Business

Saturday October 31, 2009

Regional accounting standard setters speak out

By DANNY YAP


THERE have long been complaints that international accounting standards adopted in emerging economies are sometimes problematic because these standards are largely or wholly based on those of the developed nations.

These critics point out that the international standards should take into account the situations in other parts of the world and not just the circumstances in the United States and Western Europe.

Although standard setters from all over the world are represented in the organisations that formulate the international standards, many are seeking to have a bigger say in the process. A major move in that direction is the inaugural Asian-Oceanian Standard-Setters Group (AOSSG) meeting to be held in Kuala Lumpur on Nov 4 and 5.

Datuk Zainal Abidin Putih ... ‘AOSSG will provide a platform for concerns and issues raised by countries in the region.’

It will pave the way for the formation of a body that enables the region’s standard setters to speak in “one voice” with regards to the setting of accounting standards, which has been traditionally dominated by the West.

In Malaysia, the Malaysian Accounting Standards Board (MASB) develops and issues financial reporting standards, and each country in the Asian-Oceanian region has an equivalent.

MASB is an independent statutory body entrusted by the Finance Ministry with the sole responsibility of issuing approved accounting standards for application in Malaysia.

MASB AOSSG committee chairman Datuk Zainal Abidin Putih says the formation of AOSSG is important, given the number of countries in this region that are in the process of fully converging their accounting standards to comply with the International Financial Reporting Standards (IFRS).

He adds that the global convergence of accounting standards will foster greater investor confidence and increase investment crossovers worldwide.

“Accountants all over the world will also be able to apply the same standards with more uniformity and understanding, especially in consolidation of accounts,” he says.

According to Zainal, the AOSSG will provide a platform for concerns and issues raised by countries in the region to be conveyed to the International Accounting Standards Board (IASB) in a more formal and holistic way. At the same time, it offers an avenue for resolving common issues.

“Hence, AOSSG serves to assist us (countries in Asian-Oceanian region) to comply with IASB quicker and also enable us to have a stronger representation in standard settings at the global stage,” he notes.

IASB is an independent, privately-funded accounting standard setter responsible for developing the International Financial Reporting Standards.

Zainal says with the shift in global economic power, especially due to the rise of China, India and other developing countries like Malaysia, there is a need for the developed world to give more thought to the developing world when coming up with accounting standards.

“The AOSSG is therefore the channel whereby accounting standard setters in the developing world can bring forth their thoughts and concerns on international accounting standards,” he points out.

Mohammad Faiz Azmi... ‘Islamic finance has grown by leaps and bounds, registering about 20% growth per annum.’

MASB chairman Mohammad Faiz Azmi says besides having a say on accounting standards set, there is also another strong mission that AOSSG aims to push – the stronger use of Islamic financial instruments that are compliant with the IFRS.

Mohammad Faiz says Malaysia is leading the way in Islamic financing and has a lot of expertise to offer to other Asian-Oceanian countries and even to the developed world.

“In the face of the current financial crisis, there has been a stronger interest all over the world to consider Islamic financial instruments, either to borrow, invest or to safeguard their money,” he adds.

He points out that in recent years, Islamic finance have grown by leaps and bounds, registering about 20% growth and in some cases, like takaful, growth has even hit 30% per annum.

For the AOSSG meeting next month, 23 countries have confirmed their attendance, including Australia, China, India, Japan, Hong Kong, New Zealand, Pakistan, Saudi Arabia and Singapore.

Mohammad Faiz says Malaysia should be honoured to host the first AOSSG meeting.

“There are still about 74 other member countries in the region that have yet to join the group, but we are optimistic of their future participation,” he adds.

Mohammad Faiz concurs with Zainal that AOSSG will allow standard setters in the region to establish a mechanism and stage to discuss and work out resolutions to emerging issues and to contribute to the development of a single set of high-quality global financial reporting standards.

“This meeting will also serve as a platform for providing the Asian-Oceanian perspective on accounting standards that are more relevant to this region,” he says.

It is understood that IASB welcomes this AOSSG initiative as it provides more focused and relevant feedback to the board on a growing and important region of the world.

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