Understanding Malaysia's Financial Reporting Standards
Financial reporting standards play a crucial role in ensuring the transparency and accountability for businesses in Malaysia. These standards help companies communicate their financial information accurately and consistently, allowing essential stakeholders like investors, lenders, and regulators to make informed decisions.
In Malaysia, the financial reporting standards are set by the Malaysian Accounting Standards Board (MASB), which is responsible for developing and issuing financial reporting standards in line with international best practices. The standards for financial reporting developed by the MASB are known as the Malaysian Financial Reporting Standards (MFRSs).
The MFRSs cover information that is relevant and useful to stakeholders, including:
- accounting policies
- presentation of financial statements
- disclosure of information.
Companies in Malaysia are to follow the standards of both the MFRSs and the International Financial Reporting Standards (IFRSs). The IFRSs are global accounting standards set by the International Accounting Standards Board (IASB). IFRSs are used by companies in over 160 countries around the world. Following the standards set by the IASB helps to promote international commerce and cooperation with Malaysian businesses and other participating countries.
Important Requirements for Malaysia’s Financial Reporting Standards:
- As of 2012, companies in Malaysia are now required to follow the same accounting standards as companies in other countries that use the IFRSs.
- All companies that prepare consolidated financial statements must adopt the IFRSs. Consolidated financial statements present the financial information of a parent company and its subsidiaries as a single entity.
- Small and medium-sized entities (SMEs) have simplified reporting requirements: The IFRS for SMEs provide a simplified framework for SMEs to prepare and present their financial statements.
- Companies must provide a comprehensive disclosure of all relevant financial information in their financial statements. This includes information on the company’s financial performance, financial position, cash flows, and any risks and uncertainties that the company faces.
- Companies are required to maintain financial statements so that they are up-to-date and accurate. This includes preparing interim financial statements, i.e., financial statements that are prepared at the end of each quarter, and annual financial statements, which are prepared at the end of each financial year.
Proper application of Malysia’s financial reporting standards ensures companies are transparent and accountable in their financial reporting. By following these standards, companies can communicate their financial information accurately and consistently, allowing stakeholders to make informed decisions.