MASB proposes amendments to 2 standards and issues 4 draft interpretations (17 November 2008)

The Malaysian Accounting Standards Board (MASB) has released two proposed amendments to Financial Reporting Standards (FRSs) and four draft accounting interpretations for public comments. The proposed amendments and draft interpretations are virtually identical to the International Accounting Standards Board (IASB) amendments to accounting standards and interpretations respectively.

In a statement issued today, MASB executive director Dr. Nordin Mohd Zain said, "This is the first series of exposure drafts issued after the announcement of Malaysia's convergence plan with IFRS by 2012. The draft interpretations being exposed are already effective internationally while the amendments to FRSs will be effective internationally next year. In addition to this, there are a number of IASB documents which will be effective 2009 internationally which we plan to progressively expose and adopt them in Malaysia between now and before our 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.

The proposed amendment to FRSs and draft Interpretations are: ED 58 Borrowing Costs, ED 59 Amendment to FRS 2 Share-based Payment: Vesting Conditions and Cancellations, [draft] IC Interpretation 11 FRS 2: Group & Treasury Share Transactions, IC Interpretation 12 Service Concession Arrangements, IC Interpretation 13 Customer Loyalty Programmes and IC Interpretation 14 FRS 119  - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.According to Dr Nordin, IFRSs are a robust set of standards which the IASB frequently reviews for improvements and provides clarification. Likewise, we will do the same for FRSs in Malaysia. Although some of these proposals are already effective internationally, being behind others need not necessarily be a disadvantage as we can learn from others who have applied them.
Unlike FRS 1232004 Borrowing Costs which allows entities to capitalise or expense its borrowing costs, ED 58 proposes to remove the option of immediately recognising as an expense borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. This proposed amendment will standardise Malaysia's accounting of borrowing costs with worldwide practices, noted Dr Nordin.
The proposed amendments to FRS 2 Share-based Payment clarify two issues which were absent in FRS 2. Firstly the proposed amendments clarified that vesting conditions are service conditions and performance conditions only and do not include other features of a share-based payment. Secondly, the proposed amendments clarified that cancellations by parties other than the entity are to be treated in the same way as cancellations by the entity.The [draft] Interpretations, issued by the IASB, this time will most likely affect entities in various industries.
Entities that are granted concession contracts for the supply of public services “ie roads and water supply and distribution facilities" will need to take note of [draft] IC Interpretation 12 which addresses how existing FRSs should be applied to account for the rights and obligations attached to the concession contracts. Unlike current practice, the Interpretation concluded that in some cases entities might receive a financial asset while in other cases it might receive an intangible asset or both, depending on the types of service concession arrangement, commented Dr Nordin.
Entities that grant loyalty award credits "such as points or travel miles" to customers will most likely be affected by [draft] IC Interpretation 13 which explains how they should account for their obligation to provide free or discounted goods or services to customers who redeem award credits. As there is divergent practice worldwide, the effect of the interpretation will ensure that obligations to supply customer loyalty awards are measured the same way, regardless of how the award credits are granted.
All entities that have group and treasury share transactions will find [draft] IC Interpretation 11 to be a helpful guidance as it clarifies how share-based payment transactions involving its own or another entity's equity instruments in the same group to be treated. For [draft] IC Interpretation 14, it will have little impact in Malaysia as most locally incorporated entities provide defined contribution plan rather than defined benefit plan to its employees, explained Dr Nordin.
Interested parties, including the business communities, are encouraged to study the proposed amendments and draft interpretations and provide feedback to MASB. The exposure period expires on 16 February 2009. The exposure drafts are available on MASB website at The public is encouraged to provide their comments electronically through ED Online on our website. Alternatively, copies of the draft interpretations are available free of charge from MASB office.



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