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New Draft IC Interpretations (31 May 2006)

The Malaysian Accounting Standards Board (MASB) today issues 3 Draft IC Interpretations and invites the public to give feedback on the proposals. 

They are:
 
  • IC Interpretation 6: Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment
  • IC Interpretation 7: Applying the Restatement Approach under FRS 1292004 Financial Reporting in Hyperinflationary Economics
  • IC Interpretation 8: Interpretation 8 Scope of FRS 2 
 
The 3 IC Interpretations are identical to IFRIC 6, IFRIC 7 and IFRIC 8 respectively.
 
IC Interpretation 6
 
IFRIC 6 was issued following requests to IFRIC to provide guidance on how IAS 37 Provisions, Contingent Liabilities and Contingent Assets should be applied of to waste management costs under a European Union's Directive on Waste Electrical and Electronic Equipment. 
 
The IC concluded that the event giving rise to the liability for costs of such historical waste, and so its recognition, is participation in the market during a measurement period, i.e. a period in which market shares are determined for the purposes of allocating waste management costs. 
 
Introducing the Draft IC Interpretation 6, Dr. Nordin, the Executive Director of MASB commented that, "This IC Interpretation would be useful for Malaysian companies that have operation overseas which are subject to this Directive."
 
IC Interpretation 7
 
IC Interpretation 7 provides guidance on how an entity should restate its financial statements in the first year it identifies the existence of hyperinflation in the economy of its functional currency and how to account for opening deferred tax items in its restated financial statements. 
 
The IC concluded that in the period in which the economy of an entity's functional currency becomes hyperinflationary, the entity shall apply the requirements of FRS 129 as though the economy had always been hyperinflationary. 
 
Dr. Nordin said, "This IC Interpretation would complement the guidance provided in the existing FRS 129 Financial Reporting in Hyperinflationary Economy."
 
IC Interpretation 8
 
IC Interpretation 8 clarifies that the accounting standard FRS 2 Share-based Payment applies to arrangements where an entity makes share-based payments for apparently nil or inadequate consideration. 
 
The IC concluded that if the identifiable consideration given appears to be less than the fair value of the equity instruments granted or liability incurred, this situation typically indicates that other consideration has been or will be received. FRS 2 therefore applies. 
 
Dr. Nordin explained that "This IC Interpretation provides clarification to those situations where companies give their shares or rights to shares to parties other than employees from a particular section of the community, for example the disadvantage individuals, as a means of enhancing its corporate citizen."

Comment Period
Interested parties are welcome to give comments on the Draft IC Interpretations to the MASB by 31 July 2006. Copies of the Draft IC Interpretations are available free of charge at:

Malaysian Accounting Standards Board
Suites 5.01-5.03, 5th Floor
No. 338, Jalan Tuanku Abdul Rahman
50100 Kuala Lumpur
Tel: 03-2715 9199
Fax: 03- 2715 9212
E-mail address: masb@masb.org.my
Alternatively, the proposed Interpretations are also available on MASB website at here. The public may also provide their comments electronically through ED Online on our website.