Malaysia

6 Chapter Accounting

    • Outline of Malaysian accounting system

       ■Accounting related regulations

      In Malaysia, the regulating bodies on laws and guidelines on corporate information disclosure are the Company Law, Malaysian Accounting Standard (and Financial Reporting Law) and the Bursa Malaysia Stock Exchange Guidelines (Bursa Malaysia Securities Berhad Kuala Lumpur Stock Exchange, KLSE). 


       
       

      A corporation operating in Malaysia must comply with  provisions of the Company Law. Regarding accounting, as stipulated in the Article 166 to 169 of the Companies Act, the contents and procedures etc. to be followed in preparing  financial statements included in the annual report  must ben accordance with accounting standards prepared by the Malaysia Accountants Association (MASB; Malaysia Accounting Standards Board). It is required for every companies to prepare financial statements. The Corporate Law is a concise form stipulating only a general framework, and in fact  a mechanism to make changes according to various government ordinances and orders.

      Public companies and listed companies are requested to disclose financial reports timely in order to protect many stakeholders that can be affected, depending on the details determined by the Malaysian Stock Exchange etc.

       

      ■Post Period

      A corporation in Malaysia can set an arbitrary year as an accounting period individually. Because the tax year for corporate tax usually follows the accounting period prescribed by the company, it is common to adopt a fiscal period that matches the closing date of the parent company.

      In addition, financial statements audit is obligatory for all companies including dormant companies.

       

      ■Accounting Book

      Individual taxpayers who engage in business or engage in free industry, and corporate taxpayers must prepare accounting books. Directors have an obligation to prepare accounting books and keep them in the company's official address. In general, accounting books must be prepared in accordance with generally accepted accounting standards as fair and appropriate unless the tax law etc. separately prescribe, language is written in Malay or English, the currency is written in Ringgit in principle.

      The bills and invoices etc. that serve as the basis of accounting books and invoices are required to be preserved for at least seven years as stipulated by the Company Law (Article 167 (2) of the Companies Act)

       

      ■ Language  and Currency

      Regarding the disclosure documents, in the guidelines issued by SSM regarding Article 165 of the Companies Act, the language that must  be used is either Malay or English. For currency, in principle Malaysian ringgit is to be used.

    • Outline of accounting standard

      All companies registered in Malaysia will follow the standards set by the Malaysian Accounting Standards Committee (MASB). Public companies must comply with Malaysian Accounting Standards Act (MFRS) as stipulated by MASB. Standards of MFRS are almost the same as International Financial Reporting Standards (IFRS), with some exceptions. It was introduced in place of the conventional financial reporting standard (FRS) by 2012. In addition, private companies must comply with MASB's accounting standard for private companies (MPERS).
       

    • Accounting Standard Setting Committee

      Research and update on standards, revision and abolition are being made  by MASB, This committee is established as an independent organization not belonging to government agencies.

      In addition, the committee consists of members such as Malaysia Central Bank officials, securities agency officials and accounting offices.

    • Application and reporting of accounting standards

      In Malaysia, a company listed on the Malaysian Stock Exchange is obliged to report an audited financial statement to the relevant agencies within four months from the close of accounting period.  MFRS is the accounting standard that is required to be applied. Also, quarterly reports are required to be submitted  within 2 months from the end of the quarter. However, audit for the quarterly report  is not required.

      On the other hand, companies other than listed companies basically apply MPERS.  It is mandatory to submit a notification to the company registration office (Companies Commission of Malaysia (CCM)) since it is stipulated that any company will undergoes audit under the Corporate Law and the audited accounts approved at the Annual General Meeting will be based on different standard, the MPERS..

       

      Malaysia has two accounting standards. Regarding the accounting standards, there are MFRS for which listed companies and others apply, and MPERS which is being applied by other companies. It is possible to apply MFRS arbitrarily, not to enforce MPERS even at listed companies and others. In each case, an independent Malaysian Accounting Standards Board (MASB) set up by the Financial Reporting Act (Financial Reporting Act 1997) issued in 1997, sets, revises and abolishes criteria.

       

      Listed companies and financial institutions in Malaysia are obliged to comply with MFRS introduced since 2006. Other companies can choose to apply MPERS.

      Malaysian companies listed on stock exchanges must prepare financial statements based on MFRS. However, foreign companies listed on the stock exchanges are permitted to prepare financial statements based on IFRS.

       

      Because many Japanese companies in Malaysia do not fall under Malaysian listed companies, MPERS is applied. If the parent company in Japan is planning a transition to IFRS, it is possible to change the accounting standards to be adopted for subsidiaries in Malaysia from MPERS to MFRS, in that case it is desirable to change the procedure together in the transition plan and timing of the parent company.
       
       

    • IFRS

       ■ Flow of Global IFRS Application

      Recently, globalization of corporate activities is progressing more and more. M & A and financial transactions among international markets are also steadily increasing. Under such circumstances, there is a hope for investors to invest in companies that are safer and can give a consistent return. Therefore, in order to increase the comparability between companies in a global perspective, there is now a movement to unify accounting process worldwide. Its main basis is the International Financial Reporting Standards, which initially started as an accounting standard for listed companies in the EU region, but now it is being introduced in more than 100 countries around the world. It is based on an excellent theory such as Japan and the United States. Even in countries that have their own accounting standards, they are considering its application.

       

      ■ Introduction of IFRS in Malaysia

      Malaysia is one of Asian countries that has been adopting international standards aggressively in the application of their domestic standards as early as possible. In addition, the Malaysian Accounting Standards Committee (MASB) issued a statement to introduce International Financial Reporting Standards (IFRS) in August 2008 and the Malaysia Financial Reporting Standards (MFRS), which incorporated International Financial Reporting Standards (IFRS) has been introduced.

      Except for agriculture (Agriculture) set forth in MFRS 141 and IFRIC 15 (Agreements for the Construction of Real Estate), all companies except closed enterprises are eligible to comply with the Malaysia Financial Reporting Standards (MFRS) in the fiscal year starting on or after Monday 1.

      MFRS standards on preparation of financial statements is almost IFRS-compliant. The companies that prepare financial statements and intermediate financial statements for the first time are called MFRS 1 "First-time adoption of Malaysian Financial Reporting Standards". Financial statements prepared in accordance with Malaysia Financial Reporting Standard (MFRS), financial statements prepared in compliance with International Financial Reporting Standards (IFRS) will be prepared.

      In addition, the new accounting standard  (MPERS) which is being applied to companies that adopt PERS since January 1, 2016 is almost equivalent to international accounting standards for small and medium-sized enterprises, Also, by applying international accounting standards, we are steering ourselves to international accounting.
       

    • Outline of disclosure system

      In Malaysia, the three standards to be followed as laws and guidelines concerning corporate information disclosure are: ① Company Law, ⑵ Malaysian Accounting Standard (and Financial Reporting Law), ③ Bursa Malaysia Stock Exchange (Bursa Malaysia Securities Berhad Kuala Lumpur Stock Exchange (KLSE) Listing Standard.



      1, Disclosing Target, Disclosure Method and Frequency

      (1) All companies

      According to the Company Law, all companies registered in Malaysia must prepare "Annual Report". The annual report will be submitted to the Annual General Meeting to be held within six months after the end of the company's fiscal year. However, a copy of this annual report must be sent to all shareholders at least 14 days prior to the meeting date.

      If the content is approved in the shareholders' meeting, the company must prepare an "Annual Declaration Form" in accordance with the form prescribed in Article 169 of the Companies Act and submit it to the CCM within one month from the date of the general meeting of shareholders.

      Anyone who wants to view the annual declaration can browse through CCM (in the case of listed companies, exchanges), but companies may voluntarily disclose on the internet in some cases.

       

      (2) About listed companies

      Bursa Malaysia (formerly KLSE) must submit the above annual report to the relevant stock exchange market within 4 months from the end of the fiscal year. Also, a copy of this annual report must be sent to all shareholders at least 21 days before the annual general meeting.

      Furthermore, we must prepare "Quarterly Report" within two months from the end of each quarter and submit it to the relevant stock exchange market. However, auditing of the quarterly report is not required. As with the annual report, the contents of the quarterly report will be made available through exchanges, but companies may voluntarily disclose them on the internet in some cases.

    • Disclosure contents

      Disclosure Contents

      (1) All companies

      "Annual report" generally consists of audited financial statements (annual and quarterly report), director's report, director's statement, internal control report, audit report.

      According to the Corporate Law, the audited financial statements required to be  submitted are  the income statement, balance sheet and notes to financial statements, cash flow statement is also often attached. These financial statements must be prepared in accordance with Malaysia Financial Reporting Standards (MFRS), International Financial Reporting Standards (IFARS) and Company Law. In addition, if the company has subsidiaries, consolidated financial statements must be prepared.

      The Board of Directors' report summarizes information on directors and corporate auditors, important capital movements, business outline, etc. The "Company Overview", "Business Overview", "Overview of Submitting Company" in the Japanese securities corresponds to these reports.

      In addition, in the internal control report, we will report the information required for shareholders to evaluate whether the main business of the company and risk management are sufficient, according to the Bursa Malaysia Stock Exchange listing standards. The director makes statements and oaths to shareholders on the appropriateness of the company's financial statements. At least two directors are required to sign the directors' reports and directors' statements.

      Financial statements are written in English or Malay, and the value to be used must be displayed in Ringgit (Ringgit). However, in view of different nationalities  of stakeholders, some companies informally disclose reports written in other languages ​​(eg Mandarin) or other currencies (eg US dollars).

      From fiscal 2003 onwards, the accounting books under which the financial statements are prepared are generally required to be stored for seven years in principle.

       

      (2) Listed companies only

      In the KLSE Listing Requirements (Chapter 9 (Continuing Disclosure)), there are regulations concerning disclosure documents and disclosure items, respectively.

      KLSE listed companies prepare financial statements (income statement, balance sheet, notes to financial statements) as a quarterly report and audited financial statements, audit report, and director's reports as annual reports.

      In addition to the contents of the annual report under the Corporate Law, financial statements include the status of shares, details of owned real estate, related party transactions, segment information, etc.

    • Disclosure Schedule

      All companies hold a general shareholders meeting within 6 months after the fiscal year ends (the first annual general meeting after the establishment of the company is within 6 months after the settlement date, within 18 months after establishment). Within one month from the opening day, the company must  submit an annual report to the accounting registry.

    • Audit system in Malaysia

       ■ Audit System in Malaysia

      In Malaysia, in principle all representatives (including branches) of expatriate affairs, liquidators, etc. must receive an annual accounting audit report in accordance with the Company Law. After preparing and storing the accounting records, it is mandatory to prepare fair financial statements and board of directors stating the receipt of the accounting audit report at the annual general meeting of shareholders.

      Regardless of the scale of the company, even a dormant company, it is necessary to appoint an accounting auditor at the shareholders' meeting and receive an accounting audit. However, in this case, it must be appointed by the Board of Directors before the first Annual General Meeting (AGM) after the establishment.

      Since all companies are obliged to conduct accounting audits, tax offices do not come directly to the company for tax examination as in Japan, and the audit company will determine the tax amount at the time of the accounting audit, so practically the auditor  is said to be fulfilling the functions of the tax office in Japan.

       

      ■ Qualifications of the Accounting Auditor

      In order to conduct an audit in Malaysia, the auditor must be registered as Malaysia Institute of Accountants (MIA) as a certified accountant. There are three ways to acquire qualifications for auditing work as an accountant in Malaysia.

       

      ① Person who passed the accountant exam conducted by Malaysian Accountants Association

      ② Person who had a doctorate in accounting from a college faculty in Malaysia and had work experience for more than 3 years

      ③ Person who registered as a Chartered Accountant in Malaysia after obtaining certificate of accountant at a professional accountant organization such as Commonwealth countries in the UK (※ Japanese Institute of Certified Public Accountants is not included as of 2014)