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Bài tập nhóm Chủ đề Factors affect the Malaysian accounting system Hà Nội, I Introduction Malaysia is a country in Southeast Asia The federal constitutional monarchy consists of thirteen states and th.
Bài tập nhóm Chủ đề: Factors affect the Malaysian accounting system Hà Nội, I Introduction Malaysia is a country in Southeast Asia The federal constitutional monarchy consists of thirteen states and three federal territories, separated by the South China Sea into two regions, Peninsular Malaysia and Borneo's East Malaysia Peninsular Malaysia shares a land and maritime border with Thailand and maritime borders with Singapore, Vietnam, and Indonesia East Malaysia shares land and maritime borders with Brunei and Indonesia and a maritime border with the Philippines and Vietnam Kuala Lumpur is the national capital, largest city and the seat of the legislative branch of the federal government The nearby planned capital of Putrajaya is the administrative capital, which represents the seat of both the executive branch (Cabinet, federal ministries and agencies) and the judicial branch of the federal government With a population of over 32 million, Malaysia is the world's 45th-most populous country Malaysia Accounting System The Financial Reporting Foundation (FRF) and the Malaysian Accounting Standards Board (MASB) were established under the Financial Reporting Act 1997 (FRA 1997) The FRF, as a trustee body, has responsibility for the oversight of the MASB's performance, financial and funding arrangements The FRF also acts as a sounding board for the MASB, that is, the FRF would be the first to review MASB’s technical pronouncements before it goes out to the public The MASB is the independent authority to develop and issue accounting and financial reporting standards in Malaysia The MASB mission is to develop and promote high quality accounting and reporting standards that are consistent with international best practice for the benefit of users, preparers, auditors and the public II Malaysian Financial Reporting Standards (MFRSs) The Malaysian Financial Reporting Standards (MFRS) framework was introduced by the Malaysian Accounting Standards Board (MASB) and came into effect on January 2012 The MFRSs listed in the table are official pronouncements issued by the MASB MFRSs are issued by the MASB in respect of its application in Malaysia The text of the MFRSs include MFRSs as approved by the MASB for issue up to 31 March 2021 and as required to be applied for annual reporting periods beginning on January 2023 Further explanation is available in the “Introduction” section of the 2021 MFRS Bound Volume The date shown in the “Issue Date” column refers to the date the Standard was first issued The “Amendments from other Standards” column contains consequential amendments to a Standard that are a consequence of another Standard or amendments to another Standard with an effective date after January 2023 or issued after 31 March 2021 The “Explanatory” column contains documents which accompanies the respective Standards but are not part of these Standards They are IASB 2021 edition of documents accompanying IFRS Standards These Standards contain materials in which the IFRS Foundation holds copyright and which have been reproduced with the permission of the IFRS Foundation Copyright in IFRS Standards (including Interpretations), IASB Exposure Drafts and other IASB publications belongs to the IFRS Foundation All rights are reserved No part of this publication, the copyright of which is held by the IFRS Foundation, may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior written permission of MASB and the IFRS Foundation, or as may be expressly permitted by law or under terms agreed with the appropriate reprographics rights organization III Factors affect the Malaysian accounting system Taxation: In each country there will be different rules on whether to pay or be exempt from paying estimated tax, but paying estimated tax is a mandatory requirement in the filing of annual financial statements of Malaysian businesses This is a country on the rise and receives a lot of attention from foreign investors who want to establish a company to expand the scale of Asian businesses In Malaysia, Difference between tax and accounting income gives rise to deferred income taxes Inflation: Besides financial supply, inflation is also considered a factor in the business environment that affects the accounting system in countries When inflation occurs, the value of the local currency declines against other foreign currencies in the world For countries that are facing inflation, the concept of capital preservation becomes important, and several accounting methods need to be used to exclude the misleading effect of price fluctuations on financial statements In many South American countries, the most commonly used method to solve this problem is the price index adjustment method, and the state must usually publish the price index Meanwhile, Malaysia adopted a policy of controlling the self-movement of foreign indirect capital flows to overcome the crisis Therefore, the goal of capital preservation is always very important, the financial statements of companies must always be adjusted to exclude the misleading effect of price changes on the value of assets and company income From the management of Malaysia's foreign capital flows over the years, the Government has encountered many difficulties in making policies in accordance with the practice of each period and is still making efforts in solving them Source of financing Malaysia is one of the most open economies in the world with a trade to GDP ratio averaging over 130% since 2010 Openness to trade and investment has been instrumental in employment creation and income growth The government plays an important role in the economy, especially the macro economy and public economy-related projects However, Malaysia is a country has developed economy in Asia Especially, the stock market there is quite developed, the capital and financial markets are increasing Bursa Malaysia is the stock exchange of Malaysia It is one of the largest bourses in ASEAN It is based in Kuala Lumpur and was previously known as the Kuala Lumpur Stock Exchange (KLSE) It provides a full integration of transactions, offering a wide range of currency exchange and related services including trading, settlement, clearing and savings services This shows that the source of business financing in Malaysia is mainly in the equity-based market Therefore, financial reporting will be extensive and of high quality to facilitate the efficient operation of the market and the efficient allocation of resources Accounting in Malaysia tends to provide sufficient material information for users to make better investment decisions Legal systems Legal systems around the world vary greatly, but they usually follow civil law or common law In common law, past legal precedents or judicial rulings are used to decide cases at hand Under civil law, codified statutes and ordinances rule the land Some countries like South Africa use a combination of civil and common law From the perspective of legal history, an argument could be made that the British colonisation of Malaysia left behind such a lasting legacy of laws and a legal system The law of Malaysia is mainly based on the common law legal system This was a direct result of the colonization of Malaya, Sarawak, and North Borneo by Britain between the early 19th century to the 1960s The supreme law of the land—the Constitution of Malaysia—sets out the legal framework and rights of Malaysian citizens The Malaysian legal system is based on English common law, which has outstanding features such as: First, the judicial precedent -judges both adjudicate and create law indirectly, the court is like a second lawmaker Second, case law is the basic source, attaching importance to evidence, so lawyers and judges are highly valued Third, the flexibility of the accounting system is consistent with the development of social relations, because Malaysia was once a British colony, under the rule of the motherland, accounting activities are strictly controlled, so although independent, the influence of that governance on the accounting system remains, making Malaysia's accountants have mandatory control through high laws The evidence is that accounting standards are not set by professional associations In Malaysia, the Association of Professional Accountants (MIA) only has the role of issuing standards as well as circulars and 5, Education - Education level The level of education in a society and the sophistication of accounting are closely linked Malaysia is always appreciated for the quality of its education not only in Asia but all over the world Understanding the important role of education and training in the economy, the Malaysian government has always paid attention to and increased investment from the state budget in education to improve education effectiveness and promote a growth economy The more the educational level of the people improves, the less accounting problems may happen, and the extensive and sophisticated accounting system and reports become feasible Because accounting takes a written and numerical form, it has relatively little use or significance in a society that is predominantly illiterate Internally, the accounting planning and control system would be more difficult to be used effectively because of the limited ability of employees - Quality of Accounting Education The quality of accounting education in countries has a significant impact on the kind of accounting that develops Naturally, the quality of education is also impacted by a number of factors, such as, the level of economic development, the political and economic ties with other countries, and the stature of the accounting profession Certain countries have a long history of including accounting in their tertiary institutions of higher education According to Department of Statistics Malaysia, accounting and finance skills are one of the top skills in demand In Malaysia, university students are able to choose accounting as a major field of study in Bachelors, Masters and PhD programs At these programs, students are able to receive a rigorous training in accounting and emerge as well trained individuals ready to enter the accounting profession Upon graduation, they are recruited by public accounting firms as well as corporations, thus enhancing the attractiveness of accounting as a field of higher education Culture The recording, calculation and presentation of information are deeply influenced by the national culture For example, countries of Anglo-Saxon culture often prefer flexibility and judgment in accounting while many Eastern countries find it difficult to accept this and have to rely on strict regulations However, it is difficult to study the effects of cultural environment on accounting, which is often felt rather than expressed in data According to Geert Hofstede's view, there are important cultural factors that explain the similarities and differences in culture between countries in the world: individualism, power distance, uncertainty avoidance, masculinity and long-term orientation a Power distance Power distance (PD) refers to the extent to which a society can accept inequality within and between institutions and organizations Countries with high PD often turn to a statutory control over accounting to arrive at a consensus and tend to limit information disclosure Therefore, financial statements in these countries are often not widely disclosed In contrast, in countries with low PD this result is achieved through debate and voting in a professional association In Malaysia, the power distance score is very high, reaching 104 points It shows that Malaysians tend to accept an inherent hierarchical order and position themselves and other members The challenge to leadership was not warmly received b Individualism Individualism (abbreviated IDV) refers to the relationship between individuals in a society In countries with high IDVs, financial reporting tends to be more realistically flexible than in countries with low IDVs In countries with low IDVs statutory consistency is more prominent In addition, financial statements are often less conservative than countries with low IDVs specifically in their assessment of assets, countries with low IDV often use historical costs more than market prices The individualism score in Malaysia is 26, indicating that the country is a collectivist society A society fosters strong relationships, where everyone is accountable to members in their group c Masculinity A high score on this factor indicates that society will be driven by competition, achievement and success A low score (feminine) means that the dominant values in society are care for others and quality of life The basic issue here is what motivates people, wanting to be the best (masculine) With an average score of 50 in Malaysia it is difficult to characterize this society based on the gender identity factor d Uncertainty avoidance Uncertainty avoidance refers to the degree to which individuals feel uncomfortable with uncertainty and ambiguity The influence of these characteristics on the accounting system is shown in the following points: - Societies with high UAVs are often limited to exploiting more informative and tend to favor uniform rules of accounting rather than allowing flexible choice In Malaysia, the score of this factor is 36, this score is quite low, showing that Malaysian society is flexible, people have a more comfortable mindset and attitude towards deviations in work practices, good practices Rules are given more importance than principles Society easily accepts differences, not afraid to innovate e Long-term orientation It is easy to see that long-term oriented societies tend to lean more towards conservatism and uniformity in accounting than short-term oriented societies This score is not scored in Malaysia but is replaced by two factors elements are pragmatism and passion In another respect, from gray's point of view, culture will affect the accounting system, specifically affecting the core values of accounting (Professionalism vs Statutory Control, Uniformity vs Flexibility, Conservatism vs Optimism, Secrecy vs Transparency) through two ways: - Sociocultural values will shape the core values of accounting that the accounting system must aim to strengthen - Culture creates social and institutional impacts, thereby affecting the operation of the accounting system → From the above analysis combined with Gray's method of classifying accounting by cultural area, we see that the core values of accounting in Malaysia are inclined towards mandatory control and information security authority and validity, measurement and disclosure restrictions Economic development a Colonial Development - Although the political entity of Malaysia was established only a decade ago, the evolution of the development process of the Malaysian economy dates back to the nineteenth century with the inception of active trade with the West Complete British colonization brought about dramatic changes The economic revolution that accompanied strong external trade at the turn of the century was extraordinary The fundamental push for the start of the development process was the increased demand for Malaysian primary products in the West as a result of the industrial revolution Trade was the channel via which economic development from the industrial countries was passed to the Malaysian economy Foreign commerce seems to have served as a "engine of expansion," but there was no mechanism in place to guide the economy onto a course of sustained prosperity -The unpredictable character of the project development under colonial control resulted in "lopsided economic development." It was terrible that export-led development occurred Because: The Malaysian economy back then was made up of a dynamic export sector and a static domestic sector, with very little spillover effects from the former to the latter due to the lack of forward and backward linkages and because exports were exclusively made up of semi-processed raw items The presence of income-remitting and import-consuming foreign variables also tended to stymie domestic market expansion In this respect, Malaysia's export industry would be unable to convey its expansion to the rest of the economy As a result, a dualistic, reliant economy has emerged b Post - Independent Development - Malaysia gained political independence in 1957, followed by Sabah and Sarawak in 1963 Awareness, rising aspirations, and growing expectations were all necessary additions to political freedom, therefore the pattern of development began to shift Poverty levels, vulnerability to international economic volatility, excessive concentration of output in a restricted range of commodities, and a lack of manufacturing activity were among the pressing issues that received more attention - An overwhelming desire to be financially independent may be observed in efforts to lessen the economy's reliance on external commerce, which involves a relatively abrupt break from the usual outward-looking orientation The manufacturing sector grew quickly under a structure of light protection and considerable incentives, mostly to replace imports - As a consequence, between 1965 and 1970, Peninsular Malaysia's manufacturing sector grew at a 9.9% annual pace, while its contribution to GDP climbed from 10.4% to 12.8% This is impressive in compared to GDP's yearly growth rate of 5.5% - The import pattern also saw significant alterations The percentage of consumer products in Peninsular Malaysia's imports, for example, fell from 68.9 percent in 1950 to 52.2 percent in 1965, while the share of capital goods climbed from 7.0 percent to 23.4 percent, owing primarily to the import substitution program Recent Trend - The deadly racial riots that broke out on May 13, 1969, represented a crucial turning point in Malaysia's political and economic history The overall result was the introduction of the New Economic Policy, which was represented in the Second Malaysia Plan 1971–1975 and had as its primary goals the reformation of society and the eradication of poverty among all races The focus being put on public enterprises serves as an example of how the New Economic Policy has justified a shift away from the previous conservative strategy and toward a daring radical one To strengthen and intensify Bumiputra engagement in the contemporary urban sector, particularly in commerce and industry, activities of public firms that were already in place before 1969 have been scaled up Several new public enterprises have also been founded - The Second Malaysia Plan envisions (a) Bumiputras owning and managing 30% of total industrial and commercial activities in all categories and scales of operations in twenty years, and (b) the employment pattern at all levels and in all sectors reflecting the composition of the population presumably at the end of the plan period in 1975 The plan is unequivocal: the goals are to be met not by "disruptive redistribution" of the current cake, but through active Bumiputra engagement in expanding the national cake - The New Economic Policy has significant ramifications, notably for industrialization policy Export-oriented sectors are clearly taking precedence over import-substitution industries This may be seen as a comeback of the conventional outward-looking ideology, but with the crucial distinction of putting more emphasis on exporting manufactured commodities This is crucial for the New Economic Policy's success because the manufacturing sector is anticipated to contribute the majority of the growing national pie, but its ability to grow is severely constrained by the size of the domestic market, necessitating the development of manufacturing industries focused on exports Because of this, Malaysia's policy shift in favor of the private sector is liberal: a combination of minimal government regulations over private industry, commerce, and finance with a range of incentives intended to stimulate private investment, both local and international Foreign investment is closely monitored and directed toward endeavors that support governmental objectives It is also vital to highlight that the principle of self-reliance has always been a fundamental component of Malaysia's economic growth strategy Thus, unlike in most other developing nations, foreign help has a little impact Economic-political cohesion Malaysia, which was heavily struck by the regional economic crisis in 1997 and 1998, recovered rapidly, particularly in 1999 and 2000 as one of the countries with a strong export sector Since 2001, the annual growth rate has averaged 5.9% (6.3% in 2007) The growth of the service sector, which accounts for more than half of Malaysia's economic activity, has been identified as this goal and boosted the value chain growth economy Malaysia's strategic plan includes finance, Islam, information technology, tourism, education and training, biotechnology, multimedia, and professional services as priority areas (e.g the 9th Malaysia Plan and the 3rd Master Industrial Plan) In its policies, the government has also gradually fulfilled its pledge to an open economy, greater competitiveness, and attractiveness to Malaysian international investors Particularly encouraging private-sector investment In addition to services, the government's economic plan focuses on income distribution, agricultural sector development, and social service improvement, as well as action measures to protect national identity As a result, Malaysia is New Zealand's second-largest trade partner in ASEAN, its ninth-largest export market globally, and one of the top seven import sources, with crude oil and electronic products accounting for more than 40% of imports III Compare some Malaysian accounting standards with IAS/ IFRS Malaysia is one of the countries that accept international accounting standards as national standards (in addition to Nigeria, Singapore ) The similarities of FRS with IAS: - FRSs have a numbering similar to IFRS issued by the IASB + Example: FRS 1= IFRS - FRS with the prefix 100 corresponds to the corresponding IASs + Example: FRS 101= IAS - FRS with a prefix denoting 200 locally developed standards not have international equivalent standards Comparison of Malaysian accounting standards with IAS on handling arising exchange rate differences FRS 121 IAS 21 According to the method necessary to translate a foreign activity for inclusion in the financial statements of the reporting unit + Assets and liabilities in each balance sheet are converted at the end-of-period exchange rate at the balance sheet date + Income and expenses in each income statement are converted at the exchange rate at the trading day (average is allowed if it is a real number reasonable) - A transaction in a foreign currency arises must be initially recorded at the exchange rate at the transaction date (average is allowed if it is some reasonable fact) [IAS 21:21-22] - At each subsequent accounting year: [IAS 21.23] + The amount of foreign currency must be reported using the closing price + Non-currency items at the original price must be reported using the exchange rate at the transaction date + Non-monetary items at fair value must be reported at the rate at which the fair value is determined - When an investment currency item is recorded in the report in a foreign activity and is calculated in the functional currency of the reporting unit -> a rate difference arises in the foreign operating Change the personal financial statements reporting - When goods are denominated in currency foreign currencies, a rate difference arises in the reporting unit's own financial statements This exchange rate differential is classified into separate components of equity in the financial statements including foreign activities and reporting - When an enterprise converts a reporting currency, it must apply conversion procedures to the new accounting currency from the date of conversion reporting currency - When a foreign activity is disposed , the cumulative amount of the exchange rate difference is fully credited to other income and accrues to the associated capital relation to foreign activities gains or losses due to liquidation are recognized Record exchange rate differences institutions Overseas business establishm ents reporting in the currency of the highinflation economy Informatio n disclosure Standards requiring goodwill and reasonable adjustment of the value of assets and liabilities incurred on the acquisition of a foreign organization are treated as part of the company's assets & liabilities are purchased and converted at the end-of-period rate Financial statements of overseas business premises must be represented in accordance with IAS 29 (Financial statements in hyperinflationary economies) before transfer change to the accounting currency of the business + The standards cover most of the disclosure requirements of IASB SIC-30 + In addition, the unit and reason must present when there has been a change in monetary function + The amount of exchange rate difference recorded in (excluding differences arising on financial instruments at fair value through gain profit or loss according to IAS 39) profit or loss [IAS 21.52(a)] + Net exchange rate difference recognized on other comprehensive income and accrued in a separate component of equity, and reconciliation of exchange rate difference as at the beginning and end of time [IAS 21.52(b)] + When the presented currency differs from the monetary function, reveal the fact that along with the monetary function and the reason for using a currency various currencies presented [IAS 21.53] + A change in the monetary function of either a reporting unit or a significant foreign activity and reason [IAS 21.54] Comparing Malaysian Accounting Standards with IAS on borrowing costs FRS 123 IAS 23 Scope Borrowing costs may include: - Bank overdraft interest rates and short and long term loans - Depreciate discount or fee insurance related to loans - Depreciation of incurred expenses relating to the arrangement of accounts get a loan - Financial expenses related to giving recognized finance lease Comply with FRS117 Property Tax - Exchange rate differences arising from the foreign currency loans to the extent that they considered a cost adjustment interest rate Property does not qualify: - Other investments, and inventory warehouse is regularly produced or Produced in bulk on the basis of repeated in a short time - Assets are available for use or sale upon purchase Property qualifies for: Inventory requires a long enough to sell, manufacturing plants, production facilities electricity and investment properties Borrowing costs may include: - Overdraft interest rates and bank loans - Interest expense on the effective interest rate method according to IAS 39 - Financial expenses related to giving finance lease is recognized under IAS 17 Leases - Exchange rate differences arising from the foreign currency loans to the extent that they considered a cost adjustment interest rate Non-eligible property will be forfeited excluded from the scope of IAS 23: - The property qualifies for fair value Example: Biological assets recognized under IAS 41 Agriculture - Inventory produced or Produced in bulk on the basis of repeated and took a while substantial for sale Example: whiskey making process Adjustment of accounting There are methods: + Adjustment of standard accounting + Alternate accounting adjustment Recognized: According to the standard accounting adjustment method: There is only one accounting adjustment method: There are many similarities and differences compared to the alternative accounting adjustment method of FRS Recognized: - Borrowing costs that are directly attributable to the investment in the construction or production - Information Disclosure Financial statements must disclose: - The accounting policies applied to borrowing costs; - Amount of borrowing costs capitalized in the period; The capitalization rate is used to determine the amount of borrowing costs eligible for capitalization of a qualifying asset are capitalized into the cost of that asset Other borrowing costs are recognized as an expense [IAS 23.8] Financial statements must disclose: - Amount of borrowing costs capitalized during the period - Ratio of capital used