MASB issues limited amendment to Forex Standard and Accounting Interpretations (15 February 2007)

MASB today announced the issuance of a limited amendment to its existing foreign exchange standard which will result in exchange differences arising from investment in foreign operations to be recognized in equity. Previously, exchange differences arising from such transactions between companies in a group would be accounted for in income statement or equity depending on the currency of the monetary item. But with the amendment, such transactions and their foreign currency differences will be treated as part of reporting entity net investment and recognized in equity.

The Executive Director of MASB, Dr Nordin Mohd Zain said that the amendment was necessary because the existing standard required different accounting treatment for forex differences depending on the currency of the monetary item, especially if the item was part of an entity's investment in a foreign operation.

The standard was also unclear whether or not an entity of a consolidated group could enter into monetary transactions with its fellow subsidiaries in foreign countries. This amendment clarifies that an entity can enter into such transactions with fellow foreign operations.

In another development, MASB also issued 6 new Interpretations to a number of existing standards after consultation with interested parties. They covered a wide range of industry, from mining to financial services, according to Nordin

The interpretation is a form of a guidance issued to deal with conflicting views on issues not specifically addressed in the accounting standards which will help to minimize divergent accounting practices.

Among others, they provided clarification on how companies should account for obligations to dismantle and restore asset if there was a change to the existing liabilities as a result of changes in cash flows or discount rates.

Other interpretations are available from MASB website or can be purchased in booklet form from MASB office.
For enquiries, please contact:
Dr Nordin Mohd Zain
Executive Director
Malaysian Accounting Standards Board
Email: nordin@masb.org.my