Introduction to Regulation in Financial Accounting

Regulation is created to benefit society, not specific groups.

Regulatory bodies can be controlled by the groups they're supposed to regulate.

Regulation is influenced by the interests of specific groups.

Different theories try to explain the reasons for regulatory changes.

Governments act neutrally to benefit society - balancing benefits and costs of the regulation.

Regulations must balance potential good with possible harm to society.

Different theories attempt to explain why politicians introduce regulations.

Assumption that the regulatory body acts as a neutral arbiter, not favoring specific interests.

The process of creating and establishing accounting standards and rules.

The influence of political factors and power dynamics in accounting standard-setting.

Prescribed rules or authoritative directions governing conduct.

Rules governing the preparation of financial statements, set by authorized bodies.

The belief that less accounting regulation is preferable, market forces will be sufficient.

Incentive for managers to act in the interest of shareholders and debtholders because of their own interests.

If a company's performance is poor, it poses a target for takeovers by other firms.

Incentive against poor performance.

Incentives for managers based on company's accounting performance.

Loan agreements which stipulate conditions based on reported financial data.

The cost of funding for a company (e.g., loans, issuing stock).

The idea that contracts can be used to ensure that all involved parties cooperate and have incentive alignment.

The difficulty of contracting when there are many stakeholders with different interests and needs.

Expenses in negotiation among many investors about accounting information.

The assumption that all parties or individuals are motivated or influenced by their own personal gain.

A Malaysian law that establishes FRF (Financial Reporting Foundation) to oversee MASB (Malaysian Accounting Standards Board).

The body that develops and issues accounting standards in Malaysia.

A trustee body overseeing MASB's performance, funding, and standards recommendations.

Rules and principles for preparing financial statements.

Companies incorporated in Malaysia must comply with MASB-approved accounting standards.

A legal requirement for directors and management to ensure their company's financial statements adhere to accounting standards.

A Malaysian law to update the 1997 Financial Reporting Act.

Rules that public companies listed on the Kuala Lumpur Stock Exchange must follow.

The penalties for breaching accounting regulations, including compliance directives, reprimands, professional education, assigned reviewers, and financial penalties (up to RM500,000).

A maximum financial penalty of RM500,000, applicable for breaching regulations.

A temporary or permanent suspension from working as an auditor for entities involved in public interest or specific financial reporting.

The Malaysian Accounting Standards Board develops and sets accounting standards in Malaysia.

Provides funding and reviews the performance of the MASB.

MASB aims to create a structured process for developing standards, framework and guidance, prioritizing the needs of financial statement users.

Entities important for the general public, possibly regulated/involved in crucial financial information for people

The Malaysian Accounting Standards Board (MASB) is governed by a board appointed by the Minister of Finance. This board includes a chairman, the Accountant General, six members with expertise in finance and accounting, and three advisors from the Securities Commission, Companies Commission, and Bank Negara Malaysia.

The MASB Issues Committee was established to replace the previous Interpretation Committee. This committee addresses accounting issues, providing interpretations of approved standards and dealing with issues where no standard exists.

The MASB Issues Committee reviews accounting issues with conflicting interpretations. It analyzes these issues and offers recommendations to the MASB for decisions.

The MASB follows a structured process for creating and adopting new accounting standards. This process involves identifying issues, conducting research, consulting with stakeholders, and revising draft standards until they are finalized.

The MASB appoints working groups to examine specific accounting issues thoroughly. These groups are led by a MASB member and are responsible for debating the issues and forming recommendations.

The MASB considers international accounting standards (IASC) when developing its own standards. This ensures consistency and harmonization in the global accounting landscape.

The MASB actively promotes the implementation and compliance of its accounting standards through various activities. It works with organizations and individuals in Malaysia to ensure the successful adoption of these standards.

After thorough review and feedback, the MASB issues its official accounting standards. These standards provide clear guidance for financial reporting in Malaysia.

The FRF (Financial Reporting Foundation) provides funding and reviews the performance of the MASB.

A draft version of an accounting standard that is released for public comment before it is finalized.

A situation where there are too many accounting standards, making it difficult for companies to comply.

Several reasons contribute to standard overload, including the desire to reduce accounting judgement and litigation, protect public interest, and address increasing investor needs.

Guidance on applying GAAP to specific accounting issues, including Statements of Principles, Urgent Issues Abstracts, and Technical Releases.