The Malaysian Accounting Standards Board (MASB) has issued Exposure Draft (ED) 72 Financial Reporting Standard for Small and Medium-sized Entities (FRS for SMEs) intended for use by SMEs that do not have public accountability and are required to publish general purpose financial statements for external users.
ED 72 is identical with the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs), which was issued by the International Accounting Standards Board (IASB) in July 2009. It is a self-contained standard tailored for the needs and capabilities of smaller businesses. Many of the principles in Financial Reporting Standards (FRSs) for recognising and measuring assets, liabilities, income and expenses have been simplified, topics not relevant to SMEs have been omitted, and the number of required disclosures has been significantly reduced.
This draft FRS for SMEs proposes to provide improved comparability for users of accounts. It also aims to enhance the overall confidence in the accounts of SMEs, and reduce the significant costs involved of maintaining standards on a national basis.
The draft FRS for SMEs will also provide a platform for growing businesses that are preparing to enter public capital markets, where application of FRSs is required.
In Malaysia, there are currently two financial reporting frameworks for private entities and non private entities. Private entities are private companies and not subsidiaries or associates of, or jointly controlled by, entities which are required to prepare or lodge any financial statements under any law administered by the Securities Commission or the Bank Negara Malaysia. Non-private entities are required to apply FRSs whilst private entities have the option to apply either FRSs or Private Entity Reporting Standards (PERSs) in their entirety.
Similarly, at the International level, the accounting framework for the IFRS for SMEs is separate from the International Financial Reporting Standards (IFRSs) framework. Hence the decision on whether to adopt this Standard would not affect MASB’s IFRS convergence policy in 2012.
Before deciding to adopt the FRS for SMEs for application in Malaysia the Board would like to hear views on whether the proposed FRS for SMEs, MASB ED 52 Private Entity Reporting Standards (PERS), or existing PERS should be used by private entities. It also wants to hear opinions on whether non-private entities’ subsidiaries, associates and jointly controlled entities should be allowed to use the proposed FRS for SMEs when finalised.
The exposure period expires on 30 September 2010. Interested parties, including the business
communities, are encouraged to study the Exposure Draft and provide feedback to MASB.