The Malaysian Accounting Standards Board (MASB) has set 1 January 2012 as the deadline for full adoption of IFRS.
Malaysia has followed IAS since 1978 and all the provisions of the international standards have been incorporated into Malaysian accounting standards since then. Explaining the recent history of Malaysian accounting standards, MASB executive director Nordin Zain told The Accountant the board was established in 1997 with the sole responsibility of issuing standards. “[The MASB] carried on the work that had been done prior to 1997 by professional accounting bodies. In our review of the international standards since 1997, we added more guidance to the standards and additional disclosures to meet the requirements of local laws.
|Nordin Zain, Malaysian Accounting Standards Board|
“In essence, our standards were ‘higher’ in terms of disclosure requirements compared to the IAS. Unfortunately, the world does not appreciate tweaking of the IAS, even if it was for better guidance for preparers or better information disclosure for users. So from January 2006, we decided to remove all of the provisions we had added to be word-for-word identical with the IFRS,” Zain said.
Since 2006, on a per standard basis, Malaysian standards have been identical to IFRS. The difference lies in standards the nation has not adopted. The two major ones are IAS 39 – Financial Instruments: Recognition and Measurement, which will be effective from 1 January 2010, and IAS 41 – Agriculture, which is being reviewed for adoption.
Zain said IAS 41 has attracted a lot of attention in Malaysia: “We are the largest palm oil producer in the world and the world’s third largest rubber producer. Certainly the standard has become significant to preparers and users. With that in mind, we have decided to give constituents more time to study the implications of the standard.” Zain said the MASB has not decided the date of implementation of the agriculture standard. It may be earlier than 2012; but not later.
“The plantation sector, auditors and directors have to prepare themselves for its eventual implementation,” he explained. “They have the expectation that the standard is coming and, therefore, know they have to be ready.”
When Malaysia made its accounting standards identical to IFRS in January 2006, it also adopted a two-tier reporting system. Malaysia’s 1,000-odd stock exchange-listed companies and about 20,000 subsidiaries, associates and joint-venture companies use the IFRS-based financial reporting standards.
The nation’s 700,000 private entities use Private Entity Reporting Standards (PERS), which are the version of IAS issued up until 2003. Following the 2012 announcement, these private entities will continue to use PERS until the MASB decides otherwise.
Zain said the MASB is awaiting the release of IFRS for Private Entities with great interest. If the board decides to adopt the simplified international standards, it will likely drop the PERS.
See: ‘Malaysia charts its convergence course’ for firms’ reaction to the MASB announcement and an adoption time line.