Wednesday November 25, 2009
Impact of FRS139’s debut on firms
KUALA LUMPUR: The roll-out of the Financial Reporting Standard 139 (FRS139) on Jan 1 is expected to have significant impact on the performance of Malaysian companies, KPMG Malaysia partner Thong Foo Vung said.
Thong said currently there was no comprehensive accounting standard on financial instruments such as derivatives, loan receivables, bank overdrafts, debt investments and equity investments like bonds.
“The introduction of FRS139 will help provide a standard on recognition and measurement of financial instruments and hedge accounting,” he said on Tuesday at The Challenges of Implementing Reporting Standards (FRS) 139 forum.
Thong said Malaysian companies with financial year ending Dec 31, 2010 would have to adhere to FRS139 and FRS7, which related more to disclosures in financial instruments.
He said in the past derivatives and other illiquid assets were not recorded in financial statements.
“With FRS139 mandatory compliance, companies now have to be more transparent with their financial reporting by recording their exposure to various financial instruments at all times,” he said.
Thong said FRS139 aimed to measure the level of exposure or risks a company had in its business dealings, especially on financial instruments in the area of fair value.
Mazars head of International Financial Reporting Standard (IFRS) desk (Asia Pacific) Pascal Jauffret said the implementation of FRS139 was not just for stakeholders.
“More importantly, the global markets demand a more transparent and more comprehensive accounting standard on financial instruments,” he noted.
Mazars is an international organisation specialising in audit, accounting, tax and advisory services.
Jauffret said FRS139 would have varying impact on the measurement of fair value in most sectors.
He said some of the questions on FRS139 to be asked during the audit committee meetings were: what is eligible to hedge accounting according to FRS139; how will the company manage to get estimations of fair value for its financial instruments; and would the on-going developments have an impact on the financial statements of a company?
In August 2008, the Malaysian Accounting Standards Board together with the Financial Reporting Foundation announced their plans to bring Malaysia to full convergence with IFRS by Jan 1, 2012.