MFRS and Contract Law Application

This assignment examines the application of the Malaysian Financial Reporting Standards (MFRS) 132, specifically analyzing its influence on the preparation of AirAsia's balance sheet. It also delves into contract law principles relevant to Malaysian businesses, highlighting the importance of legal frameworks in ensuring fairness and clarity in agreements. The analysis draws upon academic research and real-world examples to demonstrate the practical implications of MFRS and contract law in a dynamic business environment.

Accounting for saving
deposits contract

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
(1) Identify the relevant MFRS for the saving deposits contract...........................................1
(2) Discuss how the MFRSs deal with the Recognition, measurement, presentation and
disclosure................................................................................................................................2
(3) Copy extract of actual presentation and disclosure in the financial statements for that
contract...................................................................................................................................3
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
The MFRS is the professional body which guides accounting related aspects in the
Malaysia. This report deals with MFRS and its related concepts related to accounting and
savings deposits contract (Cheong and Lee, 2016). This is important as to regulate entire
contracts and so that two parties which enter in the contract may be satisfied at reasonable
ground.
(1) Identify the relevant MFRS for the saving deposits contract
MFRS is entitled with revenue recognition has following contracts:
1. Tawarruq arrangement-
This is contract between three or more of the parties for intending to receive cash by
selling of the goods and services. The tawarruq arrangement is done for obtaining cash from
selling commodities. The Islamic banks usually uses it for framing the contractual agreement
between three parties or even more than that. This contract follows wakalah which means that
Islamic banks will be representing as purchasing and selling agent on behalf of the parties
involve in the agreement. It also includes commodity murabahah which means that sale of goods
will be settled at a future time period. This commodity murabahah involves goods such as non
precious metals and crude oil for the purpose of trading.
2. Murabahah contract-
This is the simple term of contract where seller of commodities expresses cost plus sale
to the purchaser. It is highly simple to understand and is the most use in Malaysian contracts.
This is contract is commonly used for financing of assets and for trading purpose. The
murabahah contract is used for short term financing usually which is less than a year. This is
simple to explain as seller adds cost to the commodity and conveys profit earned on that
commodity to the purchaser of good.
3. Musyarakah Mutanaqisah contract -
The above said Islamic bank contract is commonly used for the purpose of acquiring
assets which is used for effective functioning. The asset which is acquired from third party and is
jointly acquired by parties involve in the contractual agreement. This is followed on a principle
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which says that one party leases share of ownership to other party and the party which is known
as the lessee will acquire the asset and will become the full owner of the acquired asset. This
contractual agreement is used for equity financing by the Islamic banks.
4. Qard contract-
The qard contract literally means humble to others. This is a contractual agreement which
is transferred to needy borrowers by the lenders without demanding any return in form of profit
or interest. This is the contract which is solely based on helping the needy without expecting
anything in return of the amount paid to him. It is solely for helping the needy. The qard contract
is based on social welfare as intended in holy book Quran.
(2) Discuss how the MFRSs deal with the Recognition, measurement, presentation and
disclosure.
The MFRS (Malaysian Financial Reporting Standards) deals with the parameters like
recognition, measurement, presentation and disclosure. The MFRS 139 deals with the
recognition and measurement for financial instruments. It also includes hedge accounting
requirements. MFRS 139 is applied to all financial instruments which includes assets and
liabilities and derivatives in it. Under MFRS 139, financial assets and financial liabilities are
classified under recognition. These classifications are made for the purpose of smooth
accounting treatment (Allen, 2016). The MFRS 139 carries out fair value of surplus or deficit.
The reason behind is that the financial instruments are held for trading purpose. As such, MFRS
139 is used to guide and support recognition and measurement in the MFRS professional body.
The financial principle of MFRS 132 deals with presentation and disclosure. The MFRS
professional body states that financial instruments which includes financial assets and liabilities
must be recognised as either liability or equity depending on the contract of agreement and not
on its legal type. This is an important regulation regarding fair disclosure and presentation of
financial tools with much ease. A financial tool is equity tool only if this raises no contractual
liability to transfer cash to any other business enterprise. It is also an equity instrument if a
derivative that will be met by returning or exchanging same and predetermined amount in cash
for a predetermined amount of its own equity tools (Chong and et.al., 2016). The MFRS 132
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which includes disclosure states that the financial statements of enterprise should disclose assets
and liabilities which should be assessed at fair value of surplus or deficit. It should also disclose
loans and receivables from customers and also to long term investments. When there exist de-
recognition of asset in the entity, then the same should be included in the disclosure.
(3) Copy extract of actual presentation and disclosure in the financial statements for that contract
ASSETS 2016
Plant and equipment
Investment in
subsidiaries
Investment in joint
ventures
Investment in associates
Available-for sale
financial assets
Intangible assets
Deferred tax assets
Receivables and
prepayments
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Deposits on aircraft
purchase
Amounts due from
associates
Derivative financial
instruments
Inventories
Receivables and
prepayments
Derivative financial
instruments
Tax recoverable
Deposits, cash and bank
balances
LIABILITIES
Trade and other
receivables
Islamic deposits from
customers
4

Sales in advance
Amounts due to
associates
Borrowings
Derivative financial
instruments
Trade and other payables
Amounts due to
associates
Amounts due to related
party
Borrowings
Derivative financial
instruments
SHAREHOLDER'S
EQUITY
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Share capital
Share premium
Treasury shares
Retained earnings
Total equity
Total liabilities and
shareholder's equity
Restricted investment
accounts
Total Islamic banking
asset
Commitment and
Contingencies
This is the extract of Air Asia group which is a biggest airline company and has serving
the customers for several decades. This is the presentation and disclosure of financial statement.
The balance sheet is according to the MFRS 132 which states about the disclosure and
presentation of financial statements (Chen-Wishart, Loke and Ong, 2016).
CONCLUSION
Hereby it can be concluded that MFRS is the professional body which guides to company
that the financial statements should be prepared according to its principles. It also regulates
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contract so that agreement between parties may be on legal ground. As such, equality should be
made.
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REFERENCES
Allen, S. E., 2016. Navigating the Murky Waters of Foreign Maritime Liens: How effective is a
US choice of law in a bunker supply contract between the supplier and time charterer
for obtaining a necessaries lien? (Master's thesis).
Chen-Wishart, M., Loke, A. and Ong, B. eds., 2016. Studies in the Contract Laws of Asia:
Remedies for Breach of Contract. Oxford University Press.
Cheong, M. F. and Lee, Y. H., 2016. Specific remedies and money awards in the protection of
the performance interest under Malaysian Contract Law.
Chong, H. Y. And et.al., 2016. A practical approach in clarifying legal drafting: Delphi and case
study in Malaysia. Engineering, Construction and Architectural Management. 23(5).
pp.610-621.
Giliker, P., 2016. Studies in the Contract Laws of Asia: Remedies for Breach of Contract, edited
by Mindy Chen-Wishart, Alexander Loke and Burton Ong [Oxford University Press,
Oxford, 2016, ISBN 978-0-19-875722-1, 536pp,£ 75.00 (h/bk)]. International &
Comparative Law Quarterly. 65(4). pp.969-971.
San, T. P. and Peng, S. C., 2016. Legal Issues on Free Software and License Contracts: A
Malaysian Perspective. In Free and Open Source Software (FOSS) and other
Alternative License Models (pp. 293-309). Springer International Publishing.