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CHANGE IN ACCOUNTING POLICIES AND PRIOR YEAR ADJUSTMENT (a) Change in Accounting Policies During the year, the Company applied four new MASB standards which became effective from 1 January 2003, and accordingly modified certain accounting policies. The change in accounting policies which resulted in prior year adjustment relates to MASB 25: Income Taxes. Under MASB 25, deferred tax liabilities are recognized for all taxable temporary differences. Previously, deferred tax liabilities were provided for on account of timing differences only to the extent that a tax liability was expected to materialize in the foreseeable future. In addition, the Company has commenced recognition of deferred tax assets for all deductible temporary differences, when it is probable that sufficient taxable profit will be available against which the deductible temporary differences can be utilized. Previously, deferred tax assets were not recognized unless there was reasonable expectation of their realization. (b) Prior Year Adjustment The change in accounting policies has been applied retrospectively and comparatives have been restated. The effects of the change in accounting policies are as follow: Group 2003 (RM) 2002 (RM)
Effect on accumulated losses: At 1 January, as previously stated Effects of adopting MASB 25 At 1 January, as restated 71,165,169 (10,000) 71,155,169 63,473,192 (10,000) 63,463,192
Comparative amount as at 31 December 2002 has been restated as follow: Previously stated (RM) Deferred tax liabilities 10,000 Adjustment (RM) (10,000) Restated (RM) .
COMPARATIVE FIGURES The presentation and classification of items in the current year financial statements have been consistent with the previous financial year except that certain comparative amounts have been adjusted as a result of changes in accounting policies as disclosed.
FINANCIAL INSTRUMENTS (a) Financial Risk Management Objectives and Policies The Groups financial risk management policy seeks to ensure the adequate financial resources are available for the development of the Groups business whilst managing its interest rate, foreign exchange, liquidity and credit risks. The Group operates within clearly defined guidelines that are approved by the Board and the Groups policy is to not engage in speculative transactions. (b) Interest Rate Risk The Groups primary interest rate risk relates to interest bearing debts, as the Group had no substantial long-term interest bearing assets as at 31 December 2003. (c) Foreign Exchange Risk Foreign exchange exposures are mainly in relation to the purchases of goods of operating entities, which are of a very short-term nature and not subject to substantial fluctuations. (d) Liquidity Risk As the Company has been designated as an affected listed issuer, the Group strives to maintain available banking facilities to meet its working capital requirements for its operating entities. (e) Credit Risk Credit risk or the risk of counter parties defaulting, is controlled by the application of credit approvals, limits and monitoring procedures. Trade receivables are monitored on an ongoing basis by its credit control and Group management reporting procedures. (f) Fair Values
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It is not practical to estimate the fair values of the Companys related companies balances due principally to the lack of fixed repayment term.
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SEGMENTAL INFORMATION (a) Business Segment: The Group is organised into two major business segments: i. ii. Construction the construction of industrial building Trading trading and retail of fastening products
Other business segments include investment and development consultancy services, none of which are of a sufficient size to be reported separately. The directors are of the opinion that all inter-segment transactions have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from that obtainable in transactions with unrelated parties. (b) Geographical Segment: Segmental reporting by geographical region have not been prepared as the Groups operations are predominantly in Malaysia. EXAMPLE:
Policies and strategies for the first phase of Vision 2020 are presented in the Second Outline Perspective Plan (OPP2). It establishes the National Development Policy (NDP), which replaces the National Economy Policy (NEP), and contains several policy changes to give a new dimension to development efforts in creating a more balanced development while maintaining the basic policy of the NEP. Anti-poverty strategy shifted focus to the elimination of poverty, while at the same time reducing relative poverty. To increase the meaningful participation of Bumiputera in the modern sectors of the economy, the emphasis is made on the Bumiputera Commercial and Industrial communities. Greater expectations placed on private sector involvement in the restructuring process. Human resource development including moral and ethical values to achieve the development and distribution are also emphasized. One important aspect of the NEP is located at the premises of a rapidly growing economy. Development is a necessary condition to provide opportunities for the poor and disadvantaged people to keep them out of poverty and participate in mainstream economic activities. In addition, it ensures that the distribution does not occur from the reallocation of existing wealth, but from the expansion and new sources of wealth. Implementation strategy for eradicating poverty and restructuring society to produce significant improvements in income distribution took place by 1990. The rate of households living below the poverty level decreased from 49.3 percent in 1970 to 16.5 percent in 1990 and declined further to 5.1 percent in 2002.
Philosophy of Positive Accounting Theory Positive theory seeks to understand accounting phenomena by observing empirical events and use these results to make predictions about a wider set of observations and/or to predict future event. This theory different from other two theory (descriptive theory and normative theory). Descriptive theory focus only on describing events and normative theory, which prescribes what should occur. Milton Friedman championed positive theory in economics. He stated: The ultimate goal of a positive science is the development of a theory or hypothesis that yields valid and meaningful (i.e. not touristic) predictions about phenomena not yet observed. Consistent with Friedmans view, Watts and Zimmerman asserted: The objective of [positive] accounting theory is to explain and predict accounting practice... Explanation means proving reason for observed practice. For example, positive accounting theory seeks to explain why firms continue to use historical cost accounting and why certain firms switch between a number of accounting techniques. Prediction of accounting practice means that the theory predicts unobserved phenomena. Unobserved phenomena are not necessarily future phenomena; they include phenomena that have occurred, but on which systematic evidence has not yet been collected. We might also be interested in predicting the reaction of firms to proposed accounting standard, together with an explanation of why firms would lobby for and against such a standard, even though the standard has already been released.
Most research in these areas has been conducted within a prevailing paradigm in financial economics. The Efficient Market Hypothesis (EMH) draws on microeconomic price theory, which is characterised by its emphasis on the demand and supply of information in market. The definition of an efficient market as one in which price fully reflect available information based on assumptions that: There are no transaction costs in trading securities Information is available cost- free to all market participants There is agreement on the implication for the current price and distributions of future prices
The implication of these assumptions is that in a capital market that is efficient, information is fully incorporated into share prices when it is released. It is impossible, on average, to earn economic profits by trading on information. We are aware that these assumptions are not satisfied in any market. Hence, to accommodate different types of information sets ad to enable empirical testing. Fama distinguished between three information set: Weak form market efficiency where a security price at any particular time fully reflects the information contained in its sequence of part prices. Semi strong form asserts that a security price fully reflect all publicly available information. Strong form that a securitys price fully reflects all information, including information that is not publicly available. (i.e. private information)
Of the three form, the semi strong form is the one most directly related to accounting research. Normative accounting theorists and accounting standard-setting bodies give considerable effort to arguing the merits of the form in which accounting statements are disclosed to investors for decision making. Prices reflect all publicly available information (including current values of assets and liabilities). Market efficiency does not mean that all financial information has been correctly presented by a firm or properly interpreted by individual decision makers. Managers make the best management decision or that investors can predict future events with absolute precision. EMH simply means security prices reflect the aggregate impact of all relevant information.
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Economy in Recovery and Stable Accounting Environment The value relevance of intangible NCA in the presence of a strong accounting regulatory period should be easier to predict compared to in the absence of accounting regulation (Barth et al., 2001a; Hung, 2001). Since accounting standards aim to assist accountants and preparers to report and present more reliable and relevance accounting information, existence of a strong accounting
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References:
www.masb.org.my/ www.audit.gov.my/.../ceramah%20eksekutif%20bil%201.pdf www.epu.gov.my/ Accounting theory 7th edition ] http://eprints.ptar.uitm.edu.my/264/1/Pages_from_Vol._8_No._2-_43_to_66.pdf
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