Setting the financial accounting standards in Malaysia : the Malaysian Accounting Standards Board (MASB) and the accounting profession 1997-1999

Abstract

The Malaysian Accounting Standards Board was established in 1997 with objective of improving the quality of external financial reporting in Malaysia. Previously, two professional bodies, the Malaysian Institute of Accountants (MIA) (the accountants' national body) and the Malaysian Institute of Certified Public Accountants (MICPA) (a private institution) carried out the task of setting accounting standards in Malaysia.

This study investigate the standard setting arrangements in Malaysia and the roles of the accounting profession in the standard setting process, for the period between 1997-1999. Two research strategies were used to gather the data needed, documentary analysis and survey questionnaires.

The results show that the standard setting arrangements in Malaysia are similar to the arrangements in other developed countries, particularly USA. Similarities include a standard setting body with a parent organisation, a rigorous 'due process' that is followed before an accounting standard is issued, and the development of conceptual framework. There are also characteristics that are unique to MASB. The MASB is to a greater extent, strongly influenced by 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 unique Malaysian economic environment and needs. There is also emphasis on study on implementation of Islamic Financial Reporting in Malaysia.

The status of the MASB as an independent sole authority to set the accounting standards was accepted by the interest groups in Malaysia with mixed feelings. When the proposal to establish the Board was announced, there was quite strong opposition from some accountants. They argued that the Board should come under the jurisdiction of the national professional body, the MIA. Other interest groups were more positive, but quite uncertain of the future body's capability to enforce the accounting standards. Nevertheless, views gathered after the formation of the Board were divided. Generally, all agreed to have an independent body to develop the accounting standards in Malaysia. They viewed that with various inputs put into the standard setting process, and a strong legal backup for the enforcement of the standards, the MASB has done a pretty good job. The MASB has also in its more than two years existence as a standard setting body, apart from reviewing extant and developing new accounting standards, managed to come up with proposal on Malaysian own conceptual framework and participate actively in international standard setting.

The professional bodies, MIA and MICPA and the accounting profession as a whole could be said to be important players in the standard setting process still even though the job is solely rest on the MASB shoulder. The accounting profession made up the majority members on the Malaysian Financial Reporting Foundation (FRF) and the MASB. They also involved in the Working Groups set up by the MASB to carry out the development of accounting standards, contributed actively for the comments on the discussion documents and exposure drafts issued by the MASB, and participated in standard setting at the international level. The MIA and MACPA also provide interpretations and guidelines on how to apply the approved accounting standards to the accountant members. The accounting profession is seen by various interest groups as the 'best man' still to do the standard setting job, along with other MASB's constituents.