August 2008 www.micpa.com.my KDNPP 3809/3/2009
The Malaysian Accountant AUGUST 2008
EDITORIAL BOARD Datuk Robert Yong Kuen Loke (Chairman) Dato’ Nordin Baharuddin Dato’ Hj Maidin Syed Ali Loh Lay Choon Ng Kim Tuck See Huey Beng Sam Soh Siong Hoon Tan Chin Hock Chia Kum Cheng (Co-opted) Chong Kian Soon (Co-opted) PRINCIPAL OFFICE BEARERS President Dato’ Nordin Baharuddin Vice President Dato’ Ahmad Johan Mohammad Raslan PRINCIPAL OFFICERS Executive Director FEATURE page 3 Foo Yoke Pin ([email protected]) Technical Manager PERSPECTIVE 2 Melissa Yeoh ([email protected]) Education & Research Manager FEATURES Jenny Chua ([email protected]) Malaysian Tax Updates 3 Public Affairs & Communications Manager Corporate Governance Analysis in Malaysia 7 Vicky Rajaretnam ([email protected]) Overview of Takaful in Malaysia 10 Marketing Manager Corporate Governance for Takaful 12 Evelyn Lim ([email protected]) Examination Officer INSTITUTE NEWS Lee How Lai ([email protected]) MICPA Turns 50 14 Assistant Manager, Membership Recipient of Anugerah Presiden 2008: Salyasusanti Achom YBhg Tan Sri Dato’ Seri Mohd Hassan Marican 17 ([email protected]) November 2008 Examination 20
Single Copy: RM7.50 May 2008 Examination Results 21 Subscription: 6 issues Continuing Professional Development (CPD) Programmes 22 RM43.50 per annum Career Talks at Secondary Schools 22 (including P&P within Malaysia only) Career Fairs and Exhibitions 23 The Malaysian Accountant is published Collaboration and Career Talks at Universities 24 by: The Malaysian Institute of MICPA–BURSA MALAYSIA Business Forum 2008 24 Certified Public Accountants (3246-U) 15, Jalan Medan Tuanku YOUNG CPA 50300 Kuala Lumpur, Malaysia Tel: 03-2698 9622 Fax: 03-2698 9403 Young CPA Malaysia Symposium 2008 E-mail: [email protected] - Charting the Future of Accounting and Finance Professionals 18 Website: www.micpa.com.my PROFESSIONAL NEWS Note: The views expressed in this journal are not MASB Update 26 necessarily those of the Institute or the Editorial Board. All right reserved; no part of this publication may be IASB Update 27 transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, IFAC Update 30 without prior pernission of the Institute or the Editorial Board. CASE LAW HIGHLIGHTS Concept & Design See Teow Guan & Ors v Liquidators of Kian Joo Holdings Sdn Bhd Digibook Sdn Bhd (in Liquidation) & Ors 35 Reign Associates Sdn Bhd
Printer GLOBAL INSIGHT Thumbprints Utd Sdn Bhd News from Down Under 36 World News 38 LIFESTYLE Taiping – A Town of Many Firsts 39 PERSPECTIVE
t was a significant night for the members of the MICPA as they got together to celebrate the Institute’s 50th Golden Anniversary on July 26, 2008. To commemorate the auspicious occasion, members of the accounting fraternity attended the Golden Jubilee Gala Dinner aptly themed A Golden Celebration on the Red Carpet. IThe night of fellowship and camaraderie also saw the launch of the Institute’s 50th Anniversary Logo by the guest of honour YB Dato’ Hj Hasan bin Malek, Deputy Minister in the Prime Minister’s Department. Several individuals who had made contributions in one way or another were also acknowledged at the gala night. One of the most significant recognition was accorded to YBhg Tan Sri Dato’ Seri Mohd Hassan Marican, President and Chief Executive Officer of Petronas Berhad. The Deputy Minister presented the Anugerah Presiden 2008 to Tan Sri Hassan who was admitted as a member of the MICPA in 1992. Tan Sri Hassan whose eminent career spans over 35 years has made exceptional contributions to society, the accountancy profession and the Institute. YBhg Dato’ Nordin Baharuddin, the President also honoured the early members of the Institute as well as the first CPA graduate member. Also discussed at great length is the subject of corporate governance. Corporate governance can be viewed as the financial health tool for management and directors to monitor the health status of the organisation. In managing an organisation, there must be systematic and procedural ways to ensure the sustainability and survival of the business in the fast-moving economy coupled with highly competitive market forces. Corporate governance is aimed at enhancing accountability, transparency and trustworthiness. It recognises the role of market forces in the efficient allocation of resources, socio-economic justice and well-being of all through an integrated role of moral values, market mechanism and good governance. In the local bond market context, the article inside highlights four broad categories of poor corporate governance: non-compliance of information covenants; related party transactions and improper payments; misappropriation of funds; and earnings manipulation. This issue also touches on the Young CPA Malaysia Symposium themed Charting the Future of Accounting and Finance Professionals. The symposium was held to address relevant issues in today’s business environment which would help them to capitalise on their career development opportunities. Participants were advised to continuously upgrade their knowledge, skills and expertise in order to provide relevant and high quality services to employers and clients. It is important for the young CPAs uphold their objectivity, integrity and technical excellence to fulfil the needs of both the local communities and global markets. The lifestyle section focuses on a local destination – the unassuming and quiet town of Taiping, the second largest town in Perak after Ipoh and the wettest town in Peninsular Malaysia. In the 19th century the town had a thriving mining business and was the social focus of the British administration. This former state capital is a pioneer in many fields achieving many ‘firsts’ in the country. Look inside to find out.
2 | The Malaysian Accountant | August 2008 www.micpa.com.my FEATURE Malaysian Tax Updates
BY RENUKA BHUPALAN
n recent months, we have witnessed significant taxed on the portion of chargeable employment income developments which have affected businesses and attributable to the number of days that they are in individuals alike in the form of rising fuel prices, the Malaysia. This treatment for expatriates working for IPCs resulting escalation of energy costs and the increase and RDCs has now been enacted in the recently gazetted in food prices. The 2009 Budget proposals due to be Income Tax (Exemption) (No.2) Order 2008. Iannounced on August 29, 2008, will undoubtedly include tax developments as well. This Article (written prior to the Issuance of Islamic Securities by Special 2009 Budget proposals) provides an update of tax Purpose Vehicles (SPVs) developments in the last quarter. This includes several gazette orders which have been enacted to implement SPVs which were established to issue Islamic securities were changes, some of which were proposed in the 2008 Budget. exempt from tax in respect of income derived from such securities but were required nonetheless to maintain Expatriates working for International separate accounts in respect of other sources of income Procurement Centres (IPCs) and (under the Income Tax (Exemption) (No.14) Order 2007). Regional Distribution Centres (RDC’s) The 2008 Budget proposed that income of such SPVs be treated as income of the company establishing the SPV and In the 2008 Budget, it was proposed that expatriates that the SPV need not comply with the provisions of the working for IPCs and RDCs enjoy the same tax treatment Income Tax Act, 1967. A new provision, Section 60I was as those working for companies enjoying the Operational enacted in the Income Tax Act, 1967 (via the Finance Act Headquarters incentive. Such expatriates travel extensively 2007) to allow for this. (Note however that this does not in the course of their employment and hence are only apply to SPVs issuing asset-backed securities). As a result of
www.micpa.com.my August 2008 | The Malaysian Accountant | 3 via a withholding tax charge. To enhance skills in the Islamic Financial sector to promote Malaysia as an Islamic financial hub, an exemption from withholding tax is given to non-resident individuals in respect of income arising from the provision of technical advice, assistance or services rendered in relation to Islamic Finance as proposed in the 2008 Budget and enacted in the Income Tax (Exemption) (No. 3) Order 2008. To qualify for this withholding tax exemption, the non-resident individual must be verified by the Malaysia International Islamic Financial Centre Secretariat as an expert in the field of Islamic finance. This exemption is in force from September 8, 2007 until December 31, 2016.
Islamic Fund Management Services
The exemption from tax on income from the provision of Islamic fund management services to foreign investors has been widened to the provision of such services to local investors pursuant to the Income Tax (Exemption) (No. 6) Order 2008. The exemption is available to licensed Malaysian incorporated fund management companies.
Accelerated Capital Allowances on Security Equipment
The Income Tax (Accelerated Capital Allowance) (Security this new provision, the 2007 Order referred to above is no Control Equipment or Monitor Equipment) Rules 2008 longer required and has been revoked by the Income Tax have been gazetted and are effective for the years of (Exemption) (Revocation) Order 2008. It should be noted assessment 2008 to 2012. Accelerated capital allowances that revocation is effective from the year of assessment 2007. will be given in respect of specified equipment installed for security in factories and for monitor equipment installed in Revocation of Income Tax (Accelerated specified lorries. An initial allowance of 20% and an Capital Allowance) Renewable Energy annual allowance of 80% will be given in relation to such Rules (2005) equipment. Effectively therefore, the equipment will be fully depreciated for tax purposes in the first year. The 2008 Budget proposed that companies generating renewable energy for their own consumption be granted Non-Profit Oriented Schools 100% investment tax allowance on their qualifying capital expenditure over a period of 5 years. Accordingly, the Income derived by qualifying persons from the previously available accelerated capital allowances for management of registered non-profit oriented schools will such expenditure will no longer be available. Therefore the be exempt from tax pursuant to the Income Tax 2005 Rules mentioned above have been revoked by the (Exemption) (No. 5) Order 2008 with effect from the year new Income Tax (Accelerated Capital Allowance) of assessment 2008. (Renewable Energy) (Revocation) Rules 2008. Note that the investment tax allowance will only be available for Gifts of Personal Computers to applications made to the Malaysian Industrial Development Employees and Payment of Authority (MIDA) up to December 31, 2010. Broadband Subscriptions
Withholding Tax Exemption for Pursuant to the Income Tax (Exemption) (No. 4) Order Non-Resident Experts in Islamic Finance 2008, employees will not be taxed on gifts of personal computers from employers and on the payment by their Non-resident consultants who provide technical advice, employers of monthly broadband subscription fees assistance or services in Malaysia are generally subject to (registered in the name of the employer). The exemption tax on the income arising therefrom. The tax is imposed applies from the year of assessment 2008 to 2010. It
4 | The Malaysian Accountant | August 2008 www.micpa.com.my should be noted that hand phones with computer facilities Labuan Offshore Companies are excluded from the exemption. From the employer’s perspective, the cost of providing these benefits will be tax Election for Labuan Offshore Companies to be deductible pursuant to the Income Tax (Deduction for Gifts Taxed under the Income Tax Act, 1967 (ITA) of New Personal Computers and Monthly Broadband The 2008 Budget proposed a change in the law allowing Subscription fees to Employees) Rules 2008. Labuan offshore companies (OCs), which have been taxed under the Labuan Offshore Business Activity Tax Act, 1990 Accelerated Agriculture Allowance (LOBATA) to elect irrevocably to be taxed under the ITA. The Finance Act 2007 amended the ITA and LOBATA to Qualifying agricultural expenditure incurred on an allow for this. The Labuan Offshore Business Activity Tax agricultural project or on a forest plantation project for (Forms) (Amendment) Regulations 2008 were recently rubber wood will be eligible for a 100% allowance (subject gazetted, to provide for a prescribed form on which the to conditions) pursuant to the Income Tax (Accelerated election is to be made. In addition, the Inland Revenue Agriculture Allowance) (Plantation of Rubber Wood Tree) Board has issued guidelines on the tax treatment of OCs Rules 2008. which elect to be taxed under the ITA.
Public Ruling No. 2/2008 – Liberalisation of Rules in Relation to Labuan Reinvestment Allowance Offshore Companies The Labuan Offshore Financial Services Authority (LOFSA) A Public Ruling on Reinvestment Allowance (RA) has has recently announced a liberalisation in the rules finally been issued. RA claims have often been the focus pertaining to OCs. LOFSA has granted a blanket approval of tax audits and it is therefore useful to have a Public to allow OCs to: Ruling to provide clarification on the IRB’s view of the i) carry on business with Malaysian residents, following: ii) invest into domestic companies (so long as the holding - projects that qualify for RA; does not amount to a controlling holding); and - expenditure that qualifies for RA; iii) wholly own a domestic company to carry on an offshore - the period of eligibility for RA; and business - the computation of RA. It should be noted however that where approvals are Taxpayers in the manufacturing and agricultural required from other regulatory authorities, such as Bank sectors should familiarise themselves with Public Ruling Negara Malaysia, the Securities Commission and the Foreign No. 2/2008. Investment Committee (FIC), such approvals must still be obtained. Further, LOFSA has issued a notification form which Guidelines on the Income Tax OCs are required to submit when undertaking (i) – (iii) above. Treatment From Adopting FRS 139 – Financial Instruments: Recognition and Measurement
The Ministry of Finance (MOF) has issued the above guidelines which are applicable to financial institutions only and are effective from the year of assessment 2008. FRS 139 relates to the recognition and measurement of financial instruments for accounting purposes. Although the effective date for the implementation of FRS 139 has been deferred by the Malaysian Accounting Standards Board, Bank Negara Malaysia (BNM) has incorporated a significant portion of the FRS 139 into its reporting requirements as per the BNM guidelines and directives on financial assets and liabilities. The purpose behind the MOF’s guidelines is to address the income tax treatment arising from the adoption of FRS 139 with a view to converging the accounting and tax treatment of financial assets and liabilities, in particular, the timing of income recognition and the deductibility of expenses. The guidelines can be obtained from the MOF’s website: www.treasury.gov.my.
www.micpa.com.my August 2008 | The Malaysian Accountant | 5 Windfall Profit Levy
Electricity and oil palm fruit have become prescribed goods for the purposes of the Windfall Profit Levy Act, 1998. The impact of this is as follows:
Impact Computation of Windfall Profit Levy (WPL) Electricity: Producers of electricity will be subject to a windfall profit levy (WPL) on a return [Profit (before interest, tax and WPL) on assets (ROA) which exceeds 9% per financial year. – (9% of fixed assets)] x 30% WPL is payable pursuant to the Windfall Profit Levy (Electricity) Order 2008.
Oil Palm fruit: i) For Peninsular Malaysia: Plantation companies/oil palm fruit producers who own oil palm holdings which WPL = (Monthly average national price of in aggregate are not less than 100 acres are subject to a WPL in respect of crude palm oil – RM2,000) x 0.03 x monthly total oil palm fruit produced. production of oil palm fruit in metric tonnes WPL is payable pursuant to the Windfall Profit Levy (Oil Palm Fruit) Order 2008. ii) For Sabah and Sarawak: WPL = (Monthly average national price of crude palm oil – RM2,000) x 0.015 x monthly total production of oil palm fruit in metric tonnes
Other Gazette Orders of a letter to the Director General of Customs or his representative indicating the reasons for the failure to file Several other Gazette Orders have been recently issued the appeal within the stipulated time frame. The said including the following: application must be sent by way of Registered Post or by - Income Tax (Deduction of Tax on the Distribution of personal service. (Applications sent by personal service Income of a Family Fund, Family Re-Takaful Fund or would need to be acknowledged by the Customs officer). General Fund) Rules 2008 - Income Tax (Set-Off for Tax Charged on Actuarial Double Tax Agreements Surplus) Rules 2008 Malaysia and Qatar signed a double tax agreement (DTA) Indirect Tax on July 3, 2008. The details of the DTA will be reported when this information is available. Service Tax With effect from July 1, 2008, the annual sales turnover Conclusion threshold for restaurants (excluding those located in hotels) has increased from RM300,000 to RM3 million, The above summarises the tax developments in Malaysia pursuant to the Service Tax (Amendment) Regulations over the last few months. It is important that reference be 2008. This means that service tax cannot be imposed by a made to the relevant legislation, guidelines and public restaurant (other than one located in a hotel) unless its rulings to ensure a clear understanding of the changes. As turnover within a twelve-month period exceeds RM3 million. indicated at the outset, the 2009 Budget Proposals have not been announced at the time of writing this article, and Extension of Time to Appeal clearly, we can expect several tax proposals. It is hoped Taxpayers who seek to appeal against a decision of the that the proposals will take account of the increased costs Director General of Customs may do so by filing a of doing business and rising costs of living affecting prescribed form, Form A within 30 days from the date of Malaysians as a whole. written notification of such decision. In the case where it Renuka Bhupalan is a Director at TAXAND MALAYSIA is inevitable that an appeal needs to be filed out of time, Sdn Bhd which is part of the TAXAND network of independent the taxpayer may apply for an extension of time under tax consulting firms in 44 jurisdictions. She can be contacted Regulation 3 of the Customs (Appeal Tribunal) Regulations at [email protected]. The views expressed are the personal 2007. The Customs Appeal Tribunal has issued guidelines views of the writer. on such applications (for an extension of time to file The Analysis of the 2009 Budget Proposals will be appeals). Essentially, the application can be made by way published in the October 2008 issue of The Malaysian Accountant.
6 | The Malaysian Accountant | August 2008 www.micpa.com.my FEATURE Corporate Governance Analysis in Malaysia
BY RHB RESEARCH
ood corporate governance is always a In the local bond market context, we highlight four broad blessing to investors, which heightens in categories of poor corporate governance: non-compliance importance given the difficulty in aligning of information covenants; related party transactions and the interest of shareholders with improper payments; misappropriation of funds; and bondholders. earnings manipulation. GAs an example, company owners may think a We offer some suggestions for investors to search for business venture that could yield an expected return on nascent signs of deteriorating corporate governance and investment (ROI) of 20% is appealing despite a failure rate earnings quality, including a company’s timely of 70%. However, from the standpoint of bond investors, dissemination of information, growing related party incremental benefits from taking excessive risk will mostly transactions, to be watchful for purposes and use of bond accrue to equity owners at the expense of lenders. proceeds and potential signs of earnings manipulation. In this case, strict financing covenants are an option that bondholders can use to protect themselves in Broad corporate governance curtailing moral hazard and reducing chances of business issues in Malaysia owners from taking advantage of this asymmetric reward profile. At the root of finance principles, excess funds provided by In other instances, a complicated ownership structure investors feed through businesses which require financing, and “poison pill” for corporate takeovers may help equity in exchange for gaining a certain expected rate of return owners obtain a firm grip of company ownership. However, in future at the expense of sacrificing existing spending such practices may impede corporate takeovers, indulge patterns. poor management and prejudice the interest of creditors. However, how can the suppliers of funds be assured their funds will be put into productive projects, rather than
www.micpa.com.my August 2008 | The Malaysian Accountant | 7 just simply help business owners cash out their shareholdings? This is related to the agency problem, where the overlap of control and ownership causes inappropriate resource allocation. In Malaysia, with the majority of publicly traded companies being either family-owned or controlled by dominant shareholders, the agency problem is not so much an issue for owner and management, but between the company management and the minority shareholders, as well as other stakeholders. Typically, the interest of owners and creditors (as well as other stakeholders) may not be aligned due to different incentives and the asymmetric information gap regarding company health. The situation may be further complicated by the cross-shareholdings of these family-owned shareholders on other closely related companies, and the business dealings based on personal and political connections. In the bond market, conflicts of interest can arise where the investment bank and bond trustee are all “under one roof”, causing the likelihood of more lenient compliance requirements from trustee, to the detriment of bondholders. management in order to continue providing services to the Given this, a well-established legal infrastructure and company. strict enforcement would play a crucial role to safeguard We understand that some countries have introduced the interest of company stakeholders, even though it may mandatory rotation of audit firms to protect auditor be difficult to prove that the act of directors is ultra vires or independence, though the scheme is not without debate fraudulent towards minority shareholders and other and resistance. stakeholders. Larger minority shareholdings are usually associated Despite being one of the frontrunners with respect to with a higher turnover of directors and replacement of corporate governance in the region, there are still some managers in response to poor performance than those other inherent governance issues with our current without it. Nonetheless, substantial minority shareholdings ownership structures. by the institutional investors in the local market are With some conglomerates and companies in Malaysia uncommon, thus reducing the opportunity for large having the complex and pyramid model for their investors to act as a disciplining mechanism. ownership structure, this has reduced, if not eliminated, the Also, creditors like banks and bondholders have very possibilities of the company being taken over (this also limited access to the company management and the partly explains why leveraged buyouts (LBO) are not business operations of the company. prevalent in Malaysia), thereby undermining the corporate For the case of bondholders, any enquiry on the governance system, resulting in poor management not company operations and financial conditions may only be being punished. allowed via the request through the bond trustee, which Additionally, the pyramid structure helps controlling will inevitably impede the process of timely dissemination shareholders draw capital, selectively passed down to less of crucial information. desired assets in subsidiaries and adopting discriminative In a collaborative study on Malaysia’s corporate transfer pricing. Finally, apparently fragmented shareholdings governance disclosures conducted by Standard & Poor’s tend to be disguised via indirect shareholdings and (S&P) and National University of Singapore in June 2004, nominees, lending subterfuge to linkages pointing to a single, the study highlighted that 32% of the top 50 largest ultimate majority holder. capitalised companies listed then in the exchange had one- Meanwhile, appointment and removal of a director is third or less independent directors on their boards, done according to simple majority vote by shareholders; suggesting that third party checks/balances on a company therefore, major shareholders would have a disproportionate may still have room for improvement. influence over the proceedings. Furthermore, S&P said that only one out of the top The method of appointing an auditor is similar to five best scoring companies had a board with majority appointing a director; therefore, auditor independence independent directors, and only two companies gave its could be weakened due to the influence of dominant directors with independent access to management. shareholders. Some auditors may even collude with the Additionally, the study also underlined that the selection of
8 | The Malaysian Accountant | August 2008 www.micpa.com.my a company’s audit, remuneration and nomination sparse and inadequate. Hence, a higher risk premium and committees were not really transparent for most of the thus lower valuation would usually be accorded by companies. investors to little known and poorly “governed” companies. From recent corporate governance cases, there are a few major trends to take note from local bond issuers: Impact of corporate governance on ratings and PDS yields volatility: Corporate governance issues will inevitably Non-compliance of information covenants: A most drive ratings and yields volatility, increasing the return common trait that problematic companies tend to have. uncertainties. Poor corporate governance has adversely We notice that most troubled companies were slow to affected the rating prospects of companies. Furthermore, provide timely information on their financial health prior in most circumstances, rating downgrades have been to heading into trouble; hence, it is a nascent sign to spot quick and deep, underscoring the severity of poor ailing companies; corporate governance to investors. The major problems of poor governance therefore are its lack of calculable risk, its Related party transactions and improper payments: uncontrollable nature, and disproportionately large Business dealings based on non-competitive tenders are negative impact to a bond’s credit rating. This is unlike, detrimental to company profits, and enrich related parties, say, the gradual decline in sales due to a slower business such as company directors, senior management and their cycle. As such, we opine it is even more important that family members. However, improper payments could be indicators of corporate governance quality be given even harder to substantiate, given that these payments do weighty consideration. not require separate disclosure like related party transactions; Links between business cycle, “name”, sector preferences and governance : Investors form their decisions based on the Misappropriation of funds: Proceeds of the bond company track record and sector preference. It should be issuance may go to purposes not stipulated in the noted that issues of corporate governance seldom emerge financing documents. Also, general borrowing terms, such during a booming economy, given that companies usually as funding for general working capital requirements, may enjoy thick profit margins and conducive lending not help the surveillance or indicate specificity of proceeds conditions. Consequently, corporate governance records used. Besides, a company may finance certain non-core during the Asian Financial Crisis 1997/98 play a central role businesses using their projected cash flows, which should for the “name” (reputational) preference for a company. have been used to meet their financial obligations and However, thriving sectors and heavily regulated industries other operational funding requirements; and such as banks and insurance companies are usually attached with lower risk premiums. It is worth mentioning that the Earnings manipulation: Commonly known as merger & acquisitions and tight central bank supervision in “creative accounting”, where the management the banking sector has significantly reduced the link between intentionally attempts to alter financial statements to complex conglomerates and banks as well as ownership mislead stakeholders about the company’s underlying concentration. Hence, some yield premium imputations of performance for their private gains. Detecting potential better corporate governance have been accorded to bank signs of earnings manipulation are: the volatility and size bonds. In a nutshell, risk aversion comes hand-in-hand with of earnings relative to cash flows; the correlation between investor preference for well-governed companies. cash flows and accruals; the extent of discretion in accounting methodology in areas such as accruals, mark- Well-governed companies can enhance returns: Corporate to-market policies, and depreciation; and the extent of governance is one of the most crucial qualitative factors in loss avoidance and income trend management. investment decisions. Numerous international studies have demonstrated that investment performance is positively Investment implications in corporate governance: Poor correlated with the quality of corporate governance. In a corporate governance implies information asymmetry, Global Investors Opinion survey done in 2002 by Mckinsey, which creates risk. In modern investment theory, capital institutional investors mentioned that they would pay will flow to an investment till the marginal rate of return additional 22% premium on average to own well-governed is on par with the opportunity cost of funding, so that companies in Asia and Latin America. In the same vein, investors would not earn excess returns, under the good corporate governance does not only reward the conditions of an efficient market. investors, but also benefits the company itself, given it attracts more investors and lenders, thereby reducing However, in reality, investors would have to deal with borrowing costs (i.e bond yields). information asymmetry — particularly in privately-held This article appeared in The Edge Daily on June 30, 2008 companies, where the coverage of media and analysts are and was extracted from the website at www.theedgedaily.com
www.micpa.com.my August 2008 | The Malaysian Accountant | 9 FEATURE Overview of Takaful in Malaysia
activities. Takaful is an insurance concept in Shariah whereby a group of participants mutually agree among themselves to guarantee each other against a defined loss or damage that may inflict upon any of them by contributing as tabarru’ or donation in the takaful funds. It emphasises unity and co-operation among participants. Takaful is not a new concept as it had been practised by the Muhajirin of Mecca and the Ansar of Medina following the hijra of the Prophet over 1400 years ago. Tabarru’ is the agreement by a participant to relinquish as donation, a certain proportion of the takaful contribution that he agrees or undertakes to pay, thus enabling him to fulfil his obligation of mutual help and joint guarantee should any of his fellow participants suffer a defined loss. The concept of tabarru’ eliminates the element of uncertainty in the takaful contract. The sharing of profit or surplus that may emerge from the operations of takaful is made only after the obligation of assisting the fellow participants has been fulfilled. Thus, the operation of takaful may be envisaged as a profit sharing business venture between the takaful operator and the individual members of a group of participants. Takaful operations are regulated and supervised by BNM since 1988 with the appointment of the BNM Governor as the Director-General of Takaful. In October 1995, the ASEAN Takaful Group (ATG), a grouping of takaful operators in Brunei, Indonesia, Malaysia and Singapore was formed to enhance mutual co-operation he concept of takaful (Islamic insurance) was and to facilitate the exchange of business among takaful first introduced in Malaysia in 1985 when the operators in ASEAN. In 1997, the Malaysian takaful first takaful operator was established to fulfil industry took a leap forward with the formation of ASEAN the need of the general public to be protected Retakaful International (L) Ltd. (ARIL) as an offshore bTased on the Islamic principles. The legal basis for the retakaful company in Labuan. The establishment of ARIL establishment of takaful operators was the Takaful Act was to create a vehicle for more dynamic retakaful which came into effect in 1984. exchanges among ATG members and provides additional Insurance as a concept does not contradict the retakaful capacity to further reduce their dependence on practices and requirements of Shariah. In essence, conventional reinsurance. insurance is synonymous to a system of mutual help. However, Muslim jurists are of the opinion that the Types of business operation of conventional insurance does not conform to the rules and requirements of Shariah as it involves the The takaful businesses carried on by the Malaysian takaful elements of uncertainty (Gharar) in the contract of operators are broadly divided into family takaful business insurance, gambling (Maisir) as the consequences of the (Islamic "life" insurance) and general takaful business presence of uncertainty and interest (riba) in its investment (Islamic general insurance).
10 | The Malaysian Accountant | August 2008 www.micpa.com.my Muslim jurists are of the opinion its participants for any material loss, damage or destruction that any of them might suffer arising from a misfortune that the operation of that might inflict upon his properties or belongings. The contribution that a participant pays into the general conventional insurance does not takaful fund is wholly on the basis of tabarru'. If at the end conform to the rules and of the period of takaful, there is a net surplus in the general takaful fund, the same shall be shared between the requirements of Shariah as it participant and the operator in accordance with the principle of al-Mudharabah, provided that the participant involves the elements of has not incurred any claim and/or not received any uncertainty (Gharar) in the benefits under the general takaful certificate. The various types of general takaful scheme provided contract of insurance, gambling by the takaful operators include: - • Fire Takaful Scheme; (Maisir) as the consequences of • Motor Takaful Scheme; the presence of uncertainty and • Accident/Miscellaneous Takaful Scheme; • Marine Takaful Scheme; and interest (riba) in its investment • Engineering Takaful Scheme. activities. Family Takaful: Individual plan - Mortgage - Health - Education - Travel Family Takaful Business - Family plan - Waqaf In general, a family takaful plan is a combination of long- Group plan - Group family term investment and mutual financial assistance scheme. - Group medical The objectives of this plan are: - Annuity - Employees Provident Fund • to save regularly over a fixed period of time; - Retirement • to earn investment returns in accordance with Islamic principles; and General Takaful: • to obtain coverage in the event of death prior to Motor maturity from a mutual aid scheme. Fire Each contribution paid by the participant is divided and Marine, aviation and transit credited into two separate accounts, namely: - Miscellaneous Includes: • The Participants' Special Account (PSA) - Personal accident A certain proportion of the contribution is credited - Workmen corporation into the PSA on the basis of tabarru'. The amount - Liability depends on the age of the participant and the cover - Engineering period. - House owners • The Participants' Account (PA) The balance goes into the PA which is meant for Registered Takaful Operators savings and investments only. Examples of covers available under family takaful business • CIMB Aviva Takaful Berhad are as follows: - • Hong Leong Tokio Marine Takaful Berhad • Individual family takaful plans; • HSBC Amanah Takaful (Malaysia) Berhad • Takaful mortgage plans; • MAA Takaful Berhad • Takaful plans for education; • Prudential BSN Takaful Berhad • Group takaful plans; and • Syarikat Takaful Malaysia Berhad • Health/Medical takaful. • Takaful Ikhlas Sdn Berhad General Takaful Business • Takaful Nasional Sdn Berhad This article is extracted from Bank Negara Malaysia’s The general takaful scheme is purely for mutual financial website at www.bnm.com.my help on a short-term basis, usually 12 months to compensate
www.micpa.com.my August 2008 | The Malaysian Accountant | 11 FEATURE Corporate Governance for Takaful
BY SAIFUL BAHRI SARONI
n managing an organisation, there must be between materialistic notion and religious, moral and systematic and procedural ways to ensure the humanistic frame of action. Takaful operation is a branch sustainability and survival of the business in the fast- of Islamic economics that serves the need of the public. moving economy coupled with highly competitive Imarket forces. Corporate governance is aimed at ISLAM enhancing accountability, transparency and trustworthiness. These values are paramount in Takaful operations as well Aqidah as Islamic financial transactions on a bigger scale. Corporate governance is about the way in which the Faith & Belief
ic P h
t I board of a company oversees the running of the firm by its r E
a S A ct &
c s L
M i t ce e iv s ti i i A A t & l managers, and how board members are in turn ie ra M L s o M S accountable to shareholders, stakeholders and the I Shariah Akhlaq Practical company. Activities It recognises the role of market forces in the efficient Man to God Man to Man Economic Relationship Relationship Activities
allocation of resource, socio-economic justice and well- Social being of all through an integrated role of moral values, Activities market mechanism and good governance. The salient ISLAM differences between conventional insurance and Takaful operator are: 1. Moral values: Moral uplift aims to change the Islamic qualities behavior, tastes and preferences of individuals, and thereby complements the price mechanism in To do that, Takaful must possess and practice such Islamic promoting general well-being. qualities in its transaction and dealing with its 2. Hereafter effect: The concept of Hereafter is stakeholders. These qualities are found in the corporate completely ignored in the conventional practice, but governance structure which will guide Takaful companies is greatly emphasised in Takaful. to attain the highest level of integrity and trustworthiness 3. Misconception of wealth maximisation: In the in the financial market. In a nutshell, Takaful companies conventional sense, this is to serve our self-interest are a branch of Islamic economics (Muamalat), which is an through wealth maximisation. In Takaful operations, offshoot of Islam itself as illustrated on the left. it is not confined to serving one’s self-interest in this Corporate governance is an important facet of world alone, but also extended to the Hereafter Takaful business philosophy. To put it simply, corporations through faithful compliance with moral values that must exercise greater accountability when undertaking help rein in self-interest so as to promote social their business operations, both to their shareholders and interest. the public. It is in fact a systematic framework that provides 4. Ethics and values a blueprint for Takaful companies to manage themselves The conventional practice lacks the fact that ethics in the best interests of the shareholders and to manage risks and values carry into the day-to-day business in an increasingly competitive global economy. The activities. In Takaful, all resources at the disposal of Islamic concept of corporate governance stresses three the organisation are a trust from God, and every main areas: accountability, transparency and trustworthiness. individual in the organisation will be accountable The diagram below illustrates the concept of Islamic before Him. There is no other option but to use them corporate governance. in keeping with the terms of trust. These terms are Islamic financial transactions have essentially defined by beliefs and moral values. embraced the concept of corporate governance. More often The relationship between Islam and economics than not, we need a mechanism that would guide Islamic cannot be underemphasised as there should be a balance corporations to fully embrace the importance of corporate
12 | The Malaysian Accountant | August 2008 www.micpa.com.my governance. Corporate governance is The Takaful industry is still fairly new and requires tremendous effort from the regulatory bodies and market aimed at enhancing participants to cooperate and implement good governance in their day-to-day operations. accountability, transparency What corporate governance entails and trustworthiness. These
Corporate governance can be viewed as the financial values are paramount in health tool for management and directors to monitor the health status of the organisation. In a way, it guides us to Takaful operations as well as stay on course to remain healthy for a long time. This leads to enhancing corporate governance (appreciation, Islamic financial transactions adoption, implementation and control), which involves collective responsibility among the regulatory agencies, on a bigger scale. professional bodies, corporate leaders as well as investors and shareholders. Management should be concerned with managing The board of directors is entrusted with the conduct the organisation in a highly ethical way and “governance” and daily management of business activities and is about seeing that it runs properly. commercial feasibility of the venture by using the available A careful observation of corporate governance as assets. Directors are, therefore, subjected to higher described would easily reveal that the central element is standards not only in the technical efficiency of operations, primarily and essentially man. In short, corporate but also the implementation of an efficient management governance is basically about the moral and ethical system through the use of “best practices” developed from dimensions of managing a company’s business. high ethical values. Thus this drives us to believe that man tends to be A good governance system should consist of a system swayed from the “desired” action. To ensure that this can of structure, operating, controlling, and monitoring a be aligned with the objective and purpose of this individual company to achieve the following objectives: in the organisation, we need to adopt a system which 1. Fulfilling long-term strategic goals, building would self-correct each “intended” action. Corporate shareholders’ value by establishing a dominant governance will pull everyone in the organisation to be market share and being a leader in a chosen sphere. more objective and committed in managing the 2. Considering and caring for the needs of the organisation in a manner that will exhibit effectiveness environment and local community, including the and efficiency. economic and cultural interaction. Takaful companies deal with intangible products and 3. Maintaining excellent relationship with customers require a great deal of transparency to their prospects and and suppliers in terms of quality of service provided, clients. considerate ordering and account settlement procedures. Responsibility and amanah 4. Maintaining compliance with all legal and regulatory requirements under which the company operates. As part of the list of items in corporate governance, trustworthiness creates a long-lasting relationship between the company and clients. Consequently, there should not ove ate G rnanc be any misappropriation or mismanagement of funds in or e F rp ra o countabilit m C Ac y e Takaful operations or other types of operations for that ic w m o r matter. la k s I Islam also looks into the essence of responsibility, the concept of work, dedication to work and vicegerency or
Takaful trusteeship. This gives Islamic corporate governance very
T
y Operator comprehensive coverage. And Takaful operators are not r
c u
n s
t e
w
r exempted from such governance.
a
o
p r
s t
h
n
y a Saiful Bahri Saroni is senior vice-president/chief actuary of r
T Takaful Ikhlas Sdn Bhd. Email: [email protected] or visit www.takaful-ikhlas.com.my This article first appeared in March 2008 in the MIF Monthly Takaful Supplement. Produced with kind permission.
www.micpa.com.my August 2008 | The Malaysian Accountant | 13 INSTITUTE NEWS MICPA Turns 50
he MICPA turned 50 Golden Years on Saturday, July 26, 2008. To commemorate the momentous occasion, the Institute’s Golden Jubilee Gala Dinner with the theme A Golden Celebration on the Red Carpet was hTeld at Mandarin Oriental Kuala Lumpur. This event was graced by YB Dato’ Hj Hasan bin Malek, Deputy Minister in the Prime Minister’s Department who also launched the Institute’s 50th Anniversary Logo. Over 600 members, invited guests and staff of the Secretariat attended the dinner. The Deputy Minister presented Anugerah Presiden 2008 to a member who has made exceptional contributions to society, the accountancy profession and the Institute which can be emulated by others. YBhg Tan Sri Dato’ Seri Mohd Hassan Marican, President and Chief Executive Officer of Petronas, was the recipient of Anugerah Presiden 2008. A Fellow of the Institute of Chartered Accountants in England and Wales (ICAEW), Tan Sri Hassan was admitted as a member of MICPA in February 1992. He is also a member of the Malaysian Institute of Accountants (MIA). Tan Sri has built a distinguished and eminent career spanning a period of over 35 years, both in the United Kingdom and in Malaysia. In his acceptance speech, YBhg Tan Sri Dato’ Seri Mohd Hassan Marican expressed that he was indeed honoured to have been accorded the MICPA’s Anugerah Presiden on the
14 | The Malaysian Accountant | August 2008 www.micpa.com.my occasion of the Institute’s 50th Golden Jubilee. He said “to be recognised by your own fraternity” makes it very special. The President, YBhg Dato’ Nordin Baharuddin presented a Memento and a Certificate of Honourable Mention to Mr Ong Boon Bah in recognition of his membership with the Institute for the past 49 years from date of admission, May 2, 1959. The other recipient was Mr Lim Sean Teck who was admitted as a member on July 18, 1959. The Institute also recognised the First CPA Graduate Member, Mr Lim Yew Chan who sat for the CPA examination in December 1965 and was admitted as a member on June 25, 1966. The most important asset of any organisation is its staff. The President also presented “Long Service Award” to two Secretariat Staff, Ms Irene Ng, PA to the Executive Director and Encik Ruslan A Hamits, Office Guard in recognition of their loyalty, diligence and dedicated service with the Institute for over 10 years. Entertainer, Amy Mastura, wooed the audience with a rendition of popular songs and aptly started off with “Celebration”. She also managed to interact with the audience and successfully persuaded the Vice President, YBhg Dato’ Ahmad Johan Mohammad Raslan and Council Member, Mr Sam Soh Siong Hoon for a sing-along. Accountants are not boring after all! All in all, it was a pleasant and enjoyable evening.
www.micpa.com.my August 2008 | The Malaysian Accountant | 15 INSTITUTE NEWS
RECIPIENT OF ANUGERAH PRESIDEN 2008
YBhg Tan Sri Dato’ Seri
Mohd Hassan M arican as a member of MICPA in February 1992 (Membership No.2523). He is also a member of the Malaysian Institute of Accountants (MIA). In 1989, Tan Sri Hassan was “called” to serve the National Oil Corporation PETRONAS as Senior Vice- President, Finance. He was appointed President and Chief Executive Officer of PETRONAS in February 1995. Tan Sri Hassan is a member of the PETRONAS Board of Directors, and is Chairman of two public listed companies under the Group, namely PETRONAS Gas Berhad and MISC Berhad. Beyond PETRONAS, Tan Sri Hassan is a board member of the Central Bank of Malaysia and a member of the board of Malaysia-Thailand Joint Authority. He is also a member of the International Investment Council for the Republic of South Africa established by President Thabo Mbeki. Tan Sri Hassan is also a board member of the World Economic Forum’s Partnering Against Corruption Initiative as well as a member of the WEF’s Council of 100 Leaders. Tan Sri Hassan has received numerous awards, among them are the Panglima Setia Mahkota (PSM) in 1997 carrying the title Tan Sri, the Bintang Darjah Seri Paduka Mahkota Terengganu (SPMT) in 1996 and Darjah Sultan Mahmud Terengganu Yang Amat Terpuji (DSMT) in Bhg Tan Sri Dato’ Seri Mohd Hassan Marican 1992, both carrying the title Dato’, the Panglima Negara was born on October 18, 1952 in Sungai Petani, Bintang Sarawak (PNBS) in 2003 which carries the title Kedah. He received his early education from Dato Sri, and the Darjah Seri Setia DiRaja Kedah (SSDK) Sekolah Rendah Ibrahim in Sungai Petani and this year which carries the title Dato’ Seri. lYater continued his secondary education at the Malay The French Government has awarded him the College Kuala Kangsar, Perak. “Commandeur De La Legion D’ Honneur” in 2000 and the Tan Sri Hassan left for London in 1972 to join the Vietnamese Government has awarded him the “Friendship accounting firm Touche Ross & Co, as an article clerk before Medal” in 2001. University of Malaya awarded him with qualifying as a Chartered Accountant in 1978, and became an Honorary Doctorate in Engineering in 2001 and the first Asian to have been appointed as an Audit Universiti Teknologi Mara awarded him with an Honorary Manager in the firm. He returned to Malaysia in 1980 and Doctorate in Corporate Governance in 2006. The joined Tetuan Hanafiah Raslan & Mohamad / Touche Ross conferment of these fine honours speaks well of his & Co, Public Accountants as Audit Manager and became contribution to the country as well as internationally. a Partner of the firm a year later. PETRONAS is committed to Corporate Social A Fellow of the Institute of Chartered Accountants in Responsibility and has contributed generously to MICPA’s England and Wales (ICAEW), Tan Sri Hassan was admitted events as well as having a strong commitment towards the
16 | The Malaysian Accountant | August 2008 www.micpa.com.my accountancy profession. This is clearly demonstrated by PETRONAS’ commitment and support in offering scholarships to students to undertake the MICPA’s CPA examinations. Practical training is an integral part of the Institute’s CPA programme apart from passing the CPA examination. Recognising the fact that supervised training is important, PETRONAS has registered as an Approved Training Organisation (ATO) of the Institute, where under the Stream II training, employees of PETRONAS may undertake the CPA examinations prior to the start of practical training or during the training period under the supervision of a member of MICPA or approved professional body. PETRONAS was also a Gold sponsor for the MICPA- Bursa Malaysia Business Forum 2007. Ladies and Gentlemen, sincerely, I can think of no other better person to receive Anugerah Presiden 2008.
ACCEPTANCE SPEECH BY young members to actively participate in the affairs of the Institute to take it to greater heights. YBHG TAN SRI DATO’ It has been some years since I left the profession. In SERI MOHD HASSAN that time, the profession has evolved into global businesses through mergers and consolidations. Today, MARICAN the Big Four amongst the professional firms are no different to the super-majors in the oil industry, wielding huge influence. I am indeed honoured to have been accorded the MICPA’s Indeed, the profession today does much more than Anugerah Presiden on the occasion of the Institute’s 50th audit. We challenge people and organisations, clients Golden Jubilee. To be recognised by your own fraternity makes and colleagues, to think and act differently, to provide it very special. Awards of this nature go beyond individual clarity and rigour, to help create and sustain prosperity. recognition. To me, this award is an acknowledgement of As leaders and advisors to major businesses, we have a the overall success and achievement of PETRONAS in its responsibility and a role to play in fostering change. We contributions to the nation, to society and to the now live in an age of increased accountability where development of the profession. Working with professional public expectations are high and we need to be able to bodies, including MICPA, PETRONAS has over the years, demonstrate that as a profession, we are both relevant developed more than 1,600 accountants and we continue and a powerful force for change. This requires us to be to train accountants both in Malaysia and overseas through competent, responsible and uphold a strong sense of various programmes. Hence, on behalf of PETRONAS and ethics and integrity. While professional firms today are myself, I humbly and sincerely accept this award. multi-million dollar businesses, we must continue to act As a national body of Certified Public Accountants, objectively especially in the face of intense pressures. MICPA has made significant contributions to the Some thoughts especially for the young practitioners. development of the modern profession in this country You can shape your own character by how you handle over a relatively short span of 50 years. The Institute has yourself. Are you going to hold to your principles or are come a long way since its relatively modest beginnings you going to rationalise away little deviations from those in 1958 with 20 founding members. principles? Will you sacrifice your principles for your Members of the Institute play an active role in both own ambition? And will you put the firm and your the private and public sectors including the academia. colleagues at risk for personal benefits? These are simple We can take pride that we have a representative in the questions and it is so easy to cross that line. But believe Cabinet. Today, about 37% of our members are female me, you cross it once, you will never come back. and increasing, and about 40% are below the age of 40. Finally, on behalf of PETRONAS and myself, I I would like to congratulate the Institute for its would like to once again express my sincere appreciation success. It is my hope that it will continue to maintain to the Malaysian Institute of Certified Public Accountants its reputation as a premier accounting body, both in for this great honour. Malaysia and overseas. I would also like to call upon the Thank you.
www.micpa.com.my August 2008 | The Malaysian Accountant | 17 YOUNG CPA Young CPA Malaysia Symposium 2008 Charting the Future of Accounting and Finance Professionals
n August 6, 2008 the Young CPA Malaysia Symposium 2008 with the theme Charting the Future of Accounting and Finance Professionals was held at the Sime Darby Convention OCentre. The Symposium was specially designed to address pertinent issues in today’s business environment and to provide young accounting and finance professionals with critical understanding of the changing financial regulatory landscape and emerging trends across the profession. This would further help them to capitalise on their career development opportunities. The Symposium, attended by over 70 participants commenced with a welcome address by the Chairman of shared their knowledge, experiences and best practices the Young CPA Group, Encik Abdul Halim Md Lassim. He with participants in the following 4 Sessions. highlighted the importance of acquiring soft skills in The first Session, “Reflection on the Past Years of today’s challenging environment as young business Financial Regulatory Reform and Corporate Failures – Impacts professionals progressively advance into management on Next Generation Accountants and Finance Managers” , was positions. presented by Mr Ong Ching Chuan, Senior Executive The President of the Institute, YBhg Dato’ Nordin Director at PricewaterhouseCoopers. He deliberated on the Baharuddin delivered the Keynote Address and officially changing external business environments and its direct declared open the Symposium. In his address, Dato’ impact on the role and career aspirations of accounting Nordin advised participants to continually upgrade their and finance professionals. The session was moderated by knowledge, skills and expertise in order to provide relevant Encik Ahmad Shahrul Hj Mohamed, a member of MICPA’s and high quality services to employers and clients. He also Young CPA Group and a Partner at Khairuddin Hasyudeen encouraged participants to facilitate entrepreneurship, & Razi create value, manage risk and rationalise complexity to The second Session was on “Employment Trends – The meet the needs of both the local communities and global Specialities and Skills in Demand” , which was delivered by Mr markets. He urged young CPAs to uphold their objectivity, Kok Ghee, Senior Manager, Group Business System at integrity and technical excellence in whatever capacities JobStreet.com. He provided an insight on the specialities they may be serving. and skills in demand and the current recruitment and After the formalities were over, a panel of highly retention strategies of various organisations in response to experienced business professionals led discussions and the changes in the business environment.
18 | The Malaysian Accountant | August 2008 www.micpa.com.my Session three was on “Working Abroad – The Myths, professionals must embrace the right skills to be successful Traps and Tips” . Two CPA members, Ms Soh Eng Hooi, in a changing profession. Executive Director of Moore Stephens AC and En Mohd For young accounting and finance professionals, the Muazzam Mohamed, Executive Director, IT Advisory symposium was a step forward in their careers. It provided Services at KPMG shared their experiences with an opportunity for participants to garner first-hand participants on working abroad. Sessions two and three knowledge on a wide array of issues in today’s globalised were moderated by Encik Abdul Halim Md Lassim, environment. The last session was a Roundtable Discussion on When approached for comments, most participants “Charting the Future of Accounting & Finance Professionals” . agreed that the event was both timely and relevant, in This interactive session between the panellists and view of the changing business environment and the need participants facilitated an exchange of ideas. The to address the challenges with the relevant knowledge, panellists concurred that young accounting and finance skills and attitudes.
INSTITUTE NEWS
MAY 2008 EXAMINATION CPA STUDENTS Performance in Individual Subjects PART SUBJECT PASSED FAILED % % Advanced Stage Module C 57.5 42.5 Examination Advanced Taxation
Module D 15.4 84.6 Advanced Financial Reporting
Module E 57.6 42.4 Advanced Auditing & Assurance
Module F 24.4 75.6 Advanced Business Management & Integrative Case Study Winners of Subject Prizes Advanced Taxation NG YI SHEUE (MISS) (2/760S) (Shamsir Jasani Grant Thornton Gold Medal)
Advanced Auditing & Assurance WONG SHENG HUEI (1/7395) (Ernst & Young Gold Medal) Presentation of 2008 MICPA Excellence Awards, Examination Certificates, Prizes, Membership and Practising Certificates
e are pleased to inform that the Presentation 2007 or May 2008, shall wear graduation gowns at the of 2008 MICPA Excellence Awards, Presentation Ceremony. Please note that the closing date Examination Certificates, Prizes, Membership for registration and gown rental is Friday, October 17, 2008. and Practising Certificates will be held on Late entries will not be entertained. SWaturday, October 25, 2008 at 10:00 a.m. to 12:30 p.m. at Pacific The administrative details and registration form for Ballroom, Best Western Premier Seri Pacific Kuala Lumpur. the Presentation Ceremony are available on the student The presentation ceremony will be officiated by YB Datuk website www.micpa.com.my Ir Hj Idris bin Hj Haron, Deputy Minister of Higher Education I. For further information, please contact the Public All registered students of the Institute who have Affairs & Communications Manager on Tel: 03-2698 9622 completed the Advanced Stage Examination in November or e-mail: [email protected]
www.micpa.com.my August 2008 | The Malaysian Accountant | 19 TIME TABLE NOVEMBER 2008 EXAMINATION Professional Stage Examination
DATE MORNING AFTERNOON (9:00 a.m. – 12:00 noon) (2:00 p.m. – 5:00 p.m.)
Monday (November 24) Financial Accounting and Taxation Financial Reporting
Tuesday (November 25) Business and Company Law Auditing and Assurance
Wednesday (November 26) Management Information and Control Business Finance & Management
Advanced Stage Examination
DATE TIME EXAMINATION PAPER
Monday (November 24) 9:00 a.m. – 12:00 noon Advanced Taxation
Tuesday (November 25) 9:00 a.m. – 12:30 p.m. Advanced Financial Reporting
Wednesday (November 26) 9:00 a.m. – 12:30 p.m. Advanced Auditing & Assurance
Thursday (November 27) Advanced Business Management & Integrative Case Study 9:30 a.m. – 11:30 a.m. Part A - Integrative Case Study [8:45 a.m. – 9:30 a.m. (Reading Time)]
12:30 p.m. – 2:30 p.m. Part B - Advanced Business Management
Admitting Examination Bye-Law 34(1)(f) [formerly bye-law 33(d)] Examination Candidates
DATE TIME EXAMINATION PAPER
Monday (November 24) 9:00 a.m. – 12:00 noon Malaysian Taxation
Tuesday (November 25) 9:00 a.m. – 12:00 noon Regulatory & Financial Reporting Framework of Malaysia
20 | The Malaysian Accountant | August 2008 www.micpa.com.my CPA STUDENTS MAY 2008 EXAMINATION RESULTS List of Successful Candidates
The President and Council of The Malaysian Institute of Certified Public Accountants congratulate successful candidates in the May 2008 Examination.
The following candidates passed Module C to the TAN BEE HWA (MISS) Chan Kam Chiew/Stream I satisfaction of the Examination Committee: TEOH KHENG KOK Ng Swee Weng/Stream I TEOH WEE TONG Ng Swee Weng/Stream I CANDIDATE PRINCIPAL/STREAM WONG SHENG HUEI Choong Mei Ling/Stream I DZULFIQAR AZLI B AYUB @ ABDUL RAHIM Stream II (S) YAN WAI MEI (MISS) Seow Yoo Lin/Stream I DZULFIQRI AZLI B AYUB @ ABDUL RAHIM Stream II (S) ZEID BIN ABDUL RAZAK Yap Seng Chong/Stream I EE MENG WANG Stream II (S) EMY IRLIANA BT KAMARUZZAMAN (CIK) Stream II (S) FOONG YIN TENG (MISS) Stream II (S) The following candidates passed Module F to the IZNI FAUZAN BT ZULKIFLY (CIK) Stream II (S) satisfaction of the Examination Committee: LEONG SIN NEE (MISS) Stream II (S) CANDIDATE PRINCIPAL/STREAM MEGAT MOHAMED NAQUIYUDDIN B SONARI Stream II (S) CHOO MING YEE (MISS) Pushpanathan a/l SA Kanagarayar//Stream I MOHD AIZUDDIN BIN OMAR Stream II (S) FADZILAH BINTI MOHAMED (CIK) Abdullah Abu Samah/Stream I MOHD FAIZAL B MOHD FARID Stream II (S) LEE YIH HONG Lee Yoke Khai, Gary//Stream I MOHD FUAD RUSHDY BIN MOHAMED RASHID Ho Yuet Mee/Stream I NG AI LIN (MISS) Tan Hock Hin/Stream I MOHD NIZAM B ABDULLAH Stream II (S) NORHAIDA BINTI YAHAYA (CIK) Ooi Lip Aun, Eric//Stream I MOHD SHAIPUL BARKHIYAH B MASOR Stream II (S) ONG SIOU HWEE (MISS) See Huey Beng/Stream I MOHD ZULFAHMI BIN HUSSAIN Stream II (S) PHANG SOON YEOW Shirley Goh/Stream I MUHAMMAD ADHWA B ISMAIL Stream II (S) SYAHRUL NAZRI BIN MOHD SAI'ON Sivadasan s/o Narayana Nair/Stream I NG YI SHEUE (MISS) Stream II (S) TAN SZE MEI (MISS) Ooi Lip Aun, Eric//Stream I NOOR FARALINA BT MOHD FAIRUZ (CIK) Stream II (S) TONG SHEAU WEI (MISS) Shirley Goh/Stream I SHAH NIZAM B MAHD RASID Stream II (S) YEAP KOH SIN (MISS) Lee Tuck Heng/Stream I SHARIFAH MARINI SYED AHMAD LABIB (CIK) Stream II TAN CHEE HEAN Stream II (S) TANG SOO LEE (MISS) Stream II (S) The following candidate passed Business & TEH SUET GHOON (MISS) Habibah Abdul/Stream I Company Law as a single subject: WAN NURAINA ZAHRA BT HJ WAN NAFI (CIK) Stream II (S) CANDIDATE PRINCIPAL/STREAM The following candidates passed Module D to the AHMAD FAZRIL B MOHD FAUZI Stream II satisfaction of the Examination Committee: The following candidates completed the Advanced CANDIDATE PRINCIPAL/STREAM Stage Examination to the satisfaction of the AHLAM NABIHAH BINTI MOHD SAFIE (CIK) Shirley Goh/Stream I Examination Committee: ANIS NADIA BINTI CHE MUSTAFAR (CIK) Teoh Soo Hock/Stream I
MD HENDREE BIN JOHARI Lee Yoke Khai, Gary/Stream I CANDIDATE PRINCIPAL/STREAM NG PEI LING (MISS) Tan Soo Yan/Stream I CHOO MING YEE (MISS) Pushpanathan a/l SA Kanagarayar//Stream I NUR AMIZA BINTI AMAN (CIK) Stream II FADZILAH BINTI MOHAMED (CIK) Abdullah Abu Samah/Stream I ROSEDALIANA BINTI ABDUL RAHIM (CIK) Stream II (S) LEE YIH HONG Lee Yoke Khai, Gary//Stream I NG AI LIN (MISS) Tan Hock Hin/Stream I The following candidates passed Module E to the NORHAIDA BINTI YAHAYA (CIK) Ooi Lip Aun, Eric//Stream I satisfaction of the Examination Committee: ONG SIOU HWEE (MISS) See Huey Beng/Stream I PHANG SOON YEOW Shirley Goh/Stream I CANDIDATE PRINCIPAL/STREAM SYAHRUL NAZRI BIN MOHD SAI'ON Sivadasan s/o Narayana Nair/Stream I ALIYAH HANIM BINTI ABD HALIM (CIK) Lee Tuck Heng/Stream I TAN SZE MEI (MISS) Ooi Lip Aun, Eric//Stream I ENG YUH YUN (MISS) Datuk Tan Kim Leong/Stream I TONG SHEAU WEI (MISS) Shirley Goh/Stream I GAN SEK LING (MISS) Habibah Abdul/Stream I YEAP KOH SIN (MISS) Lee Tuck Heng/Stream I GOH CHEE YONG Siew Chin Kiang/Stream I KHOR SEW LIN, SERENE (MISS) George Koshy/Stream I LEW CHUI HOONG (MISS) Loh Kok Leong//Stream I The following candidates passed Regulatory & NG LING ZTE (MISS) Ooi Lip Aun, Eric/Stream I Financial Reporting Framework of Malaysia to the NISHA NOR BINTI NOOR HASAN (CIK) Ooi Lip Aun, Eric/Stream I satisfaction of the Examination Committee: ONG YUN LING (MISS) George Koshy/Stream I CANDIDATE SU SIEW LING (MISS) Eric Ooi Lip Aun/Stream I AFFENDI BIN RASHDI SUHAIRI BIN JAWA Teoh Soo Hock/Stream I SIA YEAK HONG SUM MEE JIUN (MISS) Dato' Gregory Wong Guang Seng/Stream I SUZIELA BINTI ABU YAMIN (CIK) Ooi Lip Aun, Eric/Stream I
www.micpa.com.my August 2008 | The Malaysian Accountant | 21 INSTITUTE NEWS Continuing Professional Development (CPD) Programmes
he Institute organised the following CPD Tprogrammes in the months of July - August 2008: A one-day Workshop on Recent Case Laws and Tax Developments on July 2, 2008. The objective of the workshop was to provide participants with an in-depth understanding of the tax changes and developments brought about by the decisions made to the recent case laws. Mr Harvinder Singh, Managing Partner of Harvey & Associates led discussions.
A one-day Workshop on Accounting for Construction and Property Development Activities (FRS 111, FRS 123 2004 and
FRS 201 2004 ) on July 14, 2008 at the Legend Hotel Kuala A two-day Workshop on A Practical Guide to Auditing Lumpur. The workshop aimed to discuss the important on July 28 & 29, 2008 at the Legend Hotel, Kuala Lumpur. aspects of these FRSs and to highlight the major areas of The objective of the workshop is to equip participants with difficulty in measuring and recognising revenue and costs the technical knowledge and skills in conducting an audit associated with construction contracts and property of financial statements in accordance with international development activities. Ms Lim Geok Heng, a freelance standards on auditing, which have been adopted for technical and training consultant led the discussions. application in Malaysia.
A one-day Workshop on Understanding Financial Statements for Directors and Senior Management on July 17, 2008 at the Legend Hotel, Kuala Lumpur. Ms Ng Mi Li, Mr Ong Ching Chuan and Ms Yee Chai Yun led participants to consider how to manage shareholders’ expectations, knowing how the financials will be reported, and the communication of the financial information thereof. Participants also received a checklist of questions they should consider asking executive management in discharging their duties, particularly, pertaining to the financial information.
Career Talks at Secondary Schools
he Institute continued in its efforts to present Wednesday, July 2, 2008; scheduled career talks at secondary schools to 120 students at SMK Sultan Abdul Samad on T Forms 4, 5 and 6 students undertaking the Thursday, July 3, 2008; principles of accounting subject. For the month of July, the 160 students at SMK Seafield, Subang Jaya on Institute presented a talk on Career in Accountancy to: Tuesday, July 8, 2008; and 70 students at SMK TTDI Jaya, Shah Alam on 70 students at SMK Bandar Utama on Wednesday, Tuesday, July 1, 2008; July 16, 2008. 120 students at SMK Alam Megah 2, Shah Alam on
22 | The Malaysian Accountant | August 2008 www.micpa.com.my Career Fairs and Exhibitions
he Institute continued with its on-going efforts to Universiti Malaya Interaction Week embark on a more aggressive marketing strategy The Accounting Club of Universiti Malaya organised Tto position the CPA and CFiA as the designated Interaction Week 2008 with the theme “Dream Ignites choice. In this respect, the Institute participates regularly Passion, Passion Creates Reality” from July 18–19, 2008. in career fairs and exhibitions across the country to promote The MICPA was a sponsor for the event and presented a accountancy as a career choice and in particular to create Career Talk to UM accounting students on Saturday, July greater awareness of the CPA Malaysia and CFiA qualification. 19, 2008. The talk was presented by Dr Veerinderjeet Singh, For the months of July – August 2008, the Institute Council Member of MICPA. CPA Ambassadors, Mr Tiow participated in the following career fairs and exhibitions: Wei Sheng and Mr Lim Chu Guan also shared with the students their experiences as a CPA.
Accountancy & Career Education Fair (ACEF) 2008 The Malaysian Institute of Accountants (MIA) organised the Accountancy & Career Education Fair (ACEF) 2008 on July 26 & 27, 2008 at the Sunway Pyramid Convention Centre. The MICPA participated in the fair as part of the accountancy pavilion.
IIUM
International Islamic Universiti Malaysia - Exhibition on Job Market and Career Week 2008 The MICPA participated as an Exhibitor in the Exhibition on Job Market and Career Week 2008 held in conjunction with IIUM E-Fest 2008 from July 14-18, 2008 at the Cultural ACEF 2008 Activity Centre at IIUM. The objective was to increase awareness and profile the CPA Malaysia qualification to Universiti Kebangsaan Malaysia – Accountancy Week 2008 IIUM students. Other exhibitors included professional The MICPA participated as an Exhibitor in UKM’s Accountancy bodies, banking institutions and Government agencies. Week 2008 with the theme “Profesion Perakaunan Menjulang CPA firm HLB Ler Lum also shared the booth space with Kemerdekaan, Mengharungi Cabaran”, which was held MICPA to undertake recruitment of students. from August 13 – 20, 2008. The MICPA was also a sponsor for the event.
UM UKM
www.micpa.com.my August 2008 | The Malaysian Accountant | 23 INSTITUTE NEWS
Collaboration and Career Talks at Universities
s part of the Institute’s efforts to foster closer Universiti Putra Malaysia collaboration with the universities in a positive and July 31, 2008: Career Talk to 200 accountancy students. Amutually beneficial manner, the Institute has CPA ambassador, Mr Tiow Wei Sheng was also present to scheduled meetings with the Deans of the Faculty of share his experiences as a CPA with the accounting Accountancy of the various public universities. The aim is students; to promote the CPA Malaysia and CFiA qualification to accountancy students as well as lecturers. Universiti Utara Malaysia The Institute’s Executive Director, Mr Foo Yoke Pin August 7, 2008: Career Talk to 300 accountancy students. was kept busy presenting Career Talks at the following At the same talk, YBhg Datin Fadzillah Saad, Council universities in the months of July - August 2008. The visits member of MICPA also presented a talk on the CFiA were also a platform for the Institute to have discussions qualification to UUM lecturers; and with the academic staff. Universiti Sains Malaysia Universiti Kebangsaan Malaysia August 8, 2008: Talk on the CFiA qualification to USM lecturers. July 28, 2008: Career Talk to 200 accountancy students; MICPA–BURSA MALAYSIA Business Forum 2008
he 5th MICPA-Bursa Malaysia Business Forum The plenary sessions will include the following topics: 2008 will be held on October 20 & 21, 2008 at the Day 1 Shangri-La Hotel Kuala Lumpur. Featuring the theme, Reinventing for Success , the Business Forum Session 1: Global Business Trends: Threats wTill provide an invaluable platform for the exchange of ideas and experiences on the strategies and measures undertaken And Opportunities to promote reinvention and to strengthen the growth of Session 2: Corporate Governance: businesses in light of the changing landscape and trends of global business. Where Are We Going? The Organising Committee has invited YB Senator Tan Sri Datuk Amirsham A. Aziz, Minister in the Prime Minister’s Session 3: Creating Value After Listing Department, to deliver the Opening Keynote Address, as well as, speakers and panelists comprising prominent corporate leaders, senior Government officers, business professionals Day 2 and capital market regulators, including to lead discussions in the plenary sessions over the two-days. Session 4: Managing Risk in a Challenging Target participants for the MICPA-Bursa Malaysia Business Forum 2008 are company directors, CEOs, CFOs, Environment senior Government officers, fund managers, investment Session 5: The Environment: Truth Be Told advisers and business professionals. For further information on the MICPA-Bursa Malaysia Session 6: Investment Opportunities in the Business Forum 2008, please contact Ms Evelyn Lim, Marketing Manager at Tel: 03-2698 9622 or e-mail: Middle East and Africa [email protected]
24 | The Malaysian Accountant | August 2008 www.micpa.com.my
PROFESSIONAL NEWS MASB Update
Malaysia’s Convergence “All of our current standards have already incorporated IFRS with IFRS in 2012 provisions anyway. Only a few more substantive standards need to be formally adopted between now and 2012, and we In a press release dated August 1, 2008, the Financial have already discussed those with the affected parties.” Reporting Foundation (FRF) and the Malaysian Accounting Welcoming the decision, Securities Commission Standards Board (MASB) issued a statement about their Chairman Dato’ Zarinah Anwar said, “Businesses operate in plans to bring Malaysia to full convergence with an increasingly global environment. Therefore, this move International Financial Reporting Standards (IFRS) by 1 will help to give Malaysian companies and our capital January 2012. market the recognition they deserve.” MASB’s chairman, YBhg Dato’ Zainal Abidin Putih (Source: www.masb.org.my) said, “Since 1978, we have been incorporating the provisions of the international standards into our local accounting standards; and today we are convinced that by becoming fully IFRS compliant, Malaysia’s capital and financial market will be further enhanced.” Compliance with IFRS, which are used by more than a hundred countries around the world, will facilitate comparability and increase transparency. He added, “However, we’re not jumping on the bandwagon for the sake of joining the crowd. IFRS is really a robust set of standards. Because of the international consultative approach to standard-setting, a lot of thought has gone into IFRS. It gets Dear Readers, input from literally hundreds of people with diverse expertise, from diverse jurisdictions.” If you have any article, which in To facilitate a phased changeover to IFRS, the effective your view, is suitable for inclusion in date for applying FRS 139 Financial Instruments: Recognition our columns, please send the article to and Measurement will be January 1, 2010. By 2012, all the Editorial Board at the address below approved accounting standards applicable to entities other or via e-mail. than private entities will converge fully with IFRS. This convergence plan will not affect private entities that are We will be happy to review the currently applying the Private Entity Reporting Standards article for publication in this journal. (PERS). Private entities will continue to apply PERS until such Kindly contact: time the Board decides otherwise. Dato’ Johan Raslan, chairman of the Financial Reporting Foundation (FRF), the oversight body of the MASB, Public Affairs & explains the changeover milestones. He said, “Other Communications Manager economies, such as Korea, India and Canada have The Malaysian Institute of announced IFRS convergence by 2011,” he said. "With the adoption of FRS 139 in 2010, and a further 2 years to adopt Certified Public Accountants the remaining standards, 2012 is considered the right date 15 Jalan Medan Tuanku for convergence.” 50300 Kuala Lumpur Dato’ Zainal advises, “We hope that with this E-mail: [email protected] advanced notice, companies will have sufficient time to prepare themselves for the changeover.” He understands that many of them have been preparing for the changeover.
26 | The Malaysian Accountant | August 2008 www.micpa.com.my IASB Update
IFRIC UPDATE currency risk arising from its net investments in foreign IFRIC issues guidance on hedges of a operations and wishes to qualify for hedge accounting in net investment in a foreign operation accordance with IAS 39. It does not apply to other types of hedge accounting. The International Financial Reporting Interpretations The main expected change in practice is to eliminate Committee (IFRIC) on July 3, 2008 issued an Interpretation, the possibility of an entity applying hedge accounting for a IFRIC 16 Hedges of a Net Investment in a Foreign Operation. hedge of the foreign exchange differences between the The IFRIC was asked for guidance on accounting for functional currency of a foreign operation and the the hedge of a net investment in a foreign operation in an presentation currency of the parent’s consolidated financial entity’s consolidated financial statements. Practice has statements. diverged as a result of differing views on which risks are The IFRIC recognises the difficulty that entities would eligible for hedge accounting according to International face in preparing adequate documentation from the Financial Reporting Standards (IFRSs). inception of the hedge relationship and therefore requires Constituents asked for clarification of three main issues prospective application of the guidance. The Interpretation as follows: is effective for annual periods beginning on or after October First, whether risk arises from the foreign currency 1, 2008. exposure to the functional currencies of the foreign Introducing IFRIC 16, Robert Garnett, IFRIC Chairman operation and the parent entity, or from the foreign currency and IASB member, said: IAS 39 and IAS 21 provide limited exposure to the functional currency of the foreign operation guidance on the application of their requirements for hedges and the presentation currency of the parent entity’s of net investments in foreign operations. With this consolidated financial statements. Interpretation the IFRIC has provided practical guidance to Secondly, which entity within a group can hold a help entities apply those standards consistently. hedging instrument in a hedge of a net investment in a (Source: www.iasb.org) foreign operation and in particular whether the parent entity holding the net investment in a foreign operation must also hold the hedging instrument. IFRIC issues clarification on Thirdly, how an entity should determine the amounts agreements for the construction of to be reclassified from equity to profit or loss for both the real estate hedging instrument and the hedged item when the entity disposes of the investment. The IFRIC on July 3, 2008 issued an Interpretation, IFRIC 15 IFRIC 16 clarifies these issues, stating that: Agreements for the Construction of Real Estate. • the presentation currency does not create an exposure The Interpretation will standardise accounting practice to which an entity may apply hedge accounting. across jurisdictions for the recognition of revenue among real Consequently, a parent entity may designate as a estate developers for sales of units, such as apartments or hedged risk only the foreign exchange differences houses, ‘off plan’, i.e. before construction is complete. arising from a difference between its own functional The Interpretation provides guidance on how to currency and that of its foreign operation. determine whether an agreement for the construction of real • the hedging instrument(s) may be held by any entity estate is within the scope of IAS 11 Construction Contracts or or entities within the group. IAS 18 Revenue and when revenue from the construction • while IAS 39 Financial Instruments: Recognition and should be recognised. Measurement must be applied to determine the The main expected change in practice is a shift for amount that needs to be reclassified to profit or loss some entities from recognising revenue using the percentage from the foreign currency translation reserve in respect of completion method (i.e. as construction progresses, by of the hedging instrument, IAS 21 The Effects of Changes reference to the stage of completion of the development) to in Foreign Exchange Rates must be applied in respect of recognising revenue at a single time (i.e. at completion upon the hedged item. or after delivery). IFRIC 16 applies to an entity that hedges the foreign Agreements that will be affected will be mainly those
www.micpa.com.my August 2008 | The Malaysian Accountant | 27 currently accounted for in accordance with IAS 11 that do public authorities and international organisations that not meet the definition of a construction contract as have requirements for accountability to public interpreted by the IFRIC and do not transfer to the buyer authorities control and the significant risks and rewards of ownership of • expand the membership of the International the work in progress in its current state as construction Accounting Standards Board (IASB) to 16 members progresses. and add new guidelines regarding the geographical The IFRIC released draft Interpretation D21 Real Estate diversity of the members of the IASB Sales for public comment in July 2007 and received 51 The establishment of the link to a Monitoring Group, comment letters in response. In its redeliberations, the IFRIC a group established by public authorities outside the IASC responded to the concerns expressed by respondents by Foundation’s organisational framework, is aimed at improving the articulation between IAS 11 and IAS 18 and enhancing the transparency and public accountability of by providing additional guidance on how to account for the IASC Foundation, while not impairing the independence revenue in IAS 18. In addition, in its ratification process, the of the standard-setting process. IASB specifically considered whether the IFRIC’s As contemplated by the proposal, the initial interpretation was in line with the principles underpinning membership of the Monitoring Group would comprise the IAS 18 and agreed with the IFRIC’s consensus. responsible member of the European Commission, the IFRIC 15 applies to the accounting for revenue and managing director of the International Monetary Fund, the associated expenses by entities that undertake the chair of the IOSCO Emerging Markets Committee, the chair construction of real estate directly or through subcontractors. of the IOSCO Technical Committee, the commissioner of the The interpretation is effective for annual periods beginning Japan Financial Services Agency, the chairman of the US on or after January 1, 2009 and is to be applied retrospectively. Securities and Exchange Commission, and the president of Introducing IFRIC 15, Robert Garnett, IFRIC Chairman the World Bank. and IASB member, said: The Monitoring Group would have the responsibility of The real estate industry is an important sector across approving the selection of Trustees. The Trustees would also countries and, especially in times of volatile markets, report to the Monitoring Group regularly to enable it to transparency and comparability of the accounting are address whether and how the Trustees are fulfilling their role important. set out in the Constitution. However, at present there is widespread divergence in Regarding the IASB’s composition, the Trustees practice when accounting for the recognition of revenue for reiterate in their proposals that the Constitution’s emphasis ‘off plan’ contracts. IFRIC 15 clarifies how the existing on ‘professional competence and practical experience’ principles in IAS 11 and IAS 18 apply for the revenue should remain paramount. At the same time, the expansion recognition in the real estate sector and by doing so will of the IASB would enable it to engage more efficiently and ensure consistent accounting. In some cases this means that effectively with interested parties throughout the world and companies will have to change their accounting. bring new perspectives to its deliberations. Furthermore, the (Source: www.iasb.org) addition of a geographical component would strengthen the legitimacy of the IASB in the view of the countries choosing to adopt IFRSs. Trustees publish proposals on The Trustees’ proposals reflect consultations that they enhancements to public accountability have had with many parties with an interest in the and to IASB composition development of accounting standards. The Trustees have discussed their proposals with members of the proposed The Trustees of the International Accounting Standards Monitoring Group, the Standards Advisory Council (the Committee (IASC) Foundation on July 21, 2008 published a organisation’s primary advisory group) on two occasions, discussion document, Review of the Constitution: Public and stakeholders in their respective countries. Accountability and the Composition of the IASB - Proposals Most recently, and in advance of the formal for Change. consultation period, the Trustees held a series of round-table The document contains proposals that are dealt with meetings in London on June 19, 2008 with thirty in the first phase of the organisation’s five-yearly participating organisations. As a result of those discussions Constitution Review. The deadline for public comment on the Trustees revised and clarified their proposals. the document is September 20, 2008. The Trustees expect to complete the first part of the The proposals would: Constitution Review at their meeting in Beijing in October, • establish a formal link between the organisation and with the changes taking effect from January 1, 2009. a Monitoring Group comprising representatives of A review of other elements of the IASC Foundation’s
28 | The Malaysian Accountant | August 2008 www.micpa.com.my Constitution will begin after the meeting in Beijing. The The IASB adopted an annual process in 2006 to make Trustees will publish a further discussion document inviting necessary, but non-urgent, amendments to IFRSs that will respondents to suggest topics for consideration by the not be included in another project. By presenting the Trustees. It is expected that consultations will be held during proposed amendments in a single document rather than as the course of 2009, with changes taking effect from January a series of piecemeal changes the IASB aims to ease the 1, 2010. burden for all concerned. (Source: www.iasb.org) Unless otherwise specified, the proposed effective date for the amendments is for annual periods beginning on or after January 1, 2010, although entities are permitted to IASB amends standard to give adopt them earlier. The proposed effective date for those additional guidance on the amendments arising from the revised IFRS 3 Business designation of a hedged item Combinations is July 1, 2009 (in line with the effective date for the revised standards on business combinations - IFRS 3 The IASB on July 31, 2008 issued Eligible Hedged Items (an and IAS 27 Consolidated and Separate Financial amendment to IAS 39 Financial Instruments: Recognition and Statements). Measurement ). The exposure draft can be accessed via the Project The amendment clarifies how the existing principles Website or on the ‘Open to Comment’ section on underlying hedge accounting should be applied in two www.iasb.org. The IASB requests comments on the exposure particular situations. draft by November 7, 2008. The International Financial Reporting Interpretations (Source: www.iasb.org) Committee (IFRIC) asked the IASB to provide additional guidance on what can be designated as a hedged item. The responses to an exposure draft of proposed IASB proposes amendments to guidance (published in September 2007) indicated that simplify and achieve convergence in diversity in practice existed, or was likely to exist, in the the calculation of EPS designation of: • a one-sided risk in a hedged item, and The IASB on August 7, 2008 published for public comment • inflation in a financial hedged item. proposals to simplify the calculation of earnings per share The IASB has therefore focused on developing (EPS) and to eliminate differences between the methods application guidance to illustrate how the principles required by International Financial Reporting Standards underlying hedge accounting should be applied in those (IFRSs) and US accounting standards to calculate EPS. The situations. proposals are part of the short-term convergence project that Entities are required to apply the amendment the IASB is conducting jointly with the US Financial retrospectively for annual periods beginning on or after July Accounting Standards Board (FASB). Consequently the FASB 1, 2009, with earlier application permitted. has also published an exposure draft to amend SFAS 128 (Source: www.iasb.org) Earnings per Share on August 7, 2008. In particular, the proposals aim to achieve convergence by: IASB publishes proposals for • providing a clear principle to determine which amendments under its annual instruments should be included in the EPS calculation; improvements project • clarifying the EPS calculation for particular instruments, such as contracts to sell or repurchase an The IASB on August 7, 2008 published for public comment entity’s own shares and participating instruments; and an exposure draft of proposed amendments to eight • simplifying the EPS calculation for instruments that International Financial Reporting Standards (IFRSs) under are accounted for at fair value through profit or loss. its annual improvements project. The IASB believes that the proposals would, if implemented, The proposed amendments reflect issues discussed by simplify the calculation of EPS and increase the IASB in the project cycle that began last year. The transparency for users of financial statements. proposals range from guidance added to the Appendix of The IASB invites comments on the exposure draft IAS 18 Revenue, on how to determine whether an entity is Simplifying Earnings per Share (proposed amendments to acting as a principal or as an agent, to changes of wording IAS 33) by December 5, 2008. The exposure draft is available to clarify the meaning and remove unintended on the ‘Open for Comment ’ section on www.iasb.org. inconsistencies between IFRSs (Source: www.iasb.org)
www.micpa.com.my August 2008 | The Malaysian Accountant | 29 PROFESSIONAL NEWS IFAC Update
New IFAC Guidance Supports IFAC Appoints Alta Prinsloo Director Professional Accountants in Business of Operations in Promoting Better Investment Decisions Alta Prinsloo, CA (SA) has been named Director of Operations of the IFAC, with effect from, January 1, 2009. Recognising that professional accountants in business play Ms. Prinsloo is currently Deputy Director of the International an important role in helping their organisations deliver Auditing and Assurance Standards Board (IAASB), an long-term value, the International Federation of independent standard-setting board under the auspices of Accountants (IFAC) Professional Accountants in Business IFAC. She joined the organisation as an IAASB Senior (PAIB) Committee has released new guidance on the use of Technical Manager in September 2002. discounted cash flow analysis and net present value in As Director of Operations, Ms. Prinsloo will oversee evaluating investments. Entitled Project Appraisal Using IFAC's planning, budgeting, and financial management Discounted Cash Flow, this guidance was released as part and accounting processes, including supporting the of the PAIB Committee's new program to develop activities of IFAC's Planning and Finance Committee and International Good Practice Guidance on financial and Audit Committee. She will direct the organisation's day-to- management accounting topics. day operations, play a key role in the strategic planning Discounted cash flow analysis and estimating the net process, oversee its human resources and information present value of cash flows involve fundamental principles technology activities, and manage preparations for IFAC of finance that support disciplined financial management Board and Council meetings. in organisations. Professional accountants in business "Alta's strong international experience, together with have a role in promoting and explaining the importance the leadership and management skills she has demonstrated of these principles in their organisations, particularly with the IAASB, will be of great value to IFAC as she assumes where the connections between the application of financial the role of Director of Operations," states Ian Ball, IFAC Chief principles and related financial theory are not easily Executive Officer. "In that capacity, Alta will play a central understood or accepted. role in the effective management and operations of a global "This new guidance will help professional organisation with more than 150 member organisations accountants in business to promote the importance of worldwide." generating long-term value in their organisations," states Prior to joining IFAC, Ms. Prinsloo was Technical Edward Chow, Chair of the PAIB Committee. "Professional Director of the South African Institute of Chartered accountants have a significant role in ensuring that their Accountants, an IFAC member body, where she managed organisations focus on decisions that maximize expected the Technical Department and oversaw the convergence of value, rather than on their short-term impact on reported South African accounting and auditing standards with earnings. Companies with good records of value creation international standards. She also served as a technical generally have better shareholder and investor advisor to the South African member of the IAASB from acceptance." January 2001 to March 2002. Final Preface to International Good Practice Guidance Alta Prinsloo will assume the position later this year, Together with the guidance, the PAIB Committee has after she has completed her obligations with respect to work released the final Preface to IFAC's International Good on the IAASB Clarity project. She will take over from Stephen Practice Guidance. The Preface sets out the scope, purpose, Walker, who has served as IFAC Director of Operations since and due process of the committee's new International Good September 2002 and will be returning to his home country Practice Guidance, which cover management accounting, of New Zealand. financial management, and broader topics in which "Stephen has played a very significant role in professional accountants in business are engaged. strengthening IFAC's strategic planning and finance Project Appraisal Using Discounted Cash Flow and functions and improving our organisation's efficiency. We the Preface can be downloaded free-of-charge from the are grateful for his many contributions to IFAC, and we wish IFAC online bookstore at http://www.ifac.org/store. The him all the best for the future," states Mr. Ball. PAIB Committee welcomes feedback on both documents, (Source: www.ifac.org) which can be emailed to [email protected]. (Source: www.ifac.org)
30 | The Malaysian Accountant | August 2008 www.micpa.com.my IFAC Proposes Principles-Based and Improving Governance in Organisations, via an online Guidance on Governance and Costing feedback form, which can be accessed at http://www.ifac.org/ to Drive Organisational Performance governanceED. All comments will be considered a matter of public As part of its ongoing commitment to support professional record and will ultimately be posted on the IFAC website. A accountants in business and their organisations in summary of online feedback on the proposed governance enhancing governance and in assessing and delivering guidance will also be posted on the IFAC website. organisational performance, the IFAC’s Professional (Source: www.ifac.org) Accountants in Business (PAIB) Committee has released two new proposed International Good Practice Guidance documents for public comment. The proposed guidance IFAC’s International Accounting addresses evaluating and improving governance structures Education Standards Board Addresses and use of costing to support effective decision making. Measurement of Continuing Professional Development Governance The newly released exposure draft, Evaluating and Improving The International Accounting Education Standards Board Governance in Organisations, sets out a framework, a series of (IAESB), an independent standard-setting board within the fundamental principles, practical guidance, and references IFAC, has released a new information paper to assist IFAC on how to evaluate and improve governance in member bodies and other stakeholders in developing organisations. The purpose of this guidance is to assist effective continuing professional development (CPD) professional accountants and their organisations in creating programs for professional accountants. Entitled a balance between conformance with rules and regulations Approaches to Continuing Professional Development and organisational performance. (CPD) Measurement, the paper explains the elements of an effective CPD program, examines current practices by Costing accountancy and other professional associations, and The second proposed International Good Practice Guidance, discusses approaches to measure a program's effectiveness. Costing to Drive Organisational Performance , is designed to "The paper is the result of a wide-ranging international assist professional accountants in business in delivering research project into continuing professional development useful cost information to support effective decision making across a number of professions, and it is intended to and organisational performance. The proposed guidance stimulate discussion and debate on the subject of sets out eight fundamental principles of costing that measuring CPD," states IAESB Chairman Henry Saville. " In encourage a performance-based view of costing to help addition to IFAC member bodies, the findings in the paper professional accountants in business to ensure that costing will be of interest to current and future professional information supports forward-looking strategic and accountants, regulators, educators, CPD providers, and operational decisions. employers seeking to implement CPD programs for professional accountants." "This principles-based good practice guidance addresses key The IAESB commissioned the Professional Associations strategic and financial management issues that many Research Network to conduct research on measuring CPD professional accountants in business address in their daily and to prepare this information paper. The paper work," states Edward Chow, Chair of the PAIB Committee. introduces a four-phase CPD model - covering planning, "Our goal is to develop principles-based guidance that offers action, results, and reflection - that IFAC member bodies a global perspective and places professional accountants in and other professional associations may use to improve the business at the heart of driving organisational performance." effectiveness of their CPD programs. Case studies and profiles are included to provide practical examples, and How to Comment recommendations are provided that may assist IFAC Comments on the two proposed guidance documents are member bodies and others in evaluating various requested by September 23, 2008. They may be viewed by approaches to measuring CPD. going to http://www.ifac.org/EDs. Comments may be The information paper can be downloaded free- submitted by email to [email protected]. of- charge from the IFAC online bookstore at As part of a pilot project to further encourage user http://www.ifac.org/store. For more information on the involvement in the development of good practice guidance, work of the IAESB, visit its home page at http://www.ifac.org/ the PAIB Committee is inviting all those who are interested education. to provide comments on the proposed document, Evaluating (Source: www.ifac.org)
www.micpa.com.my August 2008 | The Malaysian Accountant | 31 Arnold Schilder Named to Lead IFAC's • A self-assessment of the extent to which a member International Auditing and Assurance body has committed to international convergence of Standards Board standards and promoted the implementation of strong quality assurance and enforcement regimes as The Board of the IFAC has appointed Prof. Dr. Arnold specified in IFAC membership requirements; and Schilder, RA, to lead the International Auditing and • The development of action plans to further the Assurance Standards Board (IAASB), an independent convergence process and meet other IFAC standard-setting board under the auspices of IFAC, membership requirements. beginning January 1, 2009. Prof. Schilder's appointment to The Compliance Program is now in this third phase a three-year term as IAASB Chair was approved by the and, the actions plans of IFAC members from six countries were Public Interest Oversight Board (PIOB)*, which oversees the publicly released on the IFAC website. The six members are: IAASB's activities • Federación Argentina de Consejos Profesionales de As chair, Prof. Schilder will lead the IAASB in its Ciencias Económicas; initiatives in setting high quality auditing and assurance • Botswana Institute of Accountants; standards and facilitating the convergence of international • Chinese Institute of Certified Public Accountants; and national standards. He will play a key role in guiding • Chamber of Auditors of the Czech Republic; the IAASB as it strives to enhance the quality and • Institute of Certified Public Accountants of Kenya; and uniformity of audit practice throughout the world and to • Corpul Expertilor Contabili si Contabililor Autorizati build public confidence in financial reporting. din Romania. "I am delighted to chair the IAASB during the next Representing four different continents, these actions three years as it continues to fulfill its public interest plans are reflective of the kinds of programs and activities mission," states Prof. Schilder. "I will welcome the input of that all IFAC member organisations are developing in their all our stakeholders, including users of IAASB standards, own jurisdictions. national standard setters, regulators, governments, and "These action plans demonstrate the leadership of the the public, as the IAASB addresses new assurance topics as profession in engaging country stakeholders, such as well as promotes further the benefits of its standards to key regulators, government officials, academics, and others in constituencies that have not yet adopted them." further enhancing the quality of the profession and "Arnold Schilder brings both a breadth and depth of ensuring greater consistency worldwide," states Robert experience and strong integrity to the position of IAASB Mednick, Chair of the Compliance Advisory Panel that Chair," states Fermín del Valle, IFAC President. "As its next oversees the Member Body Compliance Program. chair, he will lead the IAASB in continuing to develop high "Our expectation is that all of IFAC's 157 member quality international audit standards to be used around the bodies in both developed and emerging countries will world." Prof. Schilder is currently Executive Director of De develop actions plans that address the key elements of Nederlandsche Bank NV, the prudential supervisor of convergence, the subsequent implementation of standards financial institutions in the Netherlands. and new regulatory initiatives," added Mednick. For more information about the work of the IAASB, To view the actions plans of IFAC member bodies as visit its home page at http://www.iaasb.org. well as the responses to Parts 1 and 2 of the Compliance (Source: www.ifac.org) Program, go to http://www.ifac.org/ComplianceAssessment /published.php. (Source: www.ifac.org) IFAC Program Sparks Initiatives to Strengthen the Accountancy Profession and Achieve Convergence IAASB Issues Auditing Standard on to International Standards Related Parties; Makes Further Progress on Clarity Standards The IFAC Member Body Compliance Program, launched four years ago, has reached a major milestone in its mission to Following the consideration and approval of due process by encourage accountancy organisations worldwide to work the Public Interest Oversight Board (PIOB), the International together with their members, regulators, standard setters, Auditing and Assurance Standards Board (IAASB), an and other key stakeholders to strengthen the profession. independent standard-setting board under the auspices of The Compliance Program is comprised of a three-part process: the IFAC, on July 14, 2008 released International Standard • A member organisation's assessment of its country's on Auditing (ISAs) 550 (Revised and Redrafted), Related regulatory and standard-setting framework; Parties and three clarity redrafted ISAs.
32 | The Malaysian Accountant | August 2008 www.micpa.com.my Related Parties under the auspices of the IFAC, on July 14, 2008 released The involvement of related parties in major corporate its Strategy and Work Program, 2009-2011. The three-year scandals encouraged the IAASB to revise its current auditing strategy includes an emphasis on the development of standard on the subject. The revised Related Parties standards that contribute to the effective operation of the standard clarifies the meaning of "related party" for purposes world's capital markets and that address the needs of small- of an audit. It also makes clear the auditor's responsibility and medium-sized entities and small and medium to obtain sufficient evidence about the required accounting practices. and disclosure of related party relationships and The Strategy and Work Program, issued following transactions and to understand how such relationships and consideration and approval of its completeness from a transactions affect the view given by the financial statements. public interest perspective by the Public Interest Oversight "The standard will strengthen current auditing practice Board (PIOB)*, is consistent with the IAASB's overall in this area by emphasising the need for the auditor to objectives. ** It builds on the strong base of standards understand related party relationships and transactions in developed by the IAASB to date and focuses on three areas: order to identify the risks of material misstatement to which • The development of standards; these may give rise, and directing the auditor to focus work effort • The facilitation and monitoring of adoption of those on the assessed risks of material misstatement, including standards; and those due to fraud," explains John Kellas, IAASB Chairman. • Responding to concerns about the implementation of "The revised standard clarifies the auditor's responsibilities the standards by activities designed to improve the in those cases where the financial reporting framework consistency with which they are applied in practice. establishes minimal or no related party requirements. In "The IAASB's vision is that the high quality standards addition, it provides enhanced guidance to assist the auditor on assurance, related services and, in particular, in understanding and responding to the risks of material International Standards on Auditing that we develop in the misstatement that may arise in relation to related parties public interest are adopted and applied internationally. with dominant influence," emphasises Kellas. The strategy and work program are consistent with this longer term vision," explains John Kellas, IAASB Chairman. Clarity Redrafted ISAs The Strategy and Work Program responds to significant In addition to ISA 550 (Revised and Redrafted), the IAASB developments in the environment in which audit and other has also released the following clarity redrafted ISAs: assurance services are performed, and in which standards • ISA 250 (Redrafted) - Consideration of Laws and for such services are set. It also highlights the IAASB role in Regulations in an Audit of Financial Statements; working toward global acceptance of and convergence with • ISA 510 (Redrafted) - Initial Audit Engagements- its standards and in establishing and maintaining relevant Opening Balances; and partnerships. It is underpinned by the IAASB's communications • ISA 570 (Redrafted) - Going Concern. initiatives to keep stakeholders informed of its activities They form part of the IAASB's ambitious 18-month and to promote adoption and implementation of its program to redraft existing standards following the clarity standards. drafting conventions. To date, the IAASB has released 15 The Strategy and Work Program reflects the outcome of final clarity redrafted ISAs. The IAASB is on track to finalize an extensive consultation program to obtain the widest its complete set of clarified ISAs by the end of this year. possible input into determining the IAASB's priorities over The complete set of clarified ISAs, including newly the next three years. A summary of the IAASB's conclusions revised standards such as ISA 550 (Revised and Redrafted), with regard to significant matters raised during these will be effective for audits of financial statements for consultations is presented in the Basis for Conclusions: periods beginning on or after December 15, 2009. IAASB Strategy and Work Program, 2009-2011. The ISAs can be downloaded free-of-charge from the "I am grateful to the many people and organizations IFAC online bookstore at http://www.ifac.org/store. that contributed to our strategy review consultations. I (Source: www.ifac.org) hope that the direction of our work will be seen as responding to the representations made to us, and to the public interest, which must be our overriding concern. Of IFAC’s International Auditing and course, events and circumstances may require us to amend Assurance Standards Board Issues our program, and for this reason it will be kept under Strategy and Work Program for 2009- constant review," notes Kellas. 2011 The Strategy and Work Program, 2009-2011 can be downloaded free-of-charge from the IFAC online bookstore The International Auditing and Assurance Standards (http://www.ifac.org/store). To access the related Basis for Board (IAASB), an independent standard-setting board Conclusions and other information on the IAASB's work,
www.micpa.com.my August 2008 | The Malaysian Accountant | 33 visit its home page at http://www.iaasb.org/. Assurance Standards Board (IAASB) in addition to (Source: www.ifac.org) relevant national quality control standards and conduct, to the extent not prohibited by national regulation, regular globally coordinated internal IFAC's International Ethics Standards quality assurance reviews; Board Issues Proposals to Clarify • Have policies and methodologies for the conduct of Code of Ethics for Accountants transnational audits that are based, to the extent practicable, on ISAs issued by the IAASB; and To further promote and facilitate accountants' adherence to • Have policies and methodologies which conform to high ethical and independence standards, the the IFAC Code of Ethics for Professional Accountants International Ethics Standards Board for Accountants and national codes of ethics. (IESBA), an independent standard-setting board within the As of July 2008, of the 22 Forum members, 18 are full IFAC, has proposed changes to the IFAC Code of Ethics for members and four are provisional members. The Forum's Professional Accountants. The changes, outlined in an remaining provisional members are working toward exposure draft with the same title focus on enhancing the becoming full members in 2008. For additional details on clarity of the Code. The proposed changes make clear the the Forum of Firms, please visit: http://www.ifac.org/Forum specific requirements that are contained in the Code and _of_Firms/. refine the application of the Code's conceptual framework. (Source: www.ifac.org) "The proposals significantly enhance the clarity and understandability of the provisions in the Code," states Richard George, IESBA Chair. "We believe that the revised IFAC’S International Accounting Code will provide a strong foundation to further the IESBA's Education Standards Board Releases objective of facilitating convergence of international and Updated Education Pronouncements national ethical standards." Comments on the exposure draft are requested by To ensure that its pronouncements remain clear and October 15, 2008. The exposure draft may be viewed by relevant, the International Accounting Education going to http://www.ifac.org/eds. Comments may be Standards Board (IAESB), an independent standard-setting submitted by email to [email protected]. board within the IFAC, has released amended versions of (Source: www.ifac.org) its International Education Standards (IESs) and related education pronouncements. The amendments result in more consistent use of terminology throughout the SMS Latinoamerica Becomes Full standards and more clearly describe the role of the IAESB Member of Forum of Firms and its standard-setting process, including oversight of its work by the Public Interest Oversight Board. SMS Latinoamerica has been named a full member of the The amended documents comprise the Framework for Forum of Firms after reporting it has implemented a International Education Pronouncements, the Introduction to globally coordinated quality assurance program, International Education Standards, and International committed to the use of International Standards on Education Standards 1-8, all of which were published Auditing (ISAs), and met other specific ethics requirements, between 2003 and 2006. Given the editorial nature of the the Forum announced today. Seventeen other international changes, the IAESB felt that public consultation was not networks of accounting firms achieved full member status necessary and the amended documents were approved by earlier this year. the IAESB in its May 2008 meeting. The Forum of Firms is an association of international In addition to these editorial amendments, the IAESB networks of accounting firms. These firms perform audits has commenced a project to substantively revise the of financial statements that are or may be used across Framework and the Introduction. As part of that project, national borders. The Forum's goal is to promote consistent the IAESB will seek public comments on changes to these and high quality standards of financial reporting and documents. auditing practices worldwide. The amended versions of IESs 1-8, the Framework and In order to achieve full membership status, SMS the Introduction can be downloaded free-of-charge from Latinamerica had to commit to meet the Forum's the IFAC online bookstore at http://www.ifac.org/store. For membership obligations which require members to: more information on the IAESB’s work program, visit • Maintain appropriate quality control standards in http://www.ifac.org/education. accordance with International Standards on Quality (Source: www.ifac.org) Control issued by the International Auditing and
34 | The Malaysian Accountant | August 2008 www.micpa.com.my CASE LAW HIGHLIGHTS
See Teow Guan & Ors v Liquidators of Kian Joo Holdings Sdn Bhd (in Liquidation) & Ors
COURT OF APPEAL (PUTRAJAYA) – CIVIL APPEAL NO W-02-563 OF 2003 TENGKU BAHARUDDIN, SURIYADI AND HASAN LAH JJCA NOVEMBER 9, 2007
Civil Procedure – Injunction – Injunction for preservation of property – Delay of four years for injunction – Whether inordinate and inexcusable
Civil Procedure – Injunction – Pending appeal – Principles applicable which was now pending before the court of appeal.
Companies and Corporations – Winding up – Liquidators – Held , dismissing the motion: Officers of the court – Unless restrained, liquidators would (1) It was quite established that an injunction for the proceed to sell shares forming subject matter of appeal – Whether preservation of property and other mandatory orders court should interfere with liquidators’ decision might only be granted in accordance with the principles applicable to the granting of interlocutory injunctions. The applicants had filed a motion pursuant to s 44 of the It might be granted where the court was satisfied that Courts of Judicature Act 1964 (‘CJA’) on the ground that unless there was substantial question to be tried, and a case had an injunction was granted pending the hearing and disposal been made out for the preservation of that property. of the appeal, the liquidators of the Kian Joo Holdings Sdn Bhd (2) The first reason was that unless restrained the liquidators (in liquidation) would proceed to sell all the 69,240,877 shares would proceed to sell the 69,240,877 shares forming the forming the subject matter of the appeal making the appeal subject matter of the appeal. That they were appointed if successful, nugatory and therefore academic as causing by the court, and hence officers of the court, who merely irreparable harm to the appellants. Kian Joo Holdings Sdn wanted to perform their duties. Their decision to sell the Bhd (‘the company’) was incorporated on March 27, 1982 shares at the best possible price would have benefited having 27 shareholders who were all members of the See every shareholder including the applicants. The court Family. On September 10, 1994 a petition was filed to wind here was not about to interfere with the liquidators’ up the company. Subsequently by consent of the parties, the decision simply because its opinion might differ from high court on January 30, 1996 had ordered that the company that of the liquidator. be wound up, and liquidators appointed. On July 12, 1996 the (3) Not only was there not shown bad faith or perverse liquidators convened a meeting of the contributories of the errors had been committed by the liquidators, but as per company pursuant to s 237(2) of the Companies Act 1965, to the supporting affidavit, the applicants had also not ascertain their wishes regarding the disposal of the shares and adduced evidence that such sale would have caused warrants in its possession. In that meeting two groups irreparable damage to them. emerged viz the See Teow Chuan Contributories (‘STC group’) (4) The intention of their late father to have the shares and the See Teow Guan contributories (‘STG group or the retained by the family coupled with the fear of losing applicants’). At that meeting and confirmed in another, it was them, were inextricably intertwined to the fear of resolved that 55% in value and 52% in number of the suffering a loss in value of the investment. These were contributories (that was the STC group) preferred a sale of the not special circumstances. Mere fear and sentimentality shares and warrants, whilst the remaining holders of 54% in certainly did not qualify as persuasive grounds value and 48% in number of the shares (‘STG group’) preferred construable as special circumstances. distribution of the shares and warrants in specie. Thereafter (5) Unexplained here too was the delay of four years by the the liquidators, after coming into possession of the properties applicants since June 13, 2003 to apply for this and after the said meetings, had wanted to implement the injunction order. Despite the conspicuous clarity of s 73 majority decision. Being aggrieved the STG group filed an of the CJA, that an appeal should not operate as a stay, application (‘encl 191’) to modify the said decision. At the end the applicants took no steps for four years to apply for of the hearing of encl 191, the high court found that the STG this order. This delay was inordinate and inexcusable group had failed to show how the liquidators had acted and in the circumstances of the case quite fatal to the fraudulently or were mala fide in the exercise of their applicants’ motion. discretion, to warrant intervention by the court and dismissed (Source: Malayan Law Journal January 25, 2008, [2008] 1 MLJ 305-440) encl 191. Being dissatisfied the applicants filed an appeal Produced with kind permission
www.micpa.com.my August 2008 | The Malaysian Accountant | 35 GLOBAL INSIGHT NEWS from Down Under A O FERRERS, AUSTRALIAN CORRESPONDENT
Facilitating the Return of Women to accountants is 30 per cent, whereas ten years ago it stood the Accounting Profession at 19.7 per cent. They outnumber their male counterparts The following headline recently caught my attention – NIA in taking up accounting. proposes Govt tackles skills shortage by attracting women Speaking for the Institute, Michael Nazzari said, “A back to accounting. more balanced gender membership base is good news for This prefaced a media release by the National the accounting industry as we move into the future. This Institute of Accountants. What has happened is that the is of particular importance and significance in the current Institute has called on the Commonwealth government to skills shortage environment in which we operate.” consider a $2,500 training voucher scheme to help women accounting professionals to update their skills and re-enter Tax Review the workforce. In the budget this year Wayne Swan, the Federal Treasurer, CEO Roger Cotton has pointed out that there are announced that there would be a major overhaul of the tax many women who have left the profession, often for system under the chair of Dr Ken Henry, the head of personal reasons regarding families, who may want to Treasury. A discussion paper was released on August 6, 2008 come back, either full time or part time, but feel they have with a press release containing the following words: been out of the profession too long. He noted that a lot has The Rudd Government welcomes the launch today of the changed in accounting in recent years and someone who Australia’s Future Tax System (AFTS) Discussion Paper by has been out for more than even three years may find it Treasury Secretary Dr Ken Henry. hard to get a job at an appropriate level because they may Long-term reform of our tax and welfare systems is a be seen not to have all the skills necessary. key way to secure our economic foundations for the future, This is where a training voucher would be helpful. It create wealth, spread opportunity and reward working is proposed it would be available to women who have been Australians. out of accounting for more than 5 years. It would then be The AFTS Review will play a vital role in modernising easier for a woman to access training that would assist her Australia’s economy to meet the great economic, social to re-enter the workforce. and environmental challenges of the 21st century. Mr Cotton said, “Addressing the skills shortage in Meeting these future challenges - like climate change, the accounting in Australia is an economic issue of ageing population, new technologies and rapid fundamental importance to this country and this initiative globalisation – will require a tax system that is as fair and would be a beneficial step in the right direction.” efficient as possible and the AFTS Review will help achieve Wages are good and prospects excellent. The that goal. standing of an accountant in the community is high. The Review will be the most comprehensive Nevertheless it is difficult to attract the numbers required examination of the tax system in over 50 years. to replace those accountants leaving the profession. Many In a media release CEO Roger Cotton of the National leave because of their advancing age and there has not Institute of Accountants welcomed this initiative and the been a necessary inflow to maintain requisite numbers. opportunity for discussion with all interested parties, More are leaving than joining. particularly the accounting professions. For many years Generally speaking, women are an untapped pool of the professions have wrestled with the complications of tax talent. They need, in most cases, only some minor help to law and any simplification is good news. polish up their accounting expertise which would better He made these comments, “The complexity in the tax prepare them to return to the profession. The voucher system is an enormous disadvantage and cost to small scheme would facilitate this and the Institute is urging the business. We realise that often simplicity is traded off government to take it on board. against certainty in the tax system and the review will A survey by the Institute of Chartered Accountants in provide an opportunity to reconsider the fundamental Australia has discovered that in fact women are breaking principles of tax design and to achieve serious tax reform. down accounting industry stereotypes and embracing the “Another key issue is our ageing population. The NIA profession. In the last 10 years the number of women who recommends removing incentives for early retirement and have successfully become chartered accountants has more encouraging delayed retirement through reduced rates of than doubled. Today the proportion of women chartered income tax. Tax is a key factor in driving workforce
36 | The Malaysian Accountant | August 2008 www.micpa.com.my participation and here we have a chance to make significant begin preparing for the changeover from the present GAAP changes to help ensure sustained economic growth.” (Generally Accepted Accounting Principles). This is a Garry Addison as senior tax counsel spoke on behalf major undertaking. In order to facilitate this work, the of CPA Australia,“ Greater incentives to join the workforce Canadian Institute of Chartered Accountants has produced and measures to ensure enhanced international business a booklet entitled “20 questions directors and audit competitiveness should also be accorded priority. It is committees should ask about IFRS conversions”. A copy important that there be no financial disincentives to people may be found at www.cica.ca/IFRS. entering the workforce, including situations where President Kevin Dancey has said in a media release, households earn a second income. “It is crucial for all directors to have a general “At present the effective marginal tax rate for a understanding of what the changeover will mean for their second income earner may be so high as to discourage a organisation. The document provides suggested questions person entering or rejoining the workforce. This can only to ask of themselves, senior management and others… impact negatively on the skills shortages and productivity “Responsibility for executing the conversion to IFRS issues being experienced in the economy at present.” rests with management and it will be the board’s These aspects should be included in the review of responsibility to play an oversight role. Our document is personal income tax. He welcomed too the review of designed to help directors, especially audit committee business taxation, since an effective business tax regime is members, to understand the potential scope of the crucial to national wealth generation. transition. This involves consideration not only of the The review will look at inefficient State taxes which conversion process itself but of issues relating to risk, could be removed and harmonise the rest wherever possible stakeholder relations, financial reporting and internal to reduce business compliance costs. In this context the controls which will be triggered by the transition.” imposition of stamp duty, a State tax, should be the focus After conversion to IFRS, Canada will be on the same of attention. footing as more than 100 other countries so far as financial reporting is concerned. As a result, Canadian companies CANADA- International Financial should see a reduction in the cost of capital and greater Reporting Standards (IFRS) access to international capital markets. No longer will These new standards come into force in Canada in 2011 there have to be a reconciliation of figures between one and it is now timely for boards and audit committees to country and another.
MICPA Practising Certificate
The Membership Affairs Committee of the Institute in considering applications for practising certificates, has frequently come across cases where a member has commenced public practice before he is issued with a practising certificate by the Institute.
The Committee would like to remind members that in accordance with bye-law 56 of the Institute’s bye-laws, a member shall be entitled to engage in public practice in Malaysia only if he holds a practising certificate issued by the Institute.
If members need clarification on the above, kindly contact the Institute’s Membership Services Department.
The Malaysian Institute of Certified Public Accountants No.15 Jalan Medan Tuanku, 50300 Kuala Lumpur. Tel: 03-2698 9622 Fax: 03-2698 9403 E-mail: [email protected]
www.micpa.com.my August 2008 | The Malaysian Accountant | 37 GLOBAL INSIGHT WORLD NEWS
EUROPEAN COMMISSION
HONG KONG INDIA
European Commission The paper explores the possible development of a new financial reporting framework for large private companies, Third Anti-Money Laundering given the burden imposed on them by the application of Directive: EC Takes Action Against 15 Hong Kong Financial Reporting Standards. Member States (Source: www.hkicpa.org.hk)
The European Commission has decided to pursue infringement procedures against 15 Member States for India failure to implement the Third Anti-Money Laundering Indian Institute Launches Certificate Directive into national law, which should have occurred by Program in Accounting December 15, 2007. The Commission will send formal requests to those Member States and, if there is no reply The Institute of Cost and Works Accountants of India has within two months, the Commission may refer the matter launched a certificate program in accounting designed to to the European Court of Justice. help students living in rural areas who cannot afford the (Source: www.europa.eu) professional qualification develop accounting skills. Following the recommendation of the Union Ministry of Hong Kong Corporate Affairs in India, the program is geared towards small and medium enterprises, the retail sector, knowledge New Paper Addresses Need for process outsourcing (KPO) and business process Simplified Financial Reporting for outsourcing (BPO) sectors and Panchayats. Referred to as Private Companies the Certificate of Accounting Technician (CAT), the program will aid in addressing the expected shortage of The Hong Kong Institute of Certified Public Accountants accountants in India over the next ten years. (HKICPA) is seeking comments on a recently released (Source: www.myicwai.com) consultation paper, Financial Reporting by Private Companies.
38 | The Malaysian Accountant | August 2008 www.micpa.com.my LIFESTYLE Taiping – A Town of Many Firsts
BY KAVALYN KREER
aiping, the former state capital of Perak, town began in the 19th century when tin was discovered in has the distinction of achieving many 1848. The mines attracted large numbers of settlers, ‘firsts’ in the country. The Taiping particularly Chinese who subsequently fought over the tin- Municipal Council records a total of 40 fields. The battle for power was so ferocious that the British firsts, either in monuments or events, had to intervene and thus eventually took control of the dTating as early as 1844. town. These include the first open-tin mining activity in the Being the British Administrative centre, the town peninsula and the first hill resort in Maxwell Hill in 1844. thrived economically and its population rose The first mosque, the Masjid Tengku Menteri, was founded tremendously. Interestingly, it also gained a reputation as in 1870 while the first Magistrate court was set up a clean and cool city. in 1874. The Taiping Lake Gardens are the oldest in the country while the Perak Museum is the first to open its doors in 1883. The famous railway track from Taiping to Port Weld commenced in 1885 and the game of golf first began in Taiping at the Taiping New Club in 1885. Aside from these, there are many others and they include newspapers, government offices, hospitals, a post office, a railway station, an airfield, the library, a college, the police force team, the fire brigade, a recreation park, schools, churches, associations and other structures that were established ‘first’ in Taiping. Taiping, the second largest town in Perak after Ipoh, gets its name from the Chinese word ‘Tai-Peng’ which means eternal peace. The history of this
Taiping, known for having the highest rainfall in the country, was attractive to the British as it reminded them of the English April weather, often dispelling homesickness. Until today, usually after a heavy downpour, the lush tropical jungle and lofty hills would be covered by the white cushy blanket of heavy mist. This prompted William Edward Maxwell, the Assistant Resident of Perak then and a noted Malay scholar, to a look for a suitable spot for a hill station that would appeal to his countrymen. Thus the Maxwell Hill was founded and it quickly became the favourite retreat of high-ranking British officers, their families and guests.
www.micpa.com.my August 2008 | The Malaysian Accountant | 39 The unusual rainfall in Taiping has also blessed the Lake Gardens with a fertile and splendid collection of flora and century-old rain-trees whose branches stretch across the driveway and dip into the lake’s waters. The Taiping Lake Garden which dates back to 1880 is one of the oldest in the country and offers a beautiful panoramic landscape. Within its locality and close to the Maxwell Hill or Bukit Larut, lies the famous Taiping Zoo which houses more than 180 species. An interesting feature of the Zoo is the
The town centre of Taiping is quite small and can be covered in one day. Some part of the original General Hospital founded in 1880 still exists and so does the Old Kota Mosque on Jalan Masjid (Mosque Road) which was built in 1897. The Old Clock Tower of Taiping, the first in the country and within the city has been converted into a tourist information office. Visitors can pick up informative trail maps to guide them on walks around the town. The Taiping Government offices located at Jalan Kota in a large Victorian style building was constructed at the end of the 19th Century looks resplendent when lit-up in the night. Of the British night safari. Also within the area is the disused golf course, the first in the country and third in Asia, which was closed in the 1980s because the flying golf balls posed a public hazard to patrons of the Lake Gardens. The Perak Museum in Taiping which dates back to 1883 is another interesting visit. During Sir High Low’s administration, he appointed Leonard Wary Jr, a botanist and geologist as the first curator of the Perak Museum. Leonard exhibited zoological, archaeological, ethnological and herbarium materials in the four galleries. Currently, only the herbarium section has changed while the rest is still intact and extended with more items over the years. Indeed, the museum has the best and oldest specimens and artefacts dating over a century old. A visit to the museum library, the first in the country, is also worth the time as it is truly a walk through history. The museum library stores reference books, periodicals, government gazettes and other materials on history, Resident’s large and lofty home, the only thing left, are the anthropology, archaeology, culture, science, nature and columns that held the timber house. others to researchers. Presently, there are over 6,000 Aside from historical attractions, there are plenty of collections available in the library and some of them are gastronomy choices for everyone ranging from upmarket rare local and foreign collections. restaurants to simple hawker fare. Through the years, the Perak Museum has also Though Taiping does not offer big city excitement it retained a close relationship with the British Museum in does have a special charm of its own. London, Raffles Museum in Singapore, Cambridge This article was written by Kavalyn Kreer, who writes lifestyle Museum and Oxford Museum in England. articles for publication on the web and print.
40 | The Malaysian Accountant | August 2008 www.micpa.com.my