The revised proposals follow the issue of a 'roadmap' in March 2013 proposing the introduction in Malaysia of ‘Financial Reporting Standards for Small and Medium-sized Entities’ (FRS for SMEs) which would have been virtually identical to the IFRS for SMEs. The FRS for SMEs would have been used by medium-sized private entities, with small entities continuing to use existing Malaysian Private Entity Reporting Standards (PERS), themselves based on pre-2003 international accounting standards.

The revised proposals, contained in MASB Exposure Draft ED 77 Malaysian Private Entities Financial Reporting Standard (MPERS), would:

• apply a single financial reporting framework to all private sector entities, completely replacing the current PERS with the Malaysian Private Entities Reporting Standard (MPERS). The MASB's reasons for the change from the roadmap proposals to retain the PERS include a belief that application of the MPERS to micro-sized entities should not be onerous, the existing PERS are outdated, and that is costly to maintain three different frameworks for use in Malaysia
• amend the requirements of the IFRS for SMEs in the Malaysian context in three areas:
  • income taxes - the MPERS would have income tax accounting requirements which are equivalent to existing IFRS literature (the IFRS for SMEs income tax requirements are based on the IASB's 2009 exposure draft, these proposals were not adopted, and the IASB has also tentatively decided to align the IFRS for SMEs requirements with IAS 12 Income Taxes)
  • real estate - removing principles that are consistent with IFRIC 15 Agreements for the Construction of Real Estate (non-private Malaysian real estate entities also have deferred application of Malaysian IFRS-equivalent standards)
  • exemption from preparing consolidated financial statements - requiring an ultimate Malaysian parent to prepare consolidated financial statements, regardless of whether any non-Malaysian ultimate parent has prepared consolidated financial statements.

The amendments from the IFRS for SMEs proposed in ED 77 were determined on the basis of MASB developed criteria on when it would be appropriate to make sure modifications in the Malaysian context. These criteria include whether the change would result in more relevant and useful information to users, result in improved comparability with private entity financial statements in other jurisdictions, respond to a need to reduce complexity, or consider IASB proposals for fundamentally different requirements in the existing IFRS for SMEs. The criteria were used to reject constituent calls for amendments to the IFRS for SMEs in areas such as property, plant and equipment, investment property, development costs and borrowing costs.

The revised proposals are open for comment until 30 September 2013. The MASB hopes to finalise the MPERS by the end of 2013 for application by Malaysian private entities in accounting periods beginning on or after 1 January 2016.

Click for press release (link to MASB website).