International Accounting Standards

- MASB issued a statement plan for full

convergence of FRSs applicable in Malaysia with
IFRSs issued by IASB by the year 202 for all
entities other than private entities!
- MASB participates actively in the IASB"s due
process at an early stage of standard development!
- #his is important in ensuring that the standards
adopted are consistent with international best
practice as well as regulatory re$uirements in
Trustees
Are accountable to the Monitoring Board of public authorities
and are entrusted with the governance and oversight of the
activities underta%en by the IAS& Foundation and IASB!
Reviewed and assessed annually IASB strategy!
Responsible for safeguarding the independence of the IASB'
ensuring the financing of the organi(ation and the
appointment of the IASB members!
)romote the wor% of the IASB and the application of IFRSs!
The International Accounting Standards Board
(IASB)
- An independent and privately*funded accounting
standard*setting body!
- is responsible for the development and publication of
IFRSs' including the IFRS for SM+s and for
approving Interpretations of IFRSs as developed by
the IFRS Interpretations &ommittee
The objectives of the IASB:
to develop' in the public interest' a single set of
high $uality' understandable and enforceable
global accounting standards that re$uire high
$uality' transparent and comparable information in
financial statements and other financial reporting to
help participants in the world"s capital mar%ets and
other users ma%e economic decisions,
to promote the use and rigorous application of
those standards
to ta%e account of' as appropriate' the special
needs of small and medium*si(ed entities and
emerging
economies
#o bring about convergence of national accounting
standards and IFRSs to high $uality solutions!
Main features of the IASB structure are as
follows:
i! #he IAS& Foundation -also %nown as IFRS
Foundation. has two main bodies' the #rustees
and the IASB! #he overall ob/ective of the IAS&
Foundation is to develop a set of high $uality'
understandable' enforceable and globally
accepted financial reporting standards through its
standard setting body' the IASB!
ii! #he IASB is responsible for setting accounting
standards!
iii! Standards Advisory &ouncil and IFRS
Interpretations &ommittee are two other bodies
within the IASB structure!
Private Entities
* )rivate entities in Malaysia are e0empted from applying FRS
starting from the year 2001!
* #hese companies may continue to apply the MASB standards
referred to as )rivate +ntity Reporting Standards -)+RS.!
Private entity is a private copany incorporated under the
!opanies Act "#$% which:
is not re$uired to prepare or lodge any financial statements
under any law administered by the Securities &ommission or the
Ban% 2egara Malaysia
is not a subsidiary or associate of' or /ointly controlled by' an
entity which is re$uired to prepare or lodge any financial
statements under any law administered by the Securities
&ommission or the B2M
A private company is defined in Section 3-. of &ompanies Act
413 as a company having a share capital and incorporated as a
private company! At the same time' its M5A or A5A states the
following6
i! restricts the right to transfer its shares
ii! limits to not more than fifty the number of its members
iii! prohibits any invitation to the public to subscribe for any shares
in or debentures of the company
iv! )rohibits any invitation to the public to deposit money with the
company for fi0ed periods or payable at call' whether bearing
or not bearing interest!
)rivate entities shall apply either )+RS in their entirety or FRS in
their entirety in the preparation and presentation of their financial
statements!
!onvergence of Accounting Standards
#he top global capital mar%ets that re$uire or permit the use of IFRS are
7nited 8ingdom' France' 9ermany' :ong 8ong' Spain' Swit(erland and
Australia!
7nited States of America and ;apan are considering converging with IFRS
while 8orea' &anada and India have announced their plans for convergence
by 20!
In Malaysia' all entities that are re$uired to comply with approved accounting
standards under the Financial Reporting Act 44< will be re$uired to prepare
and present their financial statements in accordance to the IFRSs' e0cept for
private entities!
Benefits of !onvergence
i& Investors
- Increase comparability of financial information across borders as well as
among companies nationally in ma%ing investment decisions!
- Increase transparency = greater understandability!
ii& Multinational copanies
- Better access to foreign capital mar%ets!
- Increase credibility of domestic capital mar%ets to foreign capital providers!
- Facilitate compliance with reporting re$uirements of foreign stoc%
e0changes!
- Facilitate preparation and presentation of financial statements as
companies are only re$uired to maintain one set of boo%s prepared in
compliance with IFRSs!
- >ower cost of capital to companies!
iii& 'egulatory bodies
- +ase of regulation of securities mar%et as convergence increases
regulatory acceptability of financial information provided by mar%et
participants!
- Reduced costs of national standard setters!
- Facilitate calculation of ta0 liability for companies receiving income from
international sources!
- #ransfer of accounting staffs across borders as similar accounting practices
e0isted worldwide!
- )romote economic growth within region practicing common accounting
practices!
!hallenges of !onvergence
- Application of similar IFRSs may not be appropriate as the purpose of
financial reporting differs across countries! For e0ample' in countries where
the legal system is based on Roman >aw' the financial statements are
prepared for ta0 assessment while in other countries the information is for
investor decision*ma%ing!
- ?ifferent legal system can hinder development of certain accounting
practices!
- ?ifferent in culture may affect variations in ob/ectives of accounting systems!
- >ac% of professional e0pertise due to lac% of strong accountancy bodies in
certain countries!
- ?ifferent emphasis on user groups! For instance' investors and creditors are
important in the 7SA' employees are important in +urope while in many +ast
Asian countries where corporate ownerships are more concentrated' there
are lower investor protection!
- ?evelopment of standards and principles in developing countries are not at
par with the developed countries! #his could slower the rate of full
convergence in some countries!
- 2ational standards in some countries are not based on a conceptual
framewor% of accounting while IFRSs are!
IASB (ue Process
! Setting the agenda !
2! )lanning the pro/ect !
@! ?eveloping and publishing the discussion paper !
A! ?eveloping and publishing the e0posure draft !
3! ?eveloping and publishing the standard!
1! After the standard is issued ' the IASB will hold regular
meetings with various parties in order to understand issues
related to the practical implementation of the IFRS and any
impact of the IFRS!