The Malaysian Accounting Standards Board (MASB) has issued amendments to two standards, particularly to the Malaysian Financial Reporting Standards (MFRss) and the Financial Reporting Standard (FRSs). Amendments were applied to the Disclosure Initiative and Recognition of Deferred Tax Assets for Unrealized Losses of both standards.
Under the Disclosure Initiative, the Amendments to MFRS 107 require entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including changes from cash flows and non-cash changes.
The disclosure requirement could be satisfied in various ways, and one method is by providing reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities.
The Amendments are issued in response to requests from users of financial statements for information that will enable them to better understand the changes in a company’s debt position.
The Amendments are effective for annual periods beginning on or after 1 January 2017. Earlier application is permitted. Similar amendments are also made to FRS 107 Statement of Cash Flows.
Recognition of Deferred Tax Assets for Unrealized Losses
As for the Recognition of Deferred Tax Assets for Unrealized Losses, Amendments to MFRS 112 are issued to clarify whether deferred tax assets should be recognized for unrealized losses on fixed-rate debt instrument measured at fair value.
The Amendments clarify that decreases in value of a debt instrument measured at fair value for which the tax base remains at its original cost give rise to a deductible temporary difference.
The estimate of probable future taxable profits may include recovery of some of an entity’s assets for more than their carrying amounts if sufficient evidence exists that it is probable the entity will achieve this. An example is when an entity holds a fixed-rate debt instrument (measured at fair value) and expects to collect all the contractual cash flows.
The Amendments also clarify that deductible temporary differences should be compared with the entity’s future taxable profits excluding tax deductions resulting from the reversal of those deductible temporary differences when an entity evaluates whether it has sufficient future taxable profits. In addition, when an entity assesses whether taxable profits will be available, it should consider tax law restrictions with regards to the utilization of the deduction.
The Amendments are effective for annual periods beginning on or after 1 January 2017. Earlier application is permitted. Similar amendments are also made to FRS 112 Income Taxes.