The Chairman of the Malaysian Accounting Standards Board (MASB), Raja Datuk Arshad Raja Tun Uda today announced the re-issue of MASB Exposure Draft 14 (Revised) Financial Reporting of Interests in Joint Ventures for public comment.
MASB ED 14 (Revised), when finalised as an MASB Standard, will supersede MASB Approved Accounting Standard, IAS 31 Financial Reporting of Interests in Joint Ventures.
The proposed revised Standard, with some exceptions, adopts the requirements of IAS 31 (Revised 1998). The objective of this proposed Standard is to reflect the effect on an investor's financial position and performance of its interest in joint ventures.
The main features of ED 14 (Revised) are:
It defines a joint venture as a contractual arrangement whereby two or more parties undertake an economic activity which is subject to joint control i.e. where no party is in a position to unilaterally control the economic activity and where two or more parties together have the capacity to dominate the making of major decisions.
Joint ventures may take the forms and structures of jointly controlled operations, jointly controlled assets or jointly controlled entities.
When preparing consolidated financial statements, a venturer is required to use the equity method to account for its interest in a jointly controlled entity. Use of the proportionate consolidated method is not permitted.
It requires a venturer to make specific disclosures about its interests in joint ventures and also disclose aggregate amounts of assets, liabilities, income and expenses related to interests in joint ventures.
The proposed Standard also deals with matters related to transactions between a venturer and a joint venture. Chairman's Statement
Upon issuance of MASB ED 14 (Revised), MASB Chairman Raja Datuk Arshad Raja Tun Uda said, "The issue of joint ventures as a vehicle for conducting business is becoming increasingly important, both domestically and internationally. Users of financial statements require information about such activities to be consistent and complete. For this reason the MASB has reconsidered the desirability of the proportionate consolidation method for reporting interests in joint ventures. As a result, the MASB has decided to remove the option of proportionate consolidation from the proposed Standard."
Whilst acknowledging that the revised approach represented a divergence from IAS 31, the Chairman stated that this approach leads to better, more consistent reporting and is in line with our Framework for the Preparation and Presentation of Financial Statements.
"It is also relevant to note that this approach is consistent with other national standard setters and expressed views of the G4+1. Further, application of this proposed Standard will lead to compliance with IAS 31. What the MASB has done is to narrow the choices of the method for reporting interests in jointly controlled entities," he said.
"It should be noted that MASB ED 14 (Revised), when adopted as a Standard, will mandate treatments and disclosures. Interested parties are, therefore, encouraged to review this proposed Standard and make comments thereon," he added.
For individuals and organisations interested to review and comment on the document, MASB ED 14 (Revised) Financial Reporting of Interests in Joint Ventures is available at:
Malaysian Accounting Standards Board
5.01-5.03, Fifth Floor, Wisma Maran
338 Jalan Tuanku Abdul Rahman
50100 Kuala Lumpur