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MASB ADOPTED 21 NEW FRS

Effective from 1 January 2005, the Malaysian Accounting Standards Board (“MASB”) has adopted the change of name from MASB Standards to the new Financial Reporting Standards (“FRS”) to converge with international accounting standards.

^{In keeping with the policy of convergence, MASB has also issued various exposure drafts during 2005 to revise or adopt 21 new FRS. These FRS will be effective for use beginning 1 January 2006. The revised and adopted new MASB standards are as follows:-}

_Standard

_Title

_{Standard Superseded}

_{Formerly Known As}

_{MASB Standards Revised by Exposure Drafts}

_{FRS 101}

_{Presentation of Financial Statements}

_{FRS 101 2004}

_{MASB 1}

_{FRS 102}

_Inventories

_{FRS 102 2004}

_{MASB 2}

_{FRS 108}

_{Accounting Policies, Changes in Accounting Estimates and Errors}

_{FRS 108 2004}

_{MASB 3}

_{FRS 110}

_{Events After the Balance Sheet Date}

_{FRS 110 2004}

_{MASB 19}

_{FRS 116}

_{Property, Plant and Equipment}

_{FRS 116 2004}

_{MASB 15}

_{FRS 117}

_Leases

_{FRS 117 2004}

_{MASB 10}

_{FRS 121}

_{The Effect of Changes in Foreign Exchange Rates}

_{FRS 121 2004}

_{MASB 6}

_{FRS 124}

_{Related Party Disclosures}

_{FRS 124 2004}

_{MASB 8}

_{FRS 127}

_{Consolidated and Separate Financial Statements}

_{FRS 127 2004}

_{MASB 11}

_{FRS 128}

_{Investments in Associates}

_{FRS 128 2004}

_{MASB 12}

_{FRS 131}

_{Interests in Joint Ventures}

_{FRS 131 2004}

_{MASB 16}

_{FRS 132}

_{Financial Instruments: Disclosure and Presentation}

_{FRS 132 2004}

_{MASB 24}

_{FRS 133}

_{Earnings Per Share}

_{FRS 133 2004}

_{MASB 13}

_{FRS 136}

_{Impairment of Assets}

_{FRS 136 2004}

_{MASB 23}

_{FRS 3}

_{Business Combinations}

_{FRS 122 2004}

_{MASB 21}

_{FRS 5}

_{Non-current Assets Held for Sale and Presentation of Discontinued Operations}

_{FRS 135 2004}

_{MASB 28}

_{New MASB Standards}

_{FRS 138}

_{Intangible Assets}

_-

_-

_{FRS 139}

_{Financial Instruments: Recognition and Measurement}

_{FRS 125 2004}

_-

_{FRS 140}

_{Investment Property}

_{FRS 125 2004}

_-

_{FRS 1}

_{First-time Adoption of Financial Reporting Standards}

_-

_-

_{FRS 2}

_{Share-Based Payments}

_-

_-

SUMMARY OF CHANGES RESULTING FROM THE ADOPTION OF THE NEW FRS
WITH EFFECT FROM 1 JANUARY 2006

The adoption of the 21 FRS, effective for companies with financial year ends beginning on or after 1 January 206, is in line w ith the objective to streamline the Malaysian accounting standards with the international accounting standards. While this move will promote greater transparency and provide more information to the users of financial statements, the requirements of the FRS are more complex and prescriptive compared to the previous MASB Standards. To assist our clients in understanding the changes resulting from the FRS, we have highlighted the major changes in certain FRS as follows:

FRS 108 Accounting Policies, Changes in Accounting Estimates and Errors

• The concept of fundamental error has been eliminated. All error corrections that are material are to be treated as “prior period errors” and accounted for similarly as a change in accounting policy.
• It is now a requirement to disclose an impending change in accounting policy when an entity has yet to implement a new Standard or Interpretation that has been issued but not yet come into effect, as well as the possible impact these changes will have on the entity’s financial statements in the period of initial application.

FRS 16 Property, Plant and Equipment

• Cost of property, plant and equipment (“PPE”) now includes the costs of its dismantlement, removal or restoration.
• If fair value can be measured reliably, an entity may carry all items of PPE of a class at a revalued amount.
• An entity is required to determine the depreciation charge separately for each significant part of an item of PPE.
• An entity is required to measure the residual value of an item of PPE at the estimated amount it would receive currently for the asset if the asset were already of the age and in the condition expected at the end of its useful life.
• An entity is required to begin depreciating an item of PPE when it is available for use and to continue depreciating it until it is derecognised, even if during that period the item is idle.
• An entity is required to derecognise the carrying amount of an item of PPE that it disposes of on the date the criteria for the sale of goods in FRS 1182004 Revenue would be met.

FRS 124 Related Party Disclosures

• This Standard applies to all entities, except exempt entities as defined in MASB SOP 1 Exempt Enterprise.
• The definition of “related party” has been expanded by adding parties with joint control over the entity and joint ventures in which the entity is a venturer.

FRS 136 Impairment of Assets

• The recoverable amount of an intangible asset with an indefinite useful life, an intangible asset not yet available for use and goodwill acquired in a business combination to be measured annually, irrespective of whether any impairment indicators exist.
• This Standard prohibits the recognition of reversals of impairment losses for goodwill.

FRS 3 Business Combinations

^{• All business combinations within the scope of this Standard are to be accounted for using the acquisition method.
• Prohibits the amortisation of goodwill arising from a business combination and instead requires the goodwill to be subjected to an annual impairment test, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
• Negative goodwill must be reassessed and any excess remaining after that reassessment must be recognised immediately in the income statement.}

FRS 139 Financial Instruments: Recognition and Measurement

• Financial assets are classified into 4 categories for the purpose of measurement subsequent to initial recognition:
• At fair value through profit or loss – carried at fair value with gains/losses recognised in income statement.
• Held-to-maturity (“HTM”) – carried at amortised cost and cannot be fair valued.
• Loans and receivables – carried at amortised cost and cannot be fair valued.
• Available-for-sale – carried at fair value with gains/losses recognised in equity.
• If an entity sells any HTM investments, all of its other HTM must be reclassified as available-for-sale for the current and next two financial reporting years.
• Financial liabilities are classified into 2 categories for the purpose of measurement subsequent to initial recognition:
• At fair value through profit or loss – carried at fair value with gains/losses recognised in income statement.
• Other liabilities – carried at amortised cost and cannot be fair valued.

FRS 2 Share-Based Payments

• Share-based payments are required to be recognised as an expense in the income statement. Share-based payments encompass the issuance of shares or rights to shares in return for services and goods, as well as employee share options.
• Share-based payments can be equity-settled (settled through the issuance of shares, share options or other equity instruments), cashsettled (settled through the payments of cash or other assets where the amount payable is based on the price of the entity’s shares) or a combination of both.
• Share-based payments transactions are measured at fair value.
• Equity-settled share-based payments are not re-measured subsequent to initial recognition.


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