Monday, August 24, 2009

‘No necessity for Islamic accounting standards’


By Bhupinder Singh
The Malaysian Accounting Standard Board (MASB) is expected to issue a statement of principle later this year stating that it does not think there is a need to have Islamic accounting standards.
"We feel that we can use the International Financial Reporting Standards (IFRS) unless someone can show us that there is a clear prohibition in the Shariah, then we will amend it accordingly. Until such a time, we'll use the IFRS," the new chairman of MASB Mohammad Faiz Azmi told The Malaysian Reserve.
The MASB is adopting this stance as there have not been many significant issues between Islamic and conventional accounting, which required a different set of accounting standards for the former. Even countries like Saudi Arabia have adopted the IFRS, Mohammad Faiz added. The main accounting issues in Islamic finance centre around disclosure and transparency in terms of how money is utilised. There has, however, been some confusion on the behaviour of products and how they are accounted for.
MASB will seek to use Malaysia's role as a pioneer in Islamic finance to share its experience in this field with other countries, as well as to raise concerns and issues about implementing the I FRS with the International Accounting Standards Board (IASB). According to Mohammad Faiz, the country's staggered approach to a convergence with the IFRS by January 2012 is progressing smoothly.
"We are 95% there in terms of convergence with the IFRS. We have left the two major standards because of their impact — the FRS 139 that is due for implementation in January 2010 along with the agricultural standard FRS 1431," he said.
The FRS 139 (financial instruments — recognition and measurement), an omnibus standard that covers a whole range of things, is set to impact corporate earnings reporting as this standard requires companies to record/recognise their derivative contract exposures and not just disclose them as potential claims.
The standard will also act as an anti-abuse mechanism requiring the management to state clearly their investment decisions. MASB's main challenge now is to educate the market on the need to converge and the benefits of converging, as well as to explain what and how these changes will impact the market.
"The reality is accounting does not just reflect on what you do, it may actually change the way you do business," Mohammad Faiz said. The new standards may require companies to rethink their human resource, remuneration or bonus policies, he added.
Meanwhile, the new chairman of MASB, whose tenure will run for three years, has a busy schedule ahead of him. In November, MASB will host the Asian-Oceanian Standards Setters Group's (AOSSG) first meeting in Kuala Lumpur. Set up last April, the AOSSG will be a forum for Asian countries to formulate viewpoints that will be forwarded to the IASB. The AOSSG comprises representatives from China, Japan, South Korea, Singapore, New Zealand, Australia, Hong Kong, Macau, Brunei and Indonesia.

(This story appeared in The Malaysian Reserve on Aug 17, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)

3 comments:

Anonymous said...

Agriculture is IAS 41

Anonymous said...

Could be the typo error, the man knows his stuff, believe me, I have worked for him before. Excellent man.

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