MASB Chairman's Statement 2011

2012 is a significant milestone in MASB’s history. It is the year that we have fully adopted the IFRS[1] into Malaysia. This was thanks to the hard work and dedication of the Financial Reporting Foundation (FRF), Malaysian Accounting Standards Board (MASB), and countless other stakeholders (including Malaysian regulators, working group members, practitioners and other relevant parties).

In order to achieve this milestone, 2011 was an extremely busy year for the Board; as it tried to close the remaining gaps between FRS[2] issued by the MASB, and IFRS and to minimise implementation issues. To accomplish this goal the Board undertook significant activities and initiatives, which are summarised into the following areas:

  • IFRS Convergence
  • Engaging various stakeholders locally and internationally
  • Sharing knowledge and experiences
  • The push for change and clarification in IFRS guidance
  • Seeking clarification for service concession arrangements
  • Islamic finance developments

These areas are elaborated on below. 

IFRS Convergence

IFRS convergence efforts accelerated in 2011, as the 2012 deadline drew near and on 19 November 2011, the Board issued the MFRS[3] Framework and a few new standards for the existing FRS Framework.

The MFRS Framework comprises all the standards issued by the IASB and is word-by-word in agreement with the IFRS Framework. The key difference between the FRS and MFRS framework is that the former excludes IAS 41 Agriculture and IFRIC 15 Agreements for the Construction of Real Estate but includes FRS 201 Property Development Activities (a locally developed standard on property development).

Although maintaining two separate frameworks is not ideal, the Board believed this was necessary, as they were optimistic about the possibility of forthcoming changes in accounting guidance related to valuing agriculture assets (particularly bearer biological assets – such as palm oil plantations) and the method for recognising revenue on sales of real estate. As background, the IASB is considering amending IAS 41 (as discussed in their Agenda Consultation Paper), and plans to issue a new standard for revenue recognition in 2012 (which will supersede IFRIC 15). Due to the potential for forthcoming changes, the Board decided that the MFRS Framework should be applied by all entities, other than private entities, as of 1 January 2012; with a noted exception for entities within the scope of either MFRS 141 or IC 15 (including its parent, significant investors and venturers) – termed ‘Transitioning Entities’. These Transitioning Entities have been given a one-year extension by the Board before adopting the MFRS Framework, i.e. their effective date to the MFRS Framework is 1 January 2013. This dual-framework approach allows a majority of entities to be IFRS compliant in 2012 – thus meeting our convergence objectives, while giving time to the agriculture and real estate industries to see where the IASB is headed on accounting standards significant to their respective industries.     

To achieve these objectives in 2011 a total of one hundred and thirteen (113) documents were issued: comprising of seventy five (75) technical pronouncements that are a word-for-word representation of IFRSs (which make up the MFRS Framework), fourteen (14) final FRSs, twenty one (21) draft technical pronouncements and three (3) Islamic Discussion Papers. 

Engaging various stakeholders locally and internationally

In my second year as Chairman, I reaffirmed my commitment to engaging both local and international stakeholders through participation in international groups, hosting and attending public forums and road shows, and publishing articles. In 2011, the MASB participated in five (5) technical public forums, five (5) road shows relating to convergence with IFRS, and published four (4) articles.

Despite this busy schedule, I also took every opportunity to participate in the various MASB working group meetings and attended external meetings with professional bodies such as Malaysian Institute of Accountants (MIA), Financial Reporting Standards Implementation Committee (FRSIC), Chartered Tax Institute of Malaysia (CTIM) and Suruhanjaya Syarikat Malaysia (SSM).

During the year, we held and participated in various events as follows: 

International participation

We were very active in international forums. We participated in the initial IASB Emerging Economies Group (EEG) meeting in Beijing, the National Standards Setters (NSS) meetings in New York and Vienna, the Asian-Oceanian Standard-Setters Group (AOSSG) meeting in Melbourne, the IFRS Regional Policy Forum in Bali, the World Standard Setters meeting in London, the 2011 Asia IFRS Conference in Melbourne and the Indonesian Institute of Accounts (IAI) Seminar in Bali. At many of these meetings, we were invited to lead discussions on IAS 41, IFRIC 15, and accounting for Islamic finance under IFRS.  

Of particular note is our involvement with the International Accounting Standards Board’s (IASB) EEG, which is primarily comprised of the emerging G20 countries: Argentina, Brazil, China, India, Indonesia, Korea, Malaysia, Mexico, Russia, Saudi Arabia, South Africa and Turkey. Although Malaysia is not a G20 country, we were given the privilege of being the only non-G20 country included as a founding member of this group given our active participation in standard setting. In addition to the EEG, we have also been invited to participate in the IASB Advisory Group on Fair Value Measurement.

In addition to our involvement with the IASB, we also worked tirelessly with the AOSSG member countries to keep up-to-date on the latest IFRS developments, commenting on all projects issued for exposure by the IASB, and recommending changes to existing standards when necessary. In some topics, such as Islamic finance and agriculture, we took the lead – heading the AOSSG Islamic Finance Working Group and co-leading the AOSSG Agriculture Working Group in determining how current and potential IFRS’s would impact Islamic finance transactions and agriculture, respectively. On others, like revenue recognition, we joined the other members of the AOSSG Revenue Working Group to determine how the latest changes to the IASB’s revised revenue exposure draft would affect constituents in the Asian-Oceanian region. 

Organising local forums

In 2011 we also hosted national events, including public forums, road shows and meetings with regulators and other stakeholders.

Our five (5) public forums focused on the following topics: IFRS 9 Financial Instruments, Islamic finance transactions, bond and sukuk valuation methodologies, biological asset valuations, and a comprehensive overview of IFRSs. The forum on the comprehensive overview of IFRSs was of particular importance, as the MASB invited Mr. Wayne Upton, the IASB’s Director of International Activities and Chairman of the IASB’s International Financial Reporting Interpretations Committee (IFRS IC), to present a high-level overview of each standard issued by the IASB to Malaysian constituents. This forum was primarily organised to give Malaysian accounting practitioners an opportunity to study IFRSs from the source, being able to ask clarifying questions and listen to a behind-the-scenes account on pertinent facts on each standard.

In addition to our public forums, the MASB held five (5) road shows that focused on Convergence initiatives, given to various accounting associations and universities throughout Malaysia. These road shows were designed to increase awareness of Convergence in Malaysia – from practitioners who will implement the MFRS Framework to academics who train our future generations of accountants.  To reach a wider audience, in addition to Kuala Lumpur, the MASB travelled to Johor and Penang to involve constituents in other regions within the country.

All of our local forums were well received; participants were engaged in understanding the MASB-approach to IFRS Convergence, asking how these changes affect their companies and situations so they could better prepare for implementation of the MFRS Framework. 

Sharing knowledge and experiences

One of our goals of 2011 was to increase our presence globally. We undertook this initiative in a three-pronged approach: (1) meeting with regulators and standard setters outside of Malaysia, (2) publishing articles for a global audience and (3) presenting at and attending international forums.

We travelled to Dubai with senior members of our staff to meet with the accounting standard setter and regulating bodies of the Dubai Financial Services Authority (DFSA). Here, we took the opportunity to represent the AOSSG in promoting full IFRS compliance within the region – presenting the AOSSG’s research paper on Islamic finance (in which we were the primary author) that outlined tension points in applying IFRS to Islamic finance transactions. We also took the time to understand the accounting issues faced by the DFSA, especially in juggling the full-adoption of IFRS and current regulatory mandate that requires Islamic financial institutions to follow accounting standards published by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). 

The MASB also hosted a delegation of Senior Government Officials from Turkmenistan. One of the goals of their trip was to get a better understanding of Malaysian’s financial regulatory framework, including its push towards IFRS compliance.  As such, we organised a detailed presentation of the steps the MASB has taken since 2008 to make IFRS convergence a reality.

The MASB also published four (4) articles in 2011.  The first three (3) are articles authored by Professor Tan Liong Tong, the project manager of the MASB Consolidation Working Group. The MASB commissioned these articles to be drafted to give plain-language explanations of the recognition and measurement principles found in the IASB’s revised consolidation standard, and proposed standards on leases and revenue recognition. In addition to the three aforementioned articles, the Islamic finance team published an article on Corporate Social Responsibility (CSR) Reporting in a leading accounting magazine in Pakistan. This article linked the aims of CSR Reporting with the social responsible values in Islam – highlighting that CSR Reporting can provide a methodology for Islamic-minded companies to communicate to stakeholders how they uphold Islamic principles. 

Thirdly, we presented and attended numerous international conferences, as discussed in the section on International participation, above. 

The push for change and clarification in IFRS guidance

In 2011 the IASB exposed multiple pronouncements and released numerous standards. The exposed guidance includes consolidation (investment entities), financial statement presentation, hedge accounting, impairment, and revenue recognition. Standards finalised in 2011 covers disclosures related to asset and liability offsetting, consolidation, employee benefits, fair value measurement, and joint arrangements.  With so many topics, most, if not all, industries within Malaysia will be affected by one or more of these changes. As such, we encouraged our constituents to actively participate in the due process of the IASB. Here at the MASB, we primarily involved our various working group members to gain insights into the needs and concerns that should be raised to the IASB (as they relate to the proposed and final standards issued). In all, the MASB issued twenty (20) IASB draft pronouncements for public comment and reviewed sixteen (16) IASB draft documents, submitting comment letters to the IASB within the due date.

For the first time ever, in 2011 the IASB also issued an Agenda Consultation paper – which essentially asked its constituents to comment on which projects the IASB should focus on in the coming years. This we felt was helpful to our cause, as Malaysia has been working diligently for years to drive changes in the accounting guidance related to agriculture and real estate.  As such, we took this opportunity to rally support from both Malaysian companies, and entities in other jurisdictions; which were then forwarded to the IASB.


Specific to agriculture, the Secretariat continued to lobby for changes in IAS 41 in all international arenas – specifically asking to have separate measurement requirements for bearer biological assets, such as palm oil plants. As this topic is extremely important to many Malaysian agricultural entities, the MASB wanted to wholeheartedly support any efforts to get revisions to the standard. We are happy to note that our approach has shown some positive outcomes. Chiefly, IAS 41 is included in one of the possible projects under the IASB Agenda Consultation paper that was exposed for comment. As stated above, the MASB took the initiative to get as many entities as possible to request for the agriculture project to be added to the IASB’s agenda. The IASB expects to develop a strategy for its agenda by the end of 2012.

We then went a step further, refining our Issues Paper on IAS 41, twice for deliberation at NSS (which were presented at its meeting in Rome and in New York in September 2010 and March 2011 respectively) and another was presented at the AOSSG 3rd Annual meeting in Melbourne in November 2011. All the updated versions were submitted to the IASB for consideration. The main purpose for submitting an Issues Paper to the IASB was to make it easier for the Board to not only understand our concerns, but see the potential solution, which ideally would minimise staff time to making amendments and thus increase the likelihood of project adoption.

Real estate

With regards to real estate, some in Malaysia believe that IFRIC 15, as written, may lead to the prohibition of using the percentage-of-completion method for local real estate development sales. The MASB wanted to seek clarification using Malaysian-specific facts, and as such was successful at getting the IASB interpretation arm, IFRS IC, to re-open the issue of what constitutes ‘continuous transfers of control’ in IFRIC 15 (i.e. does the Malaysian model meet the terms to be considered ‘continuous transfers of control’). This was a unique accomplishment as the IFRS IC had rejected twice the request made by others.

The IFRS IC in its November 2011 meeting discussed the matter but could not reach a consensus. As such they decided to seek the IASB guidance on the matter, especially since they did not want to publish an interpretation that could contradict with the revised ED on Revenue Recognition. The IASB in February 2012 considered Malaysia’s real estate fact patterns and concluded that a careful assessment needs to be made of the facts and circumstances of individual transactions when applying IFRIC 15 and that those facts and circumstances may vary considerably between jurisdictions. This difference in facts and circumstances could result in different outcomes when assessing real estate transactions in different jurisdictions. In the meeting the IASB also considered whether IFRIC 15 should be withdrawn but decided to retain IFRIC 15 because continuous transfer is specifically addressed in its exposure draft.

In our view, the revised Revenue Recognition ED would allow the percentage-of-completion method for most sale transactions within the Malaysian real estate industry but it remains to be seen if the Revenue Standard will be issued in this form. 

Seeking clarification for service concession arrangements

Finally, the Secretariat persuaded the IFRS IC to revisit the issue on amortisation of service concession assets (IFRIC 12 Service Concession Arrangements), as their previous deliberations in November 2009 and January 2010 were not conclusive. Specifically, some entities within Malaysia wanted to know if using revenue as a base for amortisation is allowable under IFRS. IFRS IC made it clear at its meeting in November 2011 that the use of the revenue base amortisation method was not acceptable and further requested the staff to propose amendment to IAS 38 Intangible Assets as part of the IFRS Annual Improvements Project.

Islamic finance developments

As a final point, promoting the adoption of IFRS within Islamic banking has been of particular importance to the MASB. In working towards this goal, in addition to visiting the DFSA and regularly commenting on IASB proposals (from an Islamic finance perspective), both of which are discussed above, we spearheaded an Islamic finance survey and issued three Discussion Papers (DPs) related to Islamic finance topics.

The survey, issued by the AOSSG Islamic Finance Working Group, was designed to gain for insights on how prevalent Islamic finance is and determine what accounting standards are currently being applied to those transactions, on a country-by-country basis. Our goal was to better understand whether there is a separate set of accounting standards used to account for Islamic transactions in other jurisdictions; especially when the responding country has stated convergence with IFRS.

Additionally, the MASB worked vigorously to publish three (3) DPs within the year, on the topics of takaful (insurance), sukuk (bonds and asset securitisations) and Shariah compliant profit-sharing contracts (joint ventures and partnerships). With the push towards convergence, the MASB did not want to leave ambiguity around how IFRS should be applied to some of the most common Islamic finance transactions. Although these are still in DP phase, and not technically part of the binding MFRS Framework, we feel their release will get Islamic finance practitioners to start thinking about all the IFRS considerations that need to be made when fully-adopting IFRS.


It is clear that 2011 was a busy year. Much was accomplished towards our goal to Converge and we will, in 2012, refocus our efforts on the remaining issues.

With the release of the MFRS Framework, and the one-year extension of the FRS Framework, the main tasks of 2012 include assisting all stakeholders in the adoption of the MFRS Framework and monitoring the progress on agriculture and real estate accounting guidance. In addition to convergence initiatives, we also want to further promote the application of IFRS to Islamic finance transactions across the globe.

Finally, I want to sincerely thank all the staff who have contributed their time and resources to ensuring Malaysia would be IFRS compliant on 1 January 2012. The Board could not have achieved its objectives without their efforts.  I am also thankful to the FRF members for their continued guidance and direction in their independent oversight capacity. Finally, I would like to commend the efforts of the Malaysian regulators, professional bodies, academia, professional firms, the commercial sector, members of the Board and Ministry of Finance for continuing their commitment to support the efforts of the MASB and make IFRS compliance within Malaysia a reality. 

[1] IFRS – International Financial Reporting Standards

[2] FRS – Financial Reporting Standards

[3] MFRS – Malaysian Financial Reporting Standards



Malaysian Accounting Standards Board