Board (IASB) on accounting for small and medium-sized entities. 
Elaborating on the announcement, Dato' Zainal said, "Entities other than private entities are required to comply with the full set of FRS including their interpretations beginning 1 January 2006 except for FRS 117 Leases, FRS 124 Related Party Disclosures and FRS 139 Financial Instruments: Recognition and Measurement which will be effective for financial statements with annual periods beginning on or after 1 October 2006."