CHAPTER 2

CONCEPTUAL FRAMEWORK
AND STANDARD SETTING
PROCESS (PART 2)
 ACCOUNTING STANDARD
SETTING IN MALAYSIA
• On 1 August 2008, the FRF and MASB
announced their plan to bring Malaysia to full
convergence with International Financial
Reporting Standards (IFRSs) by 1 January
2012.
• IFRSs are used by more than 100 countries
around the world, and other economies such as
Korea, India and Canada have also announced
IFRS convergence by 2011 whilst the United
States have issued a proposed roadmap for the
potential use of IFRS by US issuers.
• IFRS is issued by the International Accounting
Standards Board whose mission is to develop, in the
public interest, a single set of high quality,
understandable, enforceable and globally accepted
financial reporting standards for general purpose
financial statements.
• As capital markets have become increasingly global, the
changeover from Financial Reporting Standards (FRSs)
to Malaysian Financial Reporting Standards (MFRSs),
equivalent to IFRSs will help place Malaysian
businesses on a level playing field with its international
counterparts.
 FINANCIAL REPORTING
FOUNDATION
• The Financial Reporting Foundation (FRF) is established
under the Financial Reporting Act 1997. The FRF
comprises representation from all relevant parties in
the standard setting process, including preparers,
users, regulators and the accountancy profession.
• The FRF, as a trustee body, has responsibility for the
oversight of the MASB's performance, financial and
funding arrangements, and as an initial source of views
for the MASB on proposed standards and
pronouncements. It has no direct responsibility with
regard to standard setting. This responsibility rests solely
with the MASB.
 FUNCTIONS OF FRF
• to provide its views to the MASB on any matter which the MASB seeks to
undertake or implement with respect to the development and issue of accounting
standards and a conceptual framework;
• to review the performance of the MASB;
• to be responsible for the financing arrangements and operations of the MASB;
• to approve the MASB budget;
• to engage or to employ persons and determine the conditions of such appointments
as are necessary to assist the FRF and MASB perform their functions under the Act;
• to administer the fund established to finance the ongoing operations of FRF and
MASB including management of funds not expended on operations during any
period;
• to maintain proper accounts and prepare an annual statement of accounts of the
FRF;
• to appoint an auditor for the purpose of auditing the annual statement of accounts;
• to forward the annual statement of accounts and audit report to the Minister of
Finance, and report on the activities of the FRF and MASB at the end of each
financial year; and
• to perform such other functions as the Minister of Finance may prescribe.
 MALAYSIAN ACCOUNTING
STANDARD BOARD
• The Malaysian Accounting Standards Board (MASB) is
established under the Financial Reporting Act 1997 (the
Act) as an independent authority to develop and issue
accounting and financial reporting standards in Malaysia.
• The MASB, together with the Financial Reporting
Foundation (FRF), make up the frameworks for
financial reporting in Malaysia. These frameworks
comprises an independent standard-setting structure
with representation from all relevant parties in the
standard-setting process, including preparers, users,
regulators and the accountancy profession.
 THE FUNCTION AND POWERS
OF MASB
• issue new accounting standards as approved accounting
standards and to review, revise or adopt existing accounting
standards as approved accounting standards;
• issue statements of principles for financial reporting;
• sponsor or undertake development of possible accounting
standards;
• conduct public consultation as necessary;
• develop a conceptual framework for the purpose of evaluating
proposed accounting standards;
• make such changes to proposed accounting standards as
considered necessary;
• seek the view of the FRF in relation to new and existing standards,
statement of principles, and changes to proposed standards;
• determine scope and application of accounting standards; and
• to perform such other function as the Minister of Finance may
prescribe.
 MASB’s MISSION
• The MASB's mission is to develop and
promote high quality accounting and
reporting standards that are consistent
with international best practices for the
benefit of users, preparers, auditors and
the public in Malaysia. In a wider context,
the MASB seeks to contribute directly to
the international development of financial
reporting for the benefit of users,
preparers and auditors of financial reports.
 MASB’S OBJECTIVE
• to develop high quality, clear and enforceable national
accounting standards for financial reporting that benefit
users;
• to bring about harmonisation of national accounting
standards with international accounting standards;
• to promote the use and application of those standards
by way of communication with and education of users,
preparers, auditors and the public;
• to actively contribute to the development of
accounting standards internationally, including,
Islamic-based accounting standards; and
• to promote and support research in the area of
financial reporting, in particular, for emerging markets
and Islamic markets.
 ISSUES COMMITTEE
• The Malaysian Accounting Standards Board (MASB) established a
committee in May 2002 called the Issues Committee to replace its
predecessor, the Interpretation Committee. The rationale for the
change of name is to reflect the expanded scope of the committee
which does not only deal with interpretations of approved accounting
standards but also other accounting related issues where there is no
existing accounting standard.
• The Committee is responsible for reviewing accounting issues
that have received or are likely to receive divergent views in
interpretation and to provide recommendations to the Board for
decision.
• The Committee comprises representatives from the accounting
profession, commerce, the academia as well as an analyst and
a solicitor. The following persons were appointed to the Committee
in recognition of their roles in the profession
DUE PROCESS OF MFRS
FRAMEWORK
 WORKING GROUP
• The Malaysian Accounting Standards Board (MASB) has
established more than 60 Working Groups to date, each is
responsible for different projects. A Working Group is chaired by a
member of the MASB and comprises a project manager,
representatives from the accounting profession, commerce,
academia as well as regulatory authorities.
• The Working Group plays an important role in the standards-
setting due process. Against this backdrop, it is formed by the
MASB to debate on emerging issues of significance to the
accounting profession. The Working Group is responsible for
reviewing and undertaking detailed studies of assigned project,
giving due regard to the statutory and regulatory reporting
requirements, practical implications as well as practices in
other major jurisdictions.
 CHALLENGES FOR STANDARD
SETTING
• Improving the overall financial reporting
framework in Malaysia in accordance with
international best practice.
• MASB needs to play a proactive role in
participating actively in the international
arena of standard setting.
• Lack of technical expertise
• Lack of adequate research