The MASB has had an excellent year in which many of our goals were achieved. Our hard work finally resulted in us resolving the last of the issues preventing all listed companies in Malaysia being able to adopt IFRS. The highlight of the year was the decision achieved on determining the date the Transitioning Entities exemption would expire marking the point where all listed companies could adopt IFRS following the resolution of issues on agriculture, real estate and service concession assets. In addition, it was also a ground breaking year for the private entities or also known as small and medium enterprises (SMEs), in which we have finally substituted the outdated PERS Framework with the Malaysian Private Entities Reporting Standard, MPERS. This new framework is based on IFRS for SME which is an international framework.
To accomplish these goals the MASB undertook a significant number of activities and initiatives, which can be summarised into the following areas:
1. Transitioning Entities and the MFRS Framework
2.Engaging various stakeholders locally and internationally
3. Sharing knowledge and experiences
4.IFRS developments of particular interest to Malaysia
6.Moving forward with MPERS
These areas are as outlined below.
Transitioning Entities and the MFRS Framework
During the year under review, following the issuance of MFRS 15 Revenue from Contracts with Customers and Agriculture: Bearer Plants (Amendments to MFRS 116 and MFRS 141), the MASB finally announced the mandatory date to changeover to MFRS Framework for the Transitioning Entities. The MASB concluded that, with the issuance of MFRS 15 and the amendments for Bearer Plants, all Transitioning Entities should be required to adopt the MFRS Framework by 1 January 2017 even though the effective date of new accounting treatment for bearer plants is a year earlier.
The MASB believes that the prescription of a single date to changeover is pragmatic as it would alleviate the potential complexity in preparing consolidated financial statements by Transitioning Entities that are involved in both real estate and agriculture industries. It would also be rational to accord the agriculture industry the same preparation timeframe as the real estate industry due to the fact that both industries were granted the transitional arrangement at the same time.
Nonetheless, Transitioning Entities are encouraged to consider early adoption of the MFRS Framework, especially those that are neither significantly affected by MFRS 15 or the Bearer Plants amendments.
In accordance with the MASB due process, in 2014, we issued a total of thirty-six (36) documents, comprising twenty-six (26) final and ten (10) draft technical pronouncements. The twenty-six (26) final pronouncements comprised thirteen (13) documents issued under the MFRS Framework, eleven (11) documents issued under the FRS Framework, one (1) MFRS Glossary and one (1) document under the MPERS.
Engaging various stakeholders locally and internationally
In 2014, we continued to reach out to our local and international stakeholders. We have held a multitude of outreach activities, hosting and attending various international and local conferences, public forums, working group meetings and teleconferences. MASB participated in various events – nine (9) roundtable meetings with Audit Committee chairmen of Public Listed Companies, one (1) public workshop, two (2) industry-specific dialogues on agriculture and real estate, one (1) special session on Financial Instruments, one (1) session with Audit Committee chairmen organised by Bursa Malaysia, two (2) joint IASB-MASB outreach meetings on Application of IFRS to Islamic Financing Transactions, one (1) education session via video conference on IASB Discussion Paper on Reporting the Financial Effects of Rate Regulation and one (1) Islamic Finance Master Class with academicians.
We also had eleven (11) sessions with academia whereby we briefed the students from local institutions on the MASB’s role and responsibilities as well as on reporting framework in Malaysia.
In addition to the events listed above, the MASB staff also participated in eight (8) forums organised by others, as well as in another eight (8) international and regional meetings. During the year, we also hosted three (3) visits by the delegates from the Mongolian government, National Bank of Cambodia and the Accounting and Auditing Standards Board of Bhutan.
I have represented the MASB in serving as a speaker and presenter in a number of public events. These include the SSM 2014 Conference, International Malaysia Law Conference and IFRS International Seminar.
For the current year, we plan to hold more public forums that would address the topics on financial instruments and revenue – which I believe would help to enlighten the constituents in light of the Standards which were issued this year relating to these topics.
We believe that maintaining our presence at the global level is vital in order to ensure that our voice is heard. It is also an important platform where we can channel our views and concerns as well as to listen to inputs from delegates from all over the world. We have continued to participate in these forums as an active member and are heartened by the recognitions that we have received for our contributions.
This year, we continued to participate in many international and regional events. These included the 8th EEG Meeting in Jakarta, the 2nd Meeting of the IASB Consultative Group on Shariah-compliant Instruments and Transactions in Kuala Lumpur, World Standard-Setters Meeting in London, the 6th Annual AOSSG Meeting in Hong Kong, IFASS Meeting in London and the 8th IFRS Regional Policy Forum in New Delhi. We were also invited to attend the IASB 1st Research Forum in Oxford University, besides participating in the IASB-AOSSG private meeting in Tokyo via video conference.
Our involvement with the AOSSG member countries also kept going. We diligently took part in offering comments and recommendations on all projects issued for exposure or on changes to existing standards by the IASB, and played a leadership role specifically in AOSSG Working Groups on Agriculture and Financial Reporting relating to Islamic Finance. We have also provided inputs to other AOSSG Working Groups of which we are a member, including Acquisitions & Reporting Entity Issues, Disclosure Initiative, Emission Trading Schemes, Fair Value Measurement, Financial Instruments, Insurance Contracts, Leases, Rate Regulated Activities and Conceptual Framework.
Organising local forums
One of the major local events that we organised this year was the collaboration with the IFRS Foundation and MIA to provide a workshop. The IFRS for SMEs Train-the-Trainers Workshop was designed to provide private entities an insight of the requirements of the IFRS for SMEs and how to deliver training on this subject. This Workshop was timely given that during the year, the MASB issued the new financial reporting framework for private entities, the MPERS, which is closely aligned with the IFRS for SMEs issued by the IASB. This Workshop was also meant to help those who seek to develop their knowledge and capacity to provide subsequent training on MPERS or IFRS for SMEs to other parties. We were very pleased that the Workshop was well received. It was facilitated by the Director of IFRS Education Initiative, Mr. Michael Wells and IASB Board member & Chairman of the SME Implementation Group, Mr. Darrel Scott.
Another highlight of the year was the roundtable sessions on financial reporting with Audit Committee Chairmen of PLCs. We acknowledged the important role of the Audit Committee especially with the adoption of the MFRS and so organised the roundtable sessions with the help of the Securities Commission. The purpose of the roundtable was to enlighten the Audit Committee Chairmen on the current financial reporting issues and also to share the changes on the horizon. The roundtable sessions were held for various industries in Malaysia such as financial services, insurance, real estate, plantation, manufacturing, telecommunication, energy, transportation, construction, retail, food and healthcare and the ACE market. These sessions had received good feedback from the participants.
Sharing knowledge and experiences
Further to the series of events held during the year, we have also managed to publish three (3) articles and contributed inputs to five (5) articles published by others. The articles written focused on the following areas - accounting and reporting for Insurance Contracts; a comparative analysis of PERS, MPERS and MFRS Frameworks; and a review of IFRS 15 Revenue from Contracts with Customers. We provided our input for articles published by the Malaysia SME newspaper, The Edge Daily and ACCA Malaysia on topics relating to the new financial reporting standard for SMEs, agriculture and the new standard on Revenue.
For the fourth year running, the MASB Islamic Technical Unit held an academician-focused Master Class on accounting for Islamic financial transactions. In addition, we hosted a real-time outreach meeting via video conference on the IASB Discussion Paper - Reporting Financial Effects on Rate Regulation, again, with the assistance of the IASB staff.
I would like to highlight a special event which we held in collaboration with the Asian Institute of Finance, AIF. In conjunction with his visit to Kuala Lumpur, Sir David Tweedie, the former IASB Chairman was invited to share his views and experiences on accounting, politics and the global financial crisis with about 270 people, most of whom were students from the local universities. This was a great opportunity for us to be able to listen to one of the most accomplished accounting standard setter. Sir David’s wit and charm won over the audience and helped to instil the importance of vision and hard work amongst the students.
We continued to share our experiences with our counterparts from a few nations. We described our framework and experiences to the Mongolian officials and the Accounting and Auditing Standards Board of Bhutan, both on separate occasions. We were invited by Bank Negara Malaysia to present a similar topic to the delegates from the National Bank of Cambodia. We were also invited by a fellow AOSSG member, Indonesia, to brief them on our work on the Bearer Plants amendments in Jakarta.
IFRS developments of particular interest to Malaysia
For the past few years, we have been a strong advocate on the issues that are close to our hearts. We were very committed and persistent in our lobbying to the IASB to reform its agriculture and real estate standards. Our hard work did not go unnoticed; the IASB had commended us on our research and work in tackling the two issues and for the significant input that we had given throughout the due process.
The finalisation of these two projects in 2014 was a significant milestone for us. In May and June 2014, the IASB issued the IFRS 15 Revenue from Contracts with Customers and Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) respectively. In addition, the IASB also finalised the Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 Property, Plant & Equipment and IAS 38 Intangible Assets) – another amendment addressing our concern on accounting for service concession assets. The MASB issued both pronouncements as MFRS 15 and Amendments to MFRS 116 & MFRS 141 in September 2014.
Another MFRS that we issued in November 2014 was MFRS 9 Financial Instruments. This MFRS replaces earlier versions of MFRS 9 and represents the final version of the Standard. It is a replacement standard to IAS 39. Subsequently, we established a MFRS 9 Task Force with the main purpose to facilitate the adoption of the Standard. We have drawn up a work plan and various initiatives that would help the constituents prepare for the mandatory adoption of MFRS 9 by 1 January 2018.
Whilst on another front, we continued to participate diligently and contribute positively, to the IASB’s standard-setting process. We commented on twelve (12) draft technical pronouncements which amongst others covered topics such as on the Conceptual Framework, Accounting for Dynamic Risk Management, Deferred Tax and Rate Regulation. We followed our due process, deliberated the proposals, identified issues concerning our constituents and proposed resolutions for consideration. This effort would not have been possible without the contributions from the various working group members, other stakeholders as well as the public. I am immensely grateful for the contributions received and I hope that our constituents will continue to be more involved in other IASB’s projects that are still in the pipeline.
The MASB Islamic Technical Unit played a meaningful role in promoting and supporting research in this area of financial reporting, in particular, for emerging markets and Islamic markets. As the Lead Country for the AOSSG Islamic Finance Working Group, we had produced a Research Paper on the use of IFRS to account for Islamic financing transactions following our review of financial statements of 132 Islamic financial Institutions from 31 jurisdictions. This was presented to AOSSG and IASB members in Hong Kong. We have also developed a Discussion Paper on Accounting for Waqf and wrote a chapter on Accounting and Taxation for Islamic Capital Market for a book entitled Islamic Capital Market: Principles and Practices published by ISRA.
Also, this year we were very pleased to be given the honour for the second time to host the 2nd Meeting of the IASB Consultative Group on Shariah-compliant Instruments and Transactions. At the same event, we concurrently organised the Joint IASB-MASB Outreach Meetings on Application of IFRS to Islamic Financing Transactions.
We were also invited to speak at a closed door forum at the AAOIFI in Bahrain to share our work and experiences to their Board members. We will continue to be proactive and to be actively engaged with the international and local stakeholders on Islamic finance developments.
Moving forward with MPERS
2014 also marked a historic milestone for the accounting framework for private entities. Following the issuance of MPERS in February, we had received numerous invitations to present the topic on MPERS in public forums. We had briefed the Jabatan Audit Negara, Jabatan Akauntan Negara and were invited to speak at the National Accounting Educators Symposium as well as the MIA International Accountants Conference 2014. In order to ensure smooth implementation of MPERS come 1 January 2016, we set up a MPERS Task Force with the objective to coordinate efforts of relevant authorities in reviewing the progress of companies and their transition from PERS to MPERS. It also focuses on efforts to equip the various key players in the financial reporting process with in-depth and up-to-date information of MPERS. The MPERS Task Force comprises representatives from the regulatory bodies, accountancy profession and other professional bodies and is chaired by the MASB Chairman. The MPERS Task Force is scheduled to meet half yearly and has had its first meeting in 2014.
The move to a new framework was initiated by a request from the World Bank and now makes all accounting frameworks in Malaysia, based on international ones.
The MASB has come a long way since its inception. Some 17 years on, the MASB is no longer a passive,
national accounting standard-setter, which looked principally at replicating international standards into the local market. Thanks to the efforts of past chairmen and board members, we have evolved MASB into an active participant in the global standard setting arena. We have become more vocal, are able to participate better at the formulation stage of standards and have championed many causes important to developing economies such as on Islamic Finance and Agriculture matters. The MASB has, I believe, become a respected standard-setter both in the regional and international level. The experiences that we have gained over the years have taught us much about working diligently, maintaining perseverance and being committed throughout our journey.
My tenure as MASB Chairman ends on 30 April 2015. It has been an exciting and memorable 6 years. It was initially daunting, walking in the steps of our professions giants, such as Raja Tan Sri Dato’ Seri Arshad and Dato’ Zainal Abidin Putih, who as past chairmen, were of great help to me in the beginning. I was also fortunate to have the counsel of Dato’ Seri Johan Raslan, past FRF chairman and Datuk Ali Tan Sri Abdul Kadir, my current FRF chairman, in formulating a strategy to win over local stakeholders and be more effective internationally.
When I first took the helm on 1 May 2009 as chairman, the major objective set by the FRF was for Malaysia to successfully adopt all IFRS standards and interpretations by 2012. This was by no means easy. We had to manage the introduction of IAS 39, deal with the issues of IFRIC 15 Agreements for the Construction of Real Estate and IAS 41 Agriculture and be able to accommodate the transactions done by our growing Islamic Finance industry. Alhamdulillah, we were able to successfully adopt IFRS in 2012 for most of our companies with the remaining real estate and agriculture companies crossing the line with the revised standards by 2017.
In addition to our main objective, we have worked tirelessly on other projects such as amending the accounting framework for SMEs, due next year, improving the understanding of the applicability of IFRS to Islamic Finance, advocating solutions to problems facing our stakeholders and expanding our outreach to stakeholders to help prepare them for new Standards. We were also very successful at hosting events in Malaysia for both our local and global stakeholders with the highlight being "Minggu Techie" in 2012 where we hosted ten (10) technical events and one (1) press conference in that one week.
No chairman can achieve this alone. I am very grateful to my wife Faizah, for putting up with my absences
and my being constantly preoccupied. I am also blessed by having an excellent team of angels from MASB, from the tireless Ms Tan Bee Leng to her able senior team of Christine, Mas and Stephanie as well as all the support staff. Despite our small numbers, their dedication, efforts and hard work has resulted in our successes at the MASB. My successor will inherit a great team and I look forward to seeing MASB grow stronger in stature and purpose in the future.
I am also immensely thankful to all the other MASB Board members, both past and present, for their constructive viewpoints and tireless efforts to work as a team. I would also like to express my appreciation to the FRF members for their continued guidance and leadership whilst giving direction in their independent oversight capacity. Finally, I wish to put on record my sincere gratitude to the regulators and stakeholders comprising the Securities Commission, Bank Negara Malaysia and Suruhanjaya Syarikat Malaysia; Bursa Malaysia; professional bodies; academia; professional firms; members of our working groups; the commercial sector; the financial press and last but not least, the Ministry of Finance.
So my final act before I leave the MASB is to wish them all well in the future and to welcome in the new Chairman of the MASB.
DATO’ MOHAMMAD FAIZ AZMI
Malaysian Accounting Standards Board