Financial Reporting Development in Malaysia

Study Notes

Malaysia's financial reporting framework evolved over decades.
The 1940s saw the introduction of company ordinances.
The 1960s witnessed the development of crucial legislation: the Companies Act (CA) 1965 with its 9th Schedule and the Income Tax Act (ITA) 1967.
The 1970s introduced international accounting standards with the adoption of the International Accounting Standards (IASs) in 1978.
The 1980s further enhanced the framework with the development of Malaysian Accounting Standards (MASs) in 1984.
The 1990s saw the establishment of the Securities Commission (SC) in 1993, highlighting the importance of capital markets regulations.
The Malaysian Accounting Standards Board (MASB) was formed in 1997, a crucial step towards a more standardized and internationally comparable accounting framework.
1997 marked a shift towards adopting International Financial Reporting Standards (IFRSs) as the basis for financial reporting, although this became fully effective by 2006.
Since 2006, Malaysia has maintained a dual financial reporting framework, where IFRS rules are followed for listed companies and those with global operations, while local companies can utilize Malaysian Financial Reporting Standards (MFRS).
Currently, the MASB continues to refine the financial reporting framework, ensuring it remains relevant and aligns with global best practices.

Pre-MASB Era: Prior to the establishment of the MASB in 1997, Malaysia relied on a combination of local and international standards.
Pre-Adoption of IFRS: Leading up to the adoption of IFRS in 2006, the MASB progressively introduced a new framework for financial reporting, focusing on aligning it with international standards.
Post-Adoption of IFRS: After 2006, the focus shifted to ensuring the smooth implementation of IFRS and adapting to the changing landscape of global accounting standards.
The Transition: This period witnessed the adoption of IFRS in stages, starting with FRs 139 and then moving towards full implementation, demonstrating a gradual commitment to international best practices.
Current State: Malaysia currently operates a dual system, offering flexibility for different types of businesses.
Key Players:
- MACPA/MIA: The Malaysian Association of Certified Public Accountants and the Malaysian Institute of Accountants play a significant role in setting standards and promoting professionalism.
- MASB: This body is crucial in developing and maintaining a robust financial reporting framework, contributing to the integrity of financial markets and investor confidence.