Comparison of Accounting Frameworks in Malaysia and USA

The assignment requires a comparative analysis of the financial reporting frameworks in Malaysia and the USA. It involves examining the requirements for presenting financial statements in annual reports by banks and financial institutions in both countries. The report will identify the differences and similarities between MFRS 101, which applies to Malaysian entities, and US GAAP, which is adopted by companies in the USA. The assignment aims to provide insights into the regulatory frameworks governing financial reporting in these two jurisdictions.

RUNNING HEAD: SPECIALISED FINANCIAL ACCOUNTING
accounting

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Contents
Introduction...........................................................................................................................................2
Description of the companies................................................................................................................2
Public bank Berhad............................................................................................................................2
CIMB group holdings Berhad............................................................................................................3
Requirements of MFRS101 and Securities Commission Guidelines.....................................................3
Compliance and format of disclosure by the selected banks..................................................................6
Comparing with another country.........................................................................................................11
Summary.............................................................................................................................................13
Conclusion...........................................................................................................................................14
References...........................................................................................................................................16

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Introduction
Companies operating in Malaysia follow the standards provided by MASB. The main
objective of such compliance is to give fair representation of the financial position of the
company. There are numerous of standards in the framework of Malaysian Financial
Reporting that are applied by almost each and every company. Out of many, there is one
standard named as MFRS101 Presentation of Financial Statements, generally used for the
preparation of company’s financial documents reflecting the performance highlights. This
standard has certain requirements which are been discussed in the report. Apart from this,
Malaysian companies especially unit trust funds follows the guidelines of Securities
Commission while preparing their financial documents.
The report comprises of the disclosure of requirements of MFRS101 and Securities
Commission Guidelines. It considers the two big Malaysian banks named as CIMB Group
and Public Bank Berhad. The first part deals with the description of the banks and later on the
requirements of the standard and guideline are been discussed. In the later part of the report,
the compliance with the above is been discussed. The report also highlights the comparison
between MFRS and US GAAP, considering the Bank of America as a comparative
corporation. The last part deals with the summary portion containing all the discussion in the
nutshell and followed by the conclusion.
Description of the companies
Public bank Berhad
A financial institution situated in Kuala Lumpur, Malaysia engaged in offering financial
services to the country as well as to the Asia-Pacific region. Currently, the public bank is the
second largest bank of Southeast Asia and was founded back in 1966 by Teh Hong Piow. It
got listed on Malaysian Stock Exchange in 1967. In terms of shareholders’ funds and market

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capitalization, it is the largest and second largest bank in Malaysia after Maybank (Public
Bank. 2018). The main activities of the bank include offering variety of financial products
and services like personal and commercial banking, Islamic banking, nominee and trustee
services, investment banking and many more. Talking about the financial highlights, the
operating revenue RM 20,858 million which was more than the revenue of 2016 that was RM
20,103 million. The operating profit of the bank was RM 6,745 in 2016 which increased to
RM 7319 million. Apart from that, the shareholders’ equity and total assets has also risen
during the year (Reuters. 2018).
CIMB group holdings Berhad
It is a universal bank in Malaysia having its headquarters situated at Kuala Lumpur. CIMB
operates in high growth economy in ASEAN and has a wide network of retail branches
across the region. The entities covered by the group are CIMB Bank, CIMB Investment bank
and many more. Concerning the history, it was formed by merging various other banks in the
past. The primary activities of the group includes providing consumer banking services,
wholesale banking, treasury and markets, integrating investment and corporate banking and
making strategic investments and group strategy (Bloomberg. 2018). Main markets covered
by the group are Indonesia, Thailand, Malaysia and Singapore. Taking into account its
financial highlights, the net revenue of the group has increased from RM 3,550,792 to RM
4,410,259. However, overall it has faced a shortfall of income over expenditure worth RM
4,359,008 which is pretty less than the figure reported in 2016. Also the total assets of the
group has been reduced during the year (CIMB. 2018).
Requirements of MFRS101 and Securities Commission Guidelines
Companies operating in Malaysia are required to follows the standards issued by Malaysian
Accounting Standard Board (MASB). Such standards provide the basis for financial reporting

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for all the entities which are running their business in the country. They are known as
Malaysian Financial Reporting Standards (MFRS). Public bank and CIMB, being financial
institutions are required to comply with the provisions and requirements of all MFRS that are
applicable to them. Among the various standards, MFRS101 is the one which deals with the
presentation of financial statements of a company (Deloitte. 2017). The IAS 1 is equal to the
Malaysian standard 101 and the requirements are also somewhat same. The main
requirements of this standard are:
1. As per MFRS 101, the financial statements of a unit trust must include the following:
a. Balance sheet
b. Income statement
c. Statement of cash flow prepared as per MFRS 107
d. Statement showing changes in equity
e. Notes to financial statements
f. Comparative information as required by the standard (MASB. 2018).
2. It is mandatory for the unit trust fund to represent their financial statements as per
MFRS101.
3. The financial statements must present the true and fair view of the company’s
financial position, its performance and flow of cash.
4. MFRS 101 requires the management to take an assessment of the ability of the
organization to survive for the longer period. Reason being, financial statements are
prepared on the assumption that the business will be going concern. If any
uncertainties or discrepancies are there, the company must disclose the same properly.
5. The statements must be prepared on the basis of accrual accounting except the
information of cash flow.

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6. The unit trust fund is required to display the comparative information in respect of the
previous years’ performance, both in the statement and in the notes. It is been
provided for the narrative and descriptive purposes (MASB. 2018).
7. It is required to prepare such statements at least annually and if the reporting period
changes, the entity must disclose the same.
8. Statement of financial position must classify the assets and liabilities as current and
non-current.
The unit trust in Malaysia are governed by the guideline issued by Securities Commission on
March 2008. These guidelines are issued in order to provide a regulatory framework that
protect the interest of public investments and developing the unit trust industry in Malaysia.
According to the schedule VI of Securities commission guidelines, the unit trust funds are
required to prepare their financial statements as per the generally accepted accounting
principles, the trust deed, statutory requirements that are applicable and as per the other
regulatory requirements.
Following must be present in the statements as per the schedule:
1. Assets and liabilities statement
2. Statement of income and expenditure
3. Financial statements note and a statement of changes in the value of net assets
4. Disclosure of some specific items reported in each financial document
Preparing financial statements according to MASB and above guidelines results in the
meeting of reporting requirements of schedule VI. In addition to that, the trust must separate
the capital of unit holders from realised and unrealised gains or losses. The disclosure must
be done separately.

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Compliance and format of disclosure by the selected banks
The public bank and CIMB has complied with all the requirements of MFRS101 and the
guidelines of Securities Commission. The same is been disclosed in their annual report.
Talking about Public Bank Berhad, the below abstract shows that the group has prepared and
audited its financial statements according to MFRS, IFRS and Companies act 2016 applicable
in Malaysia.
Apart from this, the directors has also fulfilled their responsibility of assessing the bank and
group’s ability to continue in a long run and operate as a going concern entity. The above
abstract proves that the accounting of the bank and group is been done on the basis of going
concern principle until and unless the directors thought of liquidating the bank or the group.
This also one of the requirement of MFRS101 whichi is completely complied by Public
Bank. In addition to this, according to the directors and auditors, the financial statements

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prepared shows a true and fair view of the financial position of the institution (Public Bank.
2017).

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The above abstracts shows the format in which Public Bank displays its financial
information. Just like the balance and profit and loss statement, the annual report of the bank
also includes statement of changes in equity and cash flow statement. Furthermore, the notes
to financial statements are also presented in the annual report covering all the disclosures and
the MFRS standards used for various accounting treatment (Public Bank. 2017). The first and
foremost requirement of MFRS 101 is completed by the bank that it has presented all the
documents that should be included in the financial statements. However, after making a
critical review it is observed that Public Bank do not classify its assets and liabilities as
current and non-current according to the standard. The statement of financial position
prepared by it shows the total amount of assets and liabilities by combing both the types. The
statements shown above are prepared on accrual basis and are displayed in comparative
format. They show both the financial results of both the group and bank. Also, the

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performance of the current year is measured against the previous year. On a whole, it gives a
comparative view to the users (Public Bank. 2017).
CIMB has also prepared its financial reports as per the standards prescribed by MFRS. Below
is the abstract of independent auditor’s report which shows that the group has followed IFRS,
MFRS and provisions of companies act 2016 properly at time of preparing the statements. All
the requirements and guidelines are been kept in mind by the group while preparing the
financial statements (CIMB. 2017).
In order to fulfil the requirement of keeping an entity going concern, the trustees of the
foundation have assessed the capability of CIMB group to survive in the future. They have
clearly disclosed the matters related to the continuity of the business and accounting is also

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done on this basis only as long as the directors have not taken any decision related to
liquidation or ceasing the operations (CIMB. 2017).

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The above disclosure of the financial information shows that CIMB has also completely
followed the guidelines and the requirements of the standard MFRS 101. The group has
prepared a statement of assets and liabilities which is the first and the foremost requirement
of Schedule VI of Securities Commission’s guidelines. Also the bank has properly
differentiated between the current assets and non-current assets along with its liabilities.
Moreover, they has also provided a comparative view with clear presentation of their
performance in the current year as well as in the previous year (CIMB. 2017). So, on a whole
it can be said that both the banks has fully complied with the standard’s requirements and has
adopted a proper format of disclosure.
Comparing with another country
The entities operating their businesses in United State of America are required to use
Generally Accepted Accounting Principles (GAAP) for reporting their financial data in the
annual reports. However the GAAP is slightly different and similar to the Malaysian

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standards of reporting. Taking comparison into account, the Bank of America (BOA) is been
considered against the CIMB and Public Bank of Malaysia.
BOA is the America based multinational company engaged in providing financial services to
the country and its people. The headquarters of the corporation are situated in Charlotte,
North Carolina. It is considered as the second largest and twenty-sixth largest bank in
America by the virtue of total assets and revenue respectively (Bank of America. 2018).
Looking at the recent annual report of BOA it is been observed that the bank has prepared
and presented its consolidated financial statement as per the US GAAP. The principles are
adopted by the Securities and Exchange Commission of United States (SEC) (Bank of
America. 2017). It is been required that the companies or the financial institutions listed on
SEC must comply with all the requirements of accepted principles of accounting. In a country
like USA, for the accounting practices, the Accounting Standards Codification is a single
authority for US GAAP which is maintained by FASB. ASC has some codes which covers all
the areas that are to be covered while preparing the financial reports of the organization
(PWC. 2017).
There are some similarities and differences in the US GAAP and MFRS 101. They are as
follows:
 Under MASB, the standard for presentation of financial statements is MFRS 101 and
as per the FASB, in GAAP it is ASC 205.
 The major difference is GAAP is rule based accounting whereas MFRS is principle
based.
 GAAP does not require to classify the assets and liabilities in current and non-current,
while the same is done in Malaysian Standard. Also, in US the items of balance sheet

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are presented in decreasing order of liquidity. However, the same is not there in
MFRS 101.
 The income statement prepared by BOA includes the classification of interest and
non-interest income while the same was not displayed in the case of Public Bank and
CIMB.
 The cash flow statement prepared under US accounting standards provides more clear
way than the one presented as per Malaysian standards (EY. 2013).
 Malaysia has its own accounting standard board as compare to United States.
Similarities
 The format for statement of changes in equity and cash flow remains the same in both
the countries.
 The requirements of the documents of financial statements are same.
 Both the standards aim at providing fair and transparent view of company’s financial
position.
From the above comparison, one thing is very clear that the presentation of financial
statements is very much different in both the countries. Though, the comparative corporation
also belongs to the banking industry but it uses different standards as belongs to different
country. However, there are some common requirements also in both the countries’
accounting standards.
Summary
From the above report, following are the key points which are explained in a summarised
form or in nutshell.
 It is very much important for the banks in Malaysia to adopt a regulatory reporting
framework. They are required to follow the guidelines and the standards.

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 The presentation of CIMB is much more understandable than the financials presented
by Public Bank.
 The Public Bank did not follow all the requirements of the standard.
 There is a slightest difference in the format of both the banks.
 The requirements of MFRS101 and the guidelines for the contents to be displayed in
the company’s financial statements are same.
 The statements prepared must stand true and should reflect the fair position and
performance of the banks in financial terms.
 Directors and trustees are required to take an assessment of the continuing capacity of
the banks in order to ensure that it is a going concern entities.
 All the companies or corporations conducting their businesses in Malaysia are
required to report their financial data as per the standards prescribed by MASB and
must follow the guidelines of Securities Commission.
 In United States, companies are required to follow GAAP which provides a rule based
accounting framework.
 US GAAP does not allow the classification of assets and liabilities as current and non-
current.
 The income in the profit and loss statement are required to be segregated as interest
and non-interest.
Conclusion
The above report concludes that entities involved in providing financial services to the people
are required to follow a regulatory framework while reporting the data in their annual reports.
Banks and financial institutions of Malaysia are required to comply with the requirements of
MFRS 101 which provides the recommendations for presenting the financial statements in
the annual report. Also they have to follow the guidelines issued by Schedule VI of securities

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commission. The report also concludes that the disclosure requirements are different in USA
as the country has adopted GAAP which is somewhat different from MFRS.
References
Bank of America. (2017). Annual Report. Retrieved from
http://media.corporate-ir.net/media_files/IROL/71/71595/BOAML_AR2017.pdf

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Bank of America. (2018). Who we are. Retrieved from
https://about.bankofamerica.com/en-us/who-we-are.html#fbid=ThhJzg2t1M2
Bloomberg. (2018). Company Overview of CIMB Bank Berhad. Retrieved from
https://www.bloomberg.com/research/stocks/private/snapshot.asp?
privcapId=11712801
CIMB (2017). ANNUAL REPORT 2017. Retrieved from
https://www.cimb.com/content/dam/cimbgroup/pdf-files/annual-reports/
CIMB_AR_2017_180413.pdf
CIMB. (2018). Who We Are. Retrieved from https://www.cimb.com/en/who-we-are.html
Deloitte. (2017). Financial Reporting Framework in Malaysia. Retrieved from
https://www.iasplus.com/en/jurisdictions/asia/malaysia
EY. (2013). US GAAP versus IFRS The basics. Retrieved from
https://www.ey.com/Publication/vwLUAssets/EY-US-GAAP-vs-IFRS-the-basics-
2013/$FILE/EY-US-GAAP-vs-IFRS-the-basics-2013.pdf
MASB. (2018). Disclosure Initiative (Amendments to MFRS 101). Retrieved from
http://www.masb.org.my/pdf.php?pdf=Disclosure
%20Initiative_MFRS_101_23Jan2015%202015%20reprint.pdf&file_path=pdf
MASB. (2018). MASB Standard 1 Presentation of Financial Statements. Retrieved from
http://www.masb.org.my/pdf.php?pdf=!masb1.pdf&file_path=pdf
Public Bank. (2017). Forging a Sustainable future – Annual Report. Retrieved from
https://www.publicbankgroup.com/CMSPages/GetFile.aspx?guid=f3a38fcb-2f55-
470c-b2f1-c275825bbc92

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Public Bank. (2018). Public Bank Corporate Homepage - Corporate Profile. Retrieved
from https://www.publicbankgroup.com/About-Us/Corporate-Profile
PWC. (2017). IFRS and US GAAP: similarities and differences. Retrieved from
https://www.pwc.com/us/en/cfodirect/publications/accounting-guides/ifrs-and-us-
gaap-similarities-and-differences.html
Reuters. (2018). Public Bank Bhd (PUBM.KL). Retrieved from
https://in.reuters.com/finance/stocks/company-profile/PUBM.KL