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IFRS implementation in Malaysia

   

Added on  2020-02-24

14 Pages4239 Words132 Views
IFRS implementation in MalaysiaStudent Name:Student ID:Subject Name:Subject ID:Date Due:Professor Name:Page | 1

AbstractFinancial statements disclose various aspects related to financial health of a company. Every company need prepare statements of financial accounts for their various stakeholders. Shareholders around the globe needs to preview such statements prior to making any sort of investment into the company. International Accounting Boards has developed and implemented IFRS globally, which is set to bring global standards around the world in financial statements related to their disclosures. The scope of this study deals in analysis of IFRS norms as implemented in Malaysia. IFRS 13 deals with application of fair value accounting standards which companies needs to accommodate. This study hence evaluates concept and the underlying assumptions of fair value accounting according to IFRS 13 Fair value measurement. Accounting research literature on the use of fair value accounting post IFRS harmonisation in Malaysia and a minimum of three other emerging economies in the Asia-Pacific countries. It also analyses disclosures on the use of fair value accounting in the annual reports of four companies.Page | 2

Introduction International Accounting Boards aims at bringing harmony in recording and disclosures related to financial statements. IFRS once it was applied in Malaysia had to be harmonized such that companies experienced relatively lesser confusions relating the same. The scope of the followingstudy deals with IFRS 13 deals with application of fair value accounting standards which companies needs to accommodate. It also evaluates concept and the underlying assumptions of fair value accounting according to IFRS 13 Fair value measurement. Accounting research literature on the useof fair value accounting post IFRS harmonisation in Malaysia and a minimum of three other emerging economies in the Asia-Pacific countries. It also analyses disclosures on the use of fair value accounting inthe annual reports of four companies. In the end, the several benefits associated with harmonization of such fair value accounting standards are disclosed.1.Explain the concept and the underlying assumptions of fair value accounting according toIFRS 13 Fair value measurement.IFRS 13 Fair value measurement explains fair values that are set within single IFRS framework.Fair value needs disclosures pertaining to measuring of fair value for all assets[ CITATION Pau12 \l 1033 ]. Fair Value Measurement was included and incorporated in IFRS 13 on May 2011, whichsets a framework allowing measurement related to fair value and their disclosures to suchmeasurements. International Accounting Standards Board (IASB) notion to enhance disclosureset for addressing valuation techniques and measurement of fair value led to such disclosures. In order to include consistent disclosure requirements Fair value 13 where price for selling orreceiving an asset for transferring a liability within market participants at a measuring date in anorderly transaction is defined as a fair value. In order to understand the concept regarding fairvalue certain assumptions or considerations needs to be accounted for. While measuring for fairvalue its condition, location restrictions for sale needs consideration in regards to any sort ofassets or liabilities. Market is the principal or most advantageous location where transactionrelated to any asset or liability can take place[ CITATION Yaa12 \l 1033 ]. In case of non-financialassets the best and highest use for it is considered when taken along with other assets or treatedsolely. The standards incorporates a hierarchy when arriving at fair value for any sort of asset.Page | 3

The first level is the unadjusted quoted price for identical liabilities or assets within an activemarket. In the second level observable inputs for liabilities or assets as quoted price for similarassets or liabilities in active market or for identical liabilities or assets in non-active markets. Inthe third level, observable inputs are developed for the entity by use of best information in casesof no market activity at a particular measurement date for the asset or liability[ CITATION Ahm131\l 1033 ]. IASB establishes that there will be no new requirements set in fair value accounting buta guidance for fair value measurement for standards which are already in existence. There arehence no standard set from IFRS 13 in regards to transaction dealt, hence its application is relatedto measurement in particular to standards and not by scope of IFRS 13. It does away with allinconsistencies in various IFRS by means of a single source of guidance in regards to fair value.The standards requires detailed disclosure for helping financial statement users by providingvaluation techniques along with inputs for measurement of fair values. In case of fair valuemeasurements, effects on their profit or loss or other comprehensive income for the period isunderstood[ CITATION Mar163 \l 1033 ]. In case of any changes in liabilities or assets over a timeperiod, unrealised losses or gains for the same outstanding, increasing or decreasing net incomebasis or as equity in balance sheet is determined. Historically fair value had separate significance and relation as compared to its current usage thatreflects price related context. In case of IASB definition for fair value, it has been taken that pricefor selling an asset will be used in paying a liability. This price is the exit price, hence it isconcentrated on market price with assumption regarding risks[ CITATION Moh15 \l 1033 ].Characteristics of an asset is taken into consideration for its sale or usage. In case fair valueaccounting did not existed then a business cannot base their argument for valuation relative toitself or unwillingness for selling at low prices. Prices used in this method are orderly transactionwhich include market transaction for a date that is not forced for activities to occur. In casesorderly transactions are not referred to then there might be emergence of competitors or morefluctuation in prices[ CITATION Yan \l 1033 ]. Even in cases of few transactions the nature oforderly might not be followed. Therefore, it can be understood that in presence of competitivespirit, sufficient information along with time there might not be presence of fair value. IFRS 13however does not include unit of account that needs to be accommodated for fair valueaccounting, which are presented to individual standards for determination of unit of account.Basic characteristics of an asset or a liability needs distinction from holding asset or liabilities ofa business needs to be established[ CITATION Pha17 \l 1033 ]. Fair value makes sure thattransaction takes place in principal market place, in absence of which the most advantageousmarket for asset or liability is taken into consideration. Most advantageous market that canPage | 4

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