MASB Publishes Exposure Draft on Financial Instruments

The Malaysian Accounting Standards Board (MASB) announces the issuance of exposure draft on Financial Instruments (MASB ED 69) which provides guidance on the classification and measurement of financial assets.

 

MASB ED 69 is, word-for-word, IFRS 9 Financial Instruments issued by the International Accounting Standards Board (IASB) on 12 November 2009. IFRS 9 represents the completion of the first part of a three-part project to replace IAS 39 Financial Instruments: Recognition and Measurement with a new Standard. It deals with the classification and measurement of financial assets.  Proposals addressing the second part, the impairment methodology for financial assets were published for public comment by the IASB on 5 November, while proposals on the third part, on hedge accounting, will be issued in 2010.

 

MASB ED 69 uses a single approach to determine whether a financial asset is measured at amortised cost or fair value, replacing the many different rules in FRS 139. The approach in MASB ED 69 is based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets. The proposed standard also requires a single impairment method to be used, replacing the many different impairment methods in FRS 139. Thus MASB ED 69 improves comparability and makes financial statements easier to understand for investors and other users.

 

On this first part of IFRS 9, the MASB has received suggestions to put in place the Standard for application in Malaysia by January 2010 so as to allow entities to early apply IFRS 9 if they so choose. As IFRS 9 only covers the classification and measurement of financial assets, if early adopted, an entity need to apply the other provisions of FRS 139 Financial Instruments: Recognition and Measurement for other areas not covered in IFRS 9 (e.g. classification and measurement of financial liabilities, recognition and derecognition of financial assets and financial liabilities, impairment of financial assets, hedge accounting etc.).

 

In response to these suggestions, the MASB Board has approved the issuance of Exposure Draft ED 69 for a 2-week exposure period in order to fast track the issuance of IFRS 9 for application in Malaysia depending on the feedback the Board receives from its stakeholders. Interested parties, including the business communities, are encouraged to study the Exposure Draft and provide feedback to MASB.

 

The exposure period expires on 23 December 2009. 

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