Malaysia is a state which located in the continent of Asia, part of Southeast Asia. The formation of Malaysia consist of 5 elements which are ancient Malaya, Hindu land, Islam and the aureate age of Melaka, colonial Malaya, and independency.
In ancient Malaya, orang asli in Peninsula, Penan of Sarawak and the Rungus of Sabah are the earliest group of people inhabitant in. Their presence consequences in the 2nd moving ridge of motion into Malaya, the Malays. Proto-Malays were formed and they are made up of husbandmans and mariners. Few centuries subsequently, Deutero-Malays besides move into Malaya, with a more advanced agriculture engineering and proficient in usage of chainss.
Second, during the Hindu land in 100 BC-1400 AD, the reachings of Indians had greatly influence the Malaya ‘s civilization. While the Indians are seeking for gold, spices and aromatic wood, they besides established Hinduism and Buddhism in Peninsula by presenting temples and other cultural traditions from India.
Islam and the aureate age of Melaka
Melaka was founded by Parameswara, a Sumatran prince in thirteenth century. A regional naval forces that policed the local Waterss and convoyed friendly ships makes Melaka go a safe and unafraid port metropolis for trading. In this instance, the entrance Arab bargainers who wanted to barter goods and spices had indirectly brought Islam to Melaka. As a consequence, Islam breaks through the cultural influences of Hinduism and Buddhism to Malaya and became a chief influence with the transition of the Malay-Hindu swayers of Melaka.
During the early sixteenth century, the lifting European powers discovered the demand to set up an ain trade spot to India and the Far East for spice trade. Thus, Alfonso de Albuquerque led a squad of Portuguese navy and captured Melaka seaport including the metropolis with canon fire in 1511. A Famosa was built by the Portuguese after that but it was occupied by the Dutch in 1641. However, Melaka was handed over to the British by the Dutch in 1795. In 1874, Sultans are forced by the British to subscribe the Pangkor peace pact due to the civil war among the Malay sultans. This gave Britain a great opportunity to supervise the huge Sn and rubber resources until World War 2 ( WW2 ) . However, Britain was forced to give up in 1942 due to the invasion of Nipponese. In 1945 after WW2, Britain resumed control of Malaya.
In 1957, the British granted the independency to Malaya in Kuala Lumpur ‘s Merdeka Square. Tunku Abdul Rahman became the first premier curate of Malaya. After Tunku Abdul Rahman persuaded Singapore, Sabah, and Sarawak to fall in Malaya in a federal brotherhood in 1961, Malaysia was borned.
2.0 Culture and Categorization
Harmonizing to Bozyk ( 2006 ) , Malaysia is considered as an unfastened state-orientated, freshly industrialized market economic system. Malaysia has a diversified and quickly spread outing fabrication sector which contributes 35 % of the GDP. On the other manus, service sector in Malaysia is lending 49.7 % of GDP. Based on Economy Watch ( 2010 ) , Malaysia had an one-year growing rate of 6.5 % in GDP for more than 50 old ages and it is one of the Asia states with best economic records
Malaysia is a state which adopted a mixture of legal system. English common jurisprudence is the chief jurisprudence in Malaysia as a consequence of Britain colonial in early 1800s to 1960s. Besides, Islamic jurisprudence and customary jurisprudence are besides practiced in Malaysia. Islamic Law is mandatory to be follow by the Islam and customary jurisprudence is by and large applied to all as it is traditional regulations which has become an recognized behavior in a community treated as a legal demands.
Political system practise in Malaysia is the parliamentary democracy. Since independency, Malaysia is led by the same alliance authorities of the National Front ( Barisan National and the United Malays National Organisation ( UMNO ) and other parties stand foring other chief etnic group in Penisular Malaysia. In add-on, heightening national integrity and economic development with equity are the two chief long term ends which are being focus by the political leading. ( EU-Malaysia Chamber of Commerce and Industry, n.d. )
Education system in Malaysia is non good developed. Harmonizing to National Economic Advisory Council ( 2010 ) , the human capital in Malaysia is non bettering and instruction system failed to present the needed endowment. For case, 80 % of Malaysia ‘s work force received instruction merely up to Sijil Pelajaran Malaysia based the the Department of Statistic in 2007 and the authorities and they are non skilled anough.
Malaysia is a multi civilization society in Asia. Harmonizing to Census ( 2000 ) , it is made up with 65 % of Malaies and other bumiputra, 26 % of Chinese follow by 8 % of Indians. Consequently, the chief faiths in Malaysia are Islam, Buddhist and Hindu. Peoples are freedom in rehearsing their ain faith without discriminatory to other faiths.
Mueller and Gray Classification
Based on Mueller ‘s categorization of development forms, Malaysia can be classified under independent subject attack where accounting is viewed as a service map that derives its constructs and rules form the concern procedure it serves, but non from a subject such as economic system. ( Mueller, 1967 ) . However, it is non ever appropriate to utilize Mueller categorization towards Malaysia accounting development. In this instance, Gray ‘s cultural model for sorting accounting system has to be taking into history. ( Gray, 1988 ) . Mention to Gray ‘s categorization, Malaysia is categorized under Asian-Colonial with lower degree of flexibleness and high degree of statutory control in footings of authorization and enforcement. Besides, in footings of measuring and revelation, Malaysia is grouped under low degree of optimism and less transparence.
3.0 Regulatory model of accounting
In Malaysia, every populace listed company are required to show their annual fiscal study to the stockholders. This is because fiscal studies allowed the external users to obtain information about the fiscal public presentation and place of an administration and it act as a communicating tools between the two parties. ( Collis and Hussy, 2007 ) However, it is of import to fix a fiscal study which is standardizing so that it is easier for external user to do comparing. Therefore, in order to guarantee all the fiscal statements are prepared harmonizing to developed model, the procedure of fiscal coverage is monitored by a regulative model harmonizing to Collis and Hussy ( 2007 ) . For case, accounting profession, scrutinizing, company jurisprudence, revenue enhancement and stock exchange demands are some of the supplier of regulative model.
Initially, Harmonizing to Jamaludin ( 2008 ) , there are 3 regulative organic structures in Malaysia. They are the Malaysian Institute of Accountants ( MIA ) , Malayan Institute of Certified Public Accountants ( MICPA ) , Malayan Accounting Standard Board ( MASB ) together with Financial Reporting Foundation ( FRF ) . MIA was established in 1967 under Accountants Act 1967. Following, MICPA is antecedently known as “ the Malayan Association of Ceritfied Public comptrollers ” and it is established in 1958 under the Companies Ordinances. Then, MASB and FRF were established in 1997 under the Financial Reporting Act 1997.Secondly, in footings of auditing, the hearers in Malaysia are regulated by Audit Act 1957 and the Auditing and Assurance Standards Board ( AASB ) which established by MIA in the twelvemonth 2009. ( Tan, 2011 ) Third, companies in Malaysia are regulated by the Companies Act 1965. Besides, income revenue enhancement, corporate revenue enhancement, gross revenues and service revenue enhancement are the three chief revenue enhancements which need to be paid by an entity or an single in any country of concern. On the other manus, Income revenue enhancement 1967 is introduced to guarantee that the revenue enhancement system is runing efficaciously in Malaysia. In footings of stock exchange, all the stocks of listed companies are traded in Malaysia Stock Exchange named “ Bursa Malaysia ” .
Again, MIA, MICPA, and MASB together with FRF are the accounting profession in Malaysia. These regulative organic structures play several of import functions in accounting development of Malaysia. For case, they are responsible to implement professional criterions and practises harmonizing to internationally accepted guidelines and criterions. Second, they besides in charge in developing a rigorous disciplinary system for those parties who fails to follow or follow with the enforced accounting criterions. In peculiarly, MIA is the chief regulative organic structure in Malaysia. For case, MIA engagement in Asean Federation of Accountants ( AFA ) and International federation of Accountants ( IFAC ) enables Malayan comptrollers to hold a voice on these planetary and regional platforms. It besides enables the latest abroad development to be brought place to better the local profession. In this instance, MIA becomes the anchor of accounting development in Malaysia. Furthermore, none of the people can be an accountant whithout registered as a member of MIA as provided under the proviso of Accountants Act 1967. ( MIA Official Web )
All the concern operations every bit good as fiscal coverage demands of the companies in Malaysia are regulated by Companies Act 1965. In peculiarly, Section 166A until Section 171 of Companies Act 1965 stated the accounting ordinances which need to be followed by the companies in Malaysia. If any of the company did non follow the accounting ordinances, punishment will be given.
As supra, MIA established AASB which is really a functionally independent standard setting-body that govern the auditing criterions in Malaysia. Roles of AASB towards accounting development in Malaysia are important. This is because AASB extremely promote on the attachment of international convergence of criterions and conformities to the high quality professional criterions. Besides, AASB support the accounting profession through uninterrupted developing and spreading of counsel for scrutinizing and confidence services. Furthermore, any other issues and new developments in other legal powers that is link to scrutinizing patterns in Malaysia will be reappraisal and see by AASB to beef up the auditing criterions. Other than AASB, Audit Act 1957 besides acts as a regulation to supervise the manner on how hearers conduct their responsibilities. It is mandatory for the hearers to follow what has been included in the Act or else punishment will be given to the hearers.
In Malayan revenue enhancement, income revenue enhancement, corporate revenue enhancement, gross revenues and service revenue enhancement are the general revenue enhancements which have to be paid. In footings of income revenue enhancement, whatever income earned by an person from the concerns or by an administration from the concerns must be taxed in Malaysia. Consequently, Income Tax Act 1967 is introduced to move as a guideline and guarantee that the sum of revenue enhancement paid by an single is sensible. For case, occupant in Malaysia with indictable income, RM16,667 and above yearly after tax write-off of personal alleviations is required to pay 1 % -26 % of income revenue enhancement whereas a non-resident is required to pay 26 % without any reliefs benefits. ( Malayan Investment Development Authority, 2012 ) . In footings of corporate income revenue enhancement, either an administration is resident or non-resident, it is required to pay a 25 % of corporate revenue enhancement. For gross revenues revenue enhancement, the revenue enhancement rate scope from 5 % to 10 % and it is normally applied in imported or locally manufactured goods based on Gross saless Tax Act 1972. On the other manus, the service revenue enhancement is at a fixed rate of 6 % and it is imposed on nonexempt services provided by nonexempt individuals such as eating houses. ( Malayan Investment Development Authority, 2012 ) .
Previously, the stock exchange of Malaysia is known as Kuala Lumpur Stock Exchange ( KLSE ) . It is renamed into Bursa Malaysia in the twelvemonth 2004. Wikipedia, 2012. Bursa Malaysia is an sanctioned exchange keeping company that offer varieties scope of investing picks globally such as offer equities, derived functions, offshore, bonds and Islamic merchandises. The company is limited by portions under Companies Act 1965. Bursa Malaysia and established under Section 15 of the Capital Markets and Services Act 2007. Based on Bursa Malaysia, a sum of 923 companies are listed in Bursa Malaysia in twelvemonth 2012 where 811 companies are listed in chief markets while the other 112 companies is listed in ACE market. The function of Bursa Malaysia is to maintain a just and orderly market in securities and derived functions which are traded though its installations. Besides, Bursa Malaysia besides responsible to guarantee that the dealing, glade and colony agreement for minutess is monitored orderly, clearly and expeditiously. In footings of company aims, Bursa Malaysia considers investor protection, market unity, transparence, and corporate administration so that the investors are assurance at take parting in the investing.
In footings of presentation of fiscal statements, all the public listed companies that operate in Malaysia are required to present balance sheet, income statement, statement demoing alterations in equity and notes to the history in their one-year study harmonizing to the national criterions, MFRS 1. In add-on, conformity with national criterions will automatically guarantee the conformance with all facet of IAS 1.
4.0 Accounting rules
As mentioned above, MASB together with FRF is one of the chief governments in modulating accounting criterions in Malaysia. The accounting criterions adopted in Malaysia is known as Financial Reporting Standards ( FRS ) . It was foremost implemented in 1 January 2006 and it had brought a important consequence to the companies in Malaysia. Some of the FRS is discussed as below:
FRS 5 Non-current assets held for sale and discontinued operations:
Requirement in categorization, presentation and measuring under this criterion is applied to all recognised non-current assets and besides all the disposal groups within an administration. FRS 5 is complied with IFRS 5 except for the effectual day of the month of the transitional proviso where FRS 5 should be applied prospectively to the non-current plus that is classified as held for sale and operations that is classified as discontinued after the effectual day of the month of FRS.
FRS 101 Presentation of fiscal statements:
This standard requires entities in Malaysia to fix and present general intent of fiscal statements in conformity with demands of FRS. FRS 101 is complied with IAS 1 ( 2003 ) but non IAS 1 ( 2005 ) . This is because amendments to IAS 1 ( 2005 ) on capital revelation have non been included in FRS 101.
FRS 102 Inventories:
This standard applies to all stock lists except work in advancement under building contracts, biological assets associating to agricultural activity and fiscal instruments. FRS 102 is consistent with IAS 2 ( amended in 2005 ) .
FRS 107 Cash flow statement:
Entities in Malaysia are required to fix hard currency flow statement demoing inflow and outflow of hard currency and hard currency equivalents within an administration with the demands under this criterion as it is portion of the complete set of fiscal statements.FRS 107 is complied with IAS7 ( amended in 2005 ) .
FRS 116 Property, works and equipment:
This criterion should be incorporated in accounting for belongings works and equipment unless another criterion indicated a particular or different accounting intervention. However it does non use in points which are classified as held for sale, biological assets related to agribusiness activities, the acknowledgment and measuring of geographic expedition and rating assets every bit good as natural resources such as mineral and oil. FRS 116 is consistent with IAS 16 except for the transitional proviso for those entities that had recognised their belongings works and equipment at revalued sums MASB Approved Accounting Standards IAS 16 for the first clip upon the execution in 1998.
FRS 117 Leases:
Accounting on rentals should follow the demands under this standard except rentals to research natural resources and licencing understandings. FRS 117 is complied with IAS 17 except that leasehold land which is antecedently revalued should keep the unamortised revalued sum as the alternate carrying sum for postpaid rental payments.
FRS 123 Borrowing costs:
Entities are required to use this criterion in accounting for borrowing costs. However, an entity need non to follow this criterions for those adoption costs that straight attributable to the acquisition, building or production of measure uping assets which are measured harmonizing to just value and stock lists that are manufactured. FRS123 is consistent with IAS23
FRS 136 Impairment of assets:
This criterion should be adopted while fixing history for impairment loss of assets. However it is non applied in stock lists, assets from building contracts, deferred revenue enhancement assets, assets from employee benefits, assets used for fiscal instrument, investing belongings at just value and so on. FRS 136 is complied with IAS 36.
FRS 138 Intangible assets:
This criterions should be use in accounting readying for intangible assets except intangible assets that are within the range of another criterion, fiscal assets which is a fiscal instrument, acknowledgment and measuring of geographic expedition and rating, and outgo on the development of minerals industry. FRs138 is consistent with IAS 38 except the prohibition of the initial acknowledgment of authorities grant at nominal value.
FRS 140 Investment belongings:
The acknowledgment, measuring and revelation of investing belongings of an entity in Malysia must be based on demands under this criterion. Yet, this criterion does non applied in biological assets from cultural activities and assets used in mineral and natural resources pull outing activities. FRS 140 is complied with IAS 40 except the accounting intervention of those entities which has recognised its investing belongingss based on MASB Approved Standards IAS 16 and has utilized themselves in the transitional proviso in that criterions.
5.0 Amalgamate histories
In Malaysia, parents companies with subordinates are required to fix amalgamate fiscal statements in regard of a group based on unvarying accounting policies under FRS127. Consolidation of a subordinate return placed from the day of the month when the parents company buy over the subordinate. After the acquisition, parent company may hold power to command the fiscal and runing policies of the subordinate and this power is suspended when the parents company lost control towards the subordinate. If a losingss of control occurred, they should decertify the assets and liabilities of the subordinate from the amalgamate histories, recognises any investing retained in the subordinate at just value every bit good as the addition or loss related with the loss of control adscription to the former controlling involvement. Therefore, the intent of amalgamate statement is to demo the consequence as if the parent and the subordinates are one entity. If the subordinate is non to the full control by the parents company, non-controlling involvements should be presented in the amalgamate statement of fiscal place under equity but individually from the equity of the proprietors of the parent. ( MASB,2011 ) . By and large, FRS 127 is consistent with IAS 27 except that FRS 127 explained that in order for a parent company to be exempted from showing amalgamate fiscal statements, other intermediate parents company are required to be incorporated in Malaysia.
6.0 Foreign currency interlingual rendition
To stay competitory in the market or increase market portion, many concerns in Malaysia may cover with abroad provider and client or even have a subordinate in foreign states. It is known as foreign currency interlingual rendition. When a foreign dealing take topographic points, different entities from different states may recognize the dealing based on their ain functional currencies. In this instance, it is of import to interpret the functional currency into presentation currency for fiscal coverage intents. For case, the currency used in Malaysia is known as Ringgit Malaysia ( RM ) which is different from the international sanctioned currency. Compare FRS 121 the effects of alterations in foreign exchange rates with IAS 21, both are similar except that FRS 121 requires fiscal statement presented in Malaysia to utilize Ringgit Malaysia unlike IAS 21 which allowed the entities to utilize different currency to show its fiscal statement. Besides that, the effectual day of the month of the transitional proviso where the entities is required to do usage of paragraph 47 in FRS 121 prospectively to all acquisition happening after the beginning of fiscal period if FRS 121 is foremost adopted.
7.0 Business ownership
By and large, there are 3 chief types of concern ownership in Malaysia. They are exclusive owner, partnership and company. Sole owner is the simplest signifier of concern in Malaysia. It is non necessary to hold merely one individual in the concern as exclusive owner. Second, partnership is a joint concern owned by minimal two individual but non more than 20 people. Third, companies are formed by several people and it is a separate legal entities with the proprietor. There are 2 types of companies in Malaysia which are the public company and private company. A private company consist of minimal 2 and maximal 50 members while public company can hold any figure of members. Besides distinguish company into private and public, it can besides be separate into company limited by portions and company limited by warrant in Malaysia. Despite exclusive owner, partnership and company, keeping company is besides another signifier of concern ownership which can be found in Malaysia. ( Companies Commission of Malaysia, 2012 )
8.0 Corporate administration
Due to the prostration of Enron instance, corporate administration has become of of the issues in most of the states. The chief beginning of corporate administration reforms agenda in Malaysia came from the Malayan Code on Corporate Governance which is established by the Finance Committee on Corporate Governance ( FCCG ) in March 2000. The codification adopted is based on intercrossed attack which is similar to the Combined Code on Corporate Governance in United Kingdom where it prescribes the best patterns in order to put relevant criterion for administration pattern in Malaysia. ( Journal of Money, Investment and Banking, 2009 ) . Yet, the administration enjoys the flexibleness to develop their ain attack in implementing corporate administration patterns. In add-on, the codification is made up with 4 parts which are rules, best patterns, exhortations to other participants and explanatory note. For case, rules in the codification discuss about the statutory responsibilities of board of managers, managers ‘ wage, stockholders and answerability and audit while the best practises explain the best behavior of board of manager and answerability and audit to assist an administration in planing their corporate administration. Development of corporate administration in Malaysia besides consequences in the constitution of Malaysian Institute of Corporate Governance ( MICG ) . MICG was formed in March 1998 by the high degree of FCCG with the intent of raising and heightening the consciousness and patterns of good corporate administration in Malaysia.
Based on Nobes ( 1992 ) , harmonisation is a procedure of increasing the compatibility of accounting patterns by puting bounds to their grade of fluctuation. Even though Malaysia is considered as an Islamic state, the recent development of FRS to follow with IFRS had brought Malaysia closer to the procedure of harmonisation. Furthermore, this can be explained through the proclamation made by MASB on 17 November 2011 where the FRS will be replaced by Malayan Financial Reporting criterion ( MFRS ) from January 2012 onwards in order to meet with the IFRS criterions issued by International Accounting Standard Board ( IASB ) . ( Geoffrey, 2011 ) . However, these criterions are ill adopted and utilized by all the companies in Malaysia. For case, some of the little and average endeavors ( SMEs ) are still following their ain accounting criterions. In this instance, relevant actions such as puting regulations and ordinances or supply workshop for these administrations should be taken by the accounting profession in Malaysia so that the harmonisation is wholly achieved.
To sum up, the accounting development in Malaysia over the last 15 old ages had alteration significantly since the twelvemonth 2006 with the acceptance of FRS to MFRS in 2012. Malaya had made a batch of accommodations and alterations associating to the accounting betterment while meeting FRS with IFRS or IAS. After some times, it had besides taken the full set of IFRS without vacillation by developing the MFRS which are word-by-word tantamount to IFRS issued by IASB. In other words, Malaysia had break through the obstructions to harmonisation as it is acquiring closer to the route of accomplishment. Merely when harmonisation is achieved, some benefits such as greater transparence, greater comprehensibility, easiness to compare fiscal informations across boundary lines, lower susceptibleness to political force per unit areas than national criterions every bit good as profitableness of cognition and instruction across national boundaries can be enjoyed by the user of fiscal study in Malaysia.