MASB seeks views on financial reporting by private entities

The Malaysian Accounting Standards Board ("MASB") has, on 29 February 2012, issued a Request for Views ("RFV") on "Private Entities, the Way Forward", to seek feedback from interested parties on the future financial reporting framework for private entities in Malaysia.

The RFV is issued following comments received from MASB ED 52 "Private Entity Reporting Standards", MASB ED 72 "Financial Reporting Standards for Small and Medium-sized Entities" and MASB ED 74 "Amendments to Financial Reporting Standards arising from Reduced Disclosure Requirements".

The RFV seeks feedback on the following broad issues:

i) Whether the existing Private Entity Reporting Standards ("PERS") should be replaced by MASB ED 52, MASB ED 72 or MASB ED 74

Based on the survey conducted by MASB in 2010, MASB ED 72, which is word-for-word the International Financial Reporting Standards for Small and Medium-sized Entities ("IFRS for SMEs"), appears to be the preferred option to replace the existing PERS framework. The International Accounting Standards Board ("IASB") is planning to review IFRS for SMEs soon in order to identify any implementation issues.

Besides that, there was also support for MASB ED 74 as its measurement and recognition criteria are identical to the Malaysian Financial Reporting Standards ("MFRS") framework.

ii) Whether there are any immediate changes that the PERS framework requires if private entities continue applying it until the new standards are in place

Many constituents have expressed concerns that the PERS framework, which was developed based on 2003-version of International Accounting Standards, has not kept pace with the changing business environment. The principles in PERS framework are not consistent with the MFRS framework in various areas. Hence, the MASB may consider reviewing the PERS framework if there are areas that need immediate improvement or amendment so as to mitigate the increasing concerns about the gap differences between PERS and MFRS reporting.

iii) Whether the proposed timeframe is sufficient to enable a private entity to properly transition to the new financial reporting requirement

In view that many private entities are currently apply the PERS framework, time is required to conduct training and possibly system changes may be required to implement the new standards. The MASB is proposing to replace the PERS framework with a new set of standards in 2015 to take effect for accounting periods beginning on or after 1 January 2016.

iv) Whether the MASB's plan to replace the PERS framework with a new set of standards in 2015 is in the best interest of financial reporting for private entities

The MASB is considering the possibility of replacing the PERS framework with a new set of standards in 2015 with effective date of 2016 to be in line with Suruhanjaya Syarikat Malaysia's XBRL (extensible Business Reporting Language) initiative. In the meantime, the MASB will consider to review the PERS framework if there are areas that need immediate improvement or amendment.

Taking into consideration these concerns and issues as well as the important role that private entities play in the economy, the MASB believes that it is critical for affected parties to provide its feedback on the future financial reporting framework for private entities in Malaysia.

Source: Malaysian Institute of Accountants