TABLE OF CONTENTS

CONTENT PAGE
INTRODUCTION 3
FACTORS AFFECTING THE DEVELOPMENT OF ACCOUNTING STANDARDS
IN MALAYSIA:
 CULTURE 4
 INTERNATIONAL POLITICAL 5
 ECONOMIC 5
 LEGAL SYSTEMS 5
 STRUCTURE OF CAPITAL MARKETS 6
CONCLUSION 7
 Accounting Theory and Practices (PAS3363)

1. INTRODUCTION

The accounting standards in Malaysia started to develop in the year of 1997 where the
Malaysian Accounting Standard Board (MASB) was established and appointed as the
professional body that issues accounting standard in Malaysia. Previously, there were
two professional bodies involved in issuing the accounting standard. Those were the
Malaysian Institute of accountants (MIA) and the Malaysian Institute of Certified Public
Accountants (MICPA).
The main function of MASB is to determine and issue accounting standard for the
preparation of financial statements, which are required to be lodged under any law,
administered by the Securities Commission, Bank Negara Malaysia and the Companies
Commission of Malaysia.
In the pre-development stage, the accounting standards were IAS (International
Accounting Standards) and MAS (Malaysian Accounting Standards). After MASB was
appointed as the professional body, MASB come up with the very first accounting
standards that is MASB 1997. Followed by Financial Reporting Standard 2005, Malaysian
Financial Reporting Standard 2012 (public listed companies) and Malaysian Private Entity
Reporting Standards 2016 (private companies).
One of the differences between the pre and post development of accounting
standards is that previously, there was no act related to the issuance of the standards
but when Malaysia started to develop, the issuance of standard are all in accordance
with the Financial Reporting Act 1997.
There are two bodies that are accountable for the Financial Reporting Act 1997,
which was gazette on 6th March 1997. Those are the Financial Reporting Foundation
(FRF) and MASB.
In order to serve the best service, MASB has taken a lot of initiatives in improving
their roles. The public has suggested a number of ways to improve their role, some of
them are: work closer and more openly with the interest groups, be more open for
improvements by having more public hearings and discussions and to make use of the
mass media to advertise and invite participation.

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2. FACTOR AFFECTING THE DEVELOPMENT OF ACCOUNTING STANDARDS IN

MALAYSIA

2.1. CULTURE
Culture is said to be powerful environmental factor that can affect the accounting
system of a country and also how individuals perceive and use accounting
information. Relates to the cultural relativism, fundamental attributes of countries
are different from one society to another. This had led to the believed that the
culture of a country influences the choice of accounting techniques.
This cultural factor can be determine by Gray’s accounting values of
development of accounting standards: (i) professionalism (is preference for the
exercise of individual professional judgement and the maintenance of professional
self-regulation) vs statutory control (is compliance needed with prescriptive legal
requirements); (ii) uniformity (it is important that there are uniform and consistent
practices) vs flexibility (the practices depend on circumstances); (iii) conservatism
(the approach is more cautious, to cope with uncertainty) vs optimism (the
approach is more risk-taking); and (iv) secrecy (is for confidentiality and disclosure
are often restricted) vs transparency (the information is more public).
In Malaysia, the MASB is more under control of the government, through the
Malaysian Finance Ministry. MASB’s approved accounting standards are based on
the International Accounting Standards (IASs) and customised to meet the
Malaysian economic environment and needs. This is a part of example of statutory
control in the accounting values. Other than that, Malaysia also used the optimism
approach in applying the accounting treatment. Malaysia also have transparency
value in presenting the accounting information because Malaysia have high number
of investor in terms of bonds, active market shares and etc.

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2.2. INTERNATIONAL POLITICAL

One of the forces that helped in the development of accounting standards is the
politics customs. The Malaysian government had intervene and appointed several
agencies that has a very high knowledge in the field of accountancy to come up with
standards so it would be easy for all public and private companies to operate in
Malaysia. The government had put a high hope and trust in MIA, MICPA and MASB
to produce and/or adapt rules and regulations that is suitable to be applied in
Malaysia’s environment.
According to Ksenija Černe (2009), upon gaining independence, numerous
countries stick to using the same political and accounting systems although their
economic system had changed. But to some, a change must be made. For example,
the Commonwealth nations’ are under a great influence of British accounting
system and Malaysia is one of them (Saudagaran, 2004).

2.3. ECONOMIC
Canada and the United States of America are the perfect examples of countries with
emerging economy. The USA economical structure and geographical position makes
it a great place for all other countries to make business with them such as import,
export or even international exchange.
As for our country, Malaysia starts to grow from time to time so it makes
great sense if the productivity and performance of Malaysia’s economy affects the
development of the standards.

2.4. LEGAL SYSTEMS

The legal systems of most countries can be classified as systems manifest by strict
observance to laws and regulations. There are two laws in the legal systems;
Common Law and Code Law.
Code Law is applicable to countries that disclose their information very few such as
Japan, Taiwan and Germany.
Taking the USA as an example (as Malaysia and USA are countries practicing
common law, also known as non – legalistic), USA discloses more information and
appears to be very transparent in order to attract potential investors.

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2.5. STRUCTURE OF CAPITAL MARKETS

Countries are tend to adopt a financial reporting system or standards that is aligned
with the prevailing financial system in the country. Thus, the structure of capital
markets influences the nature of accounting standards in different countries.
For example, financial systems in Australia and New Zealand are based on
capital markets as the main purpose of financial reporting is the protection of
investors whereas Fiji and Papua New Guinea rely on credit markets where banks
and other financial institutions are dominant as the financing for capital markets are
came from creditors.
However, in the Malaysia, in the past, banks played the major role in
mobilising financial resources for Malaysia, but now Malaysia is one of the emerging
capital markets among the developing countries. Internally, the Malaysian
government is also concerned about the establishment of good reporting practices
by companies in Malaysia especially among the listed companies on Bursa Malaysia
(formerly known as Kuala Lumpur Stock Exchange (KLSE)).
One way of doing it, the Securities Commission Act 1993 established the
Securities Commission (SC) on March 1993. The new SC’s main roles were to act as a
single regulatory body to promote the development of the capital market and to
take responsibility for streamlining the regulations of the securities market and for
speeding up the processing and approval of corporate transaction. Since its
establishment, the regulatory framework become important on influencing the
growth and development of the capital market in Malaysia.

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3. CONCLUSION

In conclusion, standards setting bodies have to face and solve many issues, including the
influence of environmental factors such as social, political, economic, legal and cultural
in development of accounting and Malaysia’s recent move forwards the adoption of
International Financial Reporting Standards (IFRS).
As Ma (1997) puts it: “…. the existence of the standard setting body, is dependent
on the acceptance of the standards by major, powerful constituent interest groups
comprising generally the professional bodies, users, preparers, and government
regulatory bodies, that is all those effected by the standards and have legitimate
interest in the standards. There is no easy way to reconcile this requirement with that
of true and fair disclosure.”
In saying, every standard setting body in the world faces the same issues, but each
might have different approaches dealing with them.