MASB Statement of Principles 1 Exempt Enterprises Summary

MASB Statement of Principles 1₂₀₀₄ Exempt Entities

The objective of MASB SOP 1₂₀₀₄, Exempt Entities (SOP 1₂₀₀₄) is to provide guidance to relevant parties as to the applicability to an entity of approved accounting standards issued by MASB as per Section 26D of the Financial Reporting Act 1997.

This Statement addresses the circumstances when an incorporated entity is exempted or is required to comply either partially or wholly with the accounting standards issued by the Board.

Highlights:

1.	An exempt entity is an entity that:
	(a)	does not have public accountability;
	(b)	all of its owners are members of the entity's governing body; and
	(c)	is not large.
2.	Public accountability can de deemed to exist:
	(a)	where it is likely that there may be sufficient stakeholders who base their resource allocation decisions upon their knowledge of the entity;
	(b)	when an entity possesses certain authority or enjoys a particular position in society; or
	(c)	if the parent or ultimate controlling entity has the coercive power to tax, rate or levy to obtain public funds.
3.	Where every owner of an entity is also a member of an entity's governing body, there is an absence of accountability relationship between the governing body and the owners.
4.	An entity is large if it exceeds any two of the following:
	(a)	an annual gross revenue of RM10 million;
	(b)	gross assets of RM 5 million at end of the financial year; and
	(c)	an average of 50 employees for the financial year.
	For any entity, other than a newly incorporated entity, the condition must have been satisfied in two of the last three preceding years. When an entity ceases to be large, the entity does not qualify as an exempt entity until the entity ceases to be large for two consecutive reporting periods.
5.	The exemptions granted, whether full or partial, are on a standard by standard basis and this would be stated in the respective standards.
6.	Effective Date
	This Statement shall be adopted as soon as practicable but in any event must be used in the application of approved accounting standards for the preparation of financial statements as per the effective date(s) of those individual standards.