MASB publishes a new optional Standard, MFRS 19 and Amendments to the Classification and Measurement of Financial Instruments (15 July 2024)

The Malaysian Accounting Standards Board (MASB) has today issued the following pronouncements for application in Malaysia: 

• MFRS 19 Subsidiaries without Public Accountability: Disclosures

• Amendments to the Classification and Measurement of Financial Instruments (Amendments to MFRS 9 Financial Instruments and MFRS 7 Financial Instruments: Disclosures)

These pronouncements are respectively word-for-word IFRS 19 Subsidiaries without Public Accountability: Disclosures and Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures), issued by the International Accounting Standards Board (IASB). 

Eligible subsidiaries under the MFRS Framework have the option to apply MFRS 19, a disclosure-only Standard. If the eligible subsidiary elects to apply MFRS 19, its financial statements shall as part of the statement of compliance with MFRS Accounting Standards state that it has applied MFRS 19. These financial statements shall also, as part of the statement of compliance with IFRS Accounting Standards state that it has applied IFRS 19.

ABOUT THE PRONOUNCEMENTS 

MFRS 19 Subsidiaries without Public Accountability: Disclosures 

MFRS 19 is an optional, disclosure-only Standard which permits eligible subsidiaries to provide reduced disclosures when applying MFRS Accounting Standards in their financial statements. The eligible subsidiary that applies MFRS 19 is required to apply the requirements in the other MFRS Accounting Standards for recognition, measurement and presentation requirements. 

Subsidiaries are eligible to apply MFRS 19 if they do not have public accountability and their parent company applies IFRS Accounting Standards in their consolidated financial statements. A subsidiary does not have public accountability if it does not have equities or debt listed in a public market (or is in the process of issuing such instruments for trading in a public market) or does not hold assets in a fiduciary capacity for a broad group of outsiders ^[1].

MFRS 19 is available for use by eligible subsidiaries for reporting periods beginning on or after 1 January 2027 and early application is permitted.

Amendments to the Classification and Measurement of Financial Instruments (Amendments to MFRS 9 Financial Instruments and MFRS 7 Financial Instruments: Disclosures)

These narrow scope amendments clarify the classification and measurement requirements in MFRS 9, including the 

• classification of financial assets with environmental, social and corporate governance (ESG) and similar features. The amendments clarify how the contractual cash flows on such loans should be assessed, specifically the assessment of interest focuses on what a company is being compensated for, rather than how much compensation it receives. Nonetheless, the amount of compensation the company receives may indicate that it is being compensated for something other than basic lending risks and costs.
  
  
• settlement of liabilities through electronic payment systems. The amendments clarify the date on which a financial asset or financial liability is derecognised. In addition, the amendments permit a company to derecognise a financial liability before it delivers cash on the settlement date if specified criteria are met. 

New disclosure requirements are also introduced in the amendments to MFRS 7 relating to investments in equity instruments designated at fair value through other comprehensive income and financial instruments with contingent features that do not relate directly to basic lending risks and costs.

The need for these amendments was identified as a result of the post implementation review of the classification and measurement requirements of MFRS 9.

The Amendments is effective for annual reporting periods beginning on or after 1 January 2026. Earlier application is permitted. 

The “Notice of Issuance” can be downloaded here. 

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