CIMB Group Holdings: Accounting and Financial Reporting Analysis

This report provides an analysis of accounting and financial reporting practices, focusing on CIMB Group Holdings Berhad in Malaysia. It begins with an introduction to accountancy and its importance in business, highlighting the different forms of business organizations such as retailing, manufacturing, and services. The report then delves into CIMB Group, identifying it as a service-oriented business providing various banking services, including retail, investment, and Islamic banking. It also discusses the types of business ownership, including sole proprietorship, partnership, and corporations, and how CIMB Group operates as a corporation with a defined corporate governance structure involving directors, board committees, and shareholders. The report further examines the advantages and disadvantages of different business ownerships and concludes by emphasizing the crucial role of accounting in the success of any business, underlining its importance for decision-making and providing a standardized format for representing financial information.

Running Head: ACCOUNTING AND FINANCIAL REPORTING
accounting

Accounting and Financial reporting 1
Contents
Introduction................................................................................................................................2
Forms of business.......................................................................................................................2
Types of business ownership.....................................................................................................5
Advantages and disadvantages of business ownerships.............................................................7
Role of accounting function.......................................................................................................8
Conclusion................................................................................................................................10
References................................................................................................................................11

Accounting and Financial reporting 2
Introduction
The process of communicating financial data and facts of a business to its users like
shareholders and managers is known as accountancy. The users uses accounting information
to take better decisions regarding the overall performance of a business. Accounting is a very
dynamic profession as it can constantly change itself as per the needs and requirements of the
users. Each and every type of business uses accounting information in order to conduct their
operations effectively and efficiently (Clarke, 2012).
The three forms of business ownership are sole proprietorship, partnership and company. All
these uses accounting function in their business. Accounting is basically a task of collecting,
identifying recording, summarising and communicating the results of business transactions to
the users (Carey, Knowles & Towers-Clark, 2017). The chosen business sample is:
Name: CIMB Group Holdings Berhad
Location: Malaysia.
Business activities: It provides various types of banking services such as retail banking,
commercial and private banking. Along with this, it is also engaged in wealth and asset
management services, insurance and many more.
This report contains a description and evaluation of the type and shape of the chosen business
ownership. It also explains the role of accounting in that particular business type.
Forms of business
In general, organizations are classified into various types according to their core business
activities. The categories defined are as per the main functions performed by the business
organization. These are:
 Retailing/ Trading/ Merchandising

Accounting and Financial reporting 3
This type of business mainly deals with purchasing the goods and selling them to the
consumers in market. The people involved in such business are known as merchandisers, who
buy different types of goods at a price (cost) and sold the same to the consumers at higher
prices (selling price). Supermarkets, wholesalers, grocery stores are some examples (Dunne,
Lusch & Carver, 2013).
 Manufacturing
The organizations who follows a process of converting raw materials into saleable
finished goods are involved in a business form named as manufacturing. These firms
purchase some products as raw materials and hire workers for assembling them and
converting them into finished products. The finished good is then sold at a price higher
than the total cost of manufacturing. An oil refinery, car manufacturing are some
examples of manufacturing firms (Obi, 2013).
 Services
There are many firms which are engaged in providing services to the customers rather than
dealing with different products. The income earned by this business is in the form of fees or
commission. Such as lawyers charges fees for rendering their legal and consultation services
to the customers (Mudie & Pirrie, 2012).
Talking about Malaysia, CIMB Group Holdings Berhad, is one of the leading universal bank
of Malaysia, operating in ASEAN (Association of Southeast Asian Nations). It also
considered as the largest investment bank in Asia and one of the largest Islamic banks in
world (CIMB. 2018a). The form of business, bank is engaged in, is services. It provides
various services like retail banking, investment banking and Islamic banking, private and
commercial banking. Along with these services, it also deals with wealth management, asset
management, securities services, financing, insurance, sales and trading, transaction banking

Accounting and Financial reporting 4
and many other services. The company provides banking solutions to its clients along with
the market-leading and Islamic financial advice. The group operates under numerous units
named as CIMB Bank, CIMB Investment Bank, CIMB Niaga, CIMB Thai and CIMB
Securities International (CIMB. 2018a). The vision of the banking group is to be the leading
company in ASEAN and its mission is to provide the banking services universally in ASEAN
and key markets, as an integrated and institutionalised company having a high performance.
The main markets in which the group operates are Malaysia, Indonesia, Thailand, Singapore
and Cambodia. It has more than 1000 branches with approximately 40000 employees, serving
over 13 million customers (CIMB. 2018a).
In Malaysia it provides many services. One of them includes personal banking in which,
individuals are provided with the facility of credit cards and loan. CIMB also offers various
investment portfolios, making it easy for its clients to manage their wealth and assets. Some
of them are unit trusts, structured investments, dual currency investments, retail bond and
Gold investment account (CIMB. 2018b). Different type of insurance services are also
provided such as life insurance, property insurance, car and personal insurance. Another one
is priority banking services which is known as CIMB Preferred. It recognize the customers
for who they are and offers them various facilities such as personalized services, financial
solutions that meet their requirements, financial advice regarding the movements in the
market and lifestyle privileges which include invites for special events and many more
(CIMB. 2018c).
Apart from the above services, CIMB started its private banking services in Malaysia in year
2002 and after that its business expanded in other countries also including Thailand,
Indonesia and recently in Singapore. At private banking, the company provides best solutions
for managing client’s wealth effectively and seamlessly. With the help of a private banker
and their team, the group assists its clients in achieving their long term investment goals by

Accounting and Financial reporting 5
protecting and enhancing their wealth. The bank offers all-inclusive investment strategy and
wide range of solutions to its customers which help them in meeting their need. These
solutions include proper portfolio management and investment advices (CIMB. 2018d). The
services or products provided by CIMB also helps its consumers in planning for their
retirement. Other services like internet banking, mobile and regional banking and a facility of
quick remittance is also provided by the group.
Types of business ownership
It is the one factor which affects the accounting process and procedure of an organization.
Reason being, different ownership of business have different financial reporting formats. The
information and data contained in financial statements are somewhat different. Therefore, it is
very necessary to understand the different characteristics of three types of business
ownership. Following are the types:
 Sole proprietorship
It is also known as sole trader and as the name suggest, the ownership of this business
belongs to any one individual. The owners and business are considered as a separate entity
for the purpose of accounting but for legal purposes both are considered as single entity. In
this form of organization the owner has full control over the business. Income or profit
generated is solely belongs to the owner. (Pride, Hughes & Kapoor, 2014).
 Partnership
A firm owned by two or more people is called a partnership firm and the people are known as
partners. Further, there is an agreement between the partners known as partnership deed,
which contains the information about how the profits and losses are to be distributed, how
much interest is to be charged on the capital and many more. For legal purposes, both

Accounting and Financial reporting 6
partners and their firm are considered as one entity. (Clough, Sears, Sears, Segner & Rounds,
2015).
 Company or Corporation
The organization which is owned by many people is called a company or corporation. The
group of people who owned it are known as shareholders, who has some percent of
shareholdings in the company. In legal and accounting aspects, a company is treated as a
separate entity from its owners and is considered as an “artificial person” who runs a business
in its own name. Further, shareholders can transfer their shares to another person easily and it
is expected to continue the business for long time. (Boone & Kurtz, 2013).
CIMB Banking Group has an ownership structure same as of a company or a corporation. It
is a company owned by a group of people who are designated to different posts as per their
expertise. The corporate governance structure of the bank includes Directors, Board
committees and shareholders. The professional code of conduct and information about
accountability and auditing is also included in its corporate governance (CIMB. 2018e). The
directors of the banking group looks after the affairs of business and focuses on developing a
right strategy, in order to generate value for shareholders. It is the responsibility of the
directors to bring the interests of all the stakeholders into a line and sets the activities of the
business in a way, where ethics and values are followed. A time to time review of board size
and composition is done. The board members lay more emphasis on enhancing the skills and
expertise of the members, so as to meet the challenges of the market in which the bank
operates. CIMB board identifies the importance of independent directors to the banking
group, in order to ensure the objectivity and impartiality in the business. Dato' Zainal Abidin
Putih is the chairman of the group and Dato' Sri Nazir Razak is a deputy chairman (CIMB.
2018f).

Accounting and Financial reporting 7
Some of the governance responsibilities of the board are delegated to the board committees,
which operates and helps the board in fulfilling its duties and responsibilities. Though the
board has given some authority to these committees to look upon some operation matters but
the final decision still lies in the hand of board members. There are many committees formed,
some of them are audit and board risk committee, group nomination, remuneration and
compensation review committee and many more (CIMB. 2018g). Shareholders and the
investors are the people who holds some percentage of the shares of the group. They got
timely updates about the changes happening in the company and the strategy followed by the
business. CIMB ensures a two-way communication with its shareholders, done according to
the principles, mediums, policies and procedures set for broadcasting the information. This
help the bank to increase its credibility and raise the level of investors’ confidence. CIMB has
many shareholders among which the one who holds majority of shares is Khazanzh Nasional
Bhd (CIMB. 2018h).
Advantages and disadvantages of business ownerships
Type of
ownership
Advantages Disadvantages
Proprietorship  It is very easy to form.
 Legal requirements are
less.
 Owner has full control
over the business.
 Limited capital.
 Limited expertise.
 Difficult to expand the
business.
Partnership  Few or little legal
requirements.
 More capital can be
generated.
 Partners’ additional skills
can be used in
strengthening the
business.
 The firm may get dissolve,
if one partner dies or goes
bankrupt.
 Instability in the
management may arise due
the conflicts between the
partners.
Company or
Corporation.
 It is easy to expand a
company and also the
business has limited
liabilities.
 More capital because of
more owners.
 It do requires lots of legal
formalities before its
incorporation.
 The set up cost of the
company is generally high.
 Obliged to comply with the

Accounting and Financial reporting 8
 The company has
unlimited life and is not
dependent on the life of its
owners.
government rules and
regulations.
Role of accounting function
Accounting play a very important role in the success of any business, whether it is sole
proprietorship, partnership or a company. It has the elements of science and art and is a
professional knowledge, which every individual should possess and should have idea about
the basic accounting concepts (O'Regan, 2015). In the world of business, accounting is
treated as a language of trade as it displays all the information related to business
transactions. Along with this, it also creates control and accountability in the organization.
The accounting information is used as a tool for decisions making by its internal and external
users. It allows the organizations to represent all its information in a standard format. All the
relevant reports and documents used for representing the financial information about the
business are included in an accounting system. There are various types of accounting function
pursued by every type of businesses, such as managerial accounting, financial accounting and
tax accounting. In any organization, the main purpose of accounting function is to keep the
record of ongoing business transactions and to timely review all the monetary information
like capital expenses, operating overheads, salaries, investments and many more. Generally, a
company has financial and managerial accounting function in its business. These functions
are carried out in order to make the management more efficient and to provide shareholders
and investors with a snapshot of the financial performance of the company (Bull, 2014). The
accounting system followed by banks is somewhat similar to the accounting functions
followed in any other businesses. However, the procedure or working of bank accountant is
slightly different from the other accountants. They need to prepare journal entries, ledger and
the statement showing the cash position of the company. Moreover, they need to ensure that

Accounting and Financial reporting 9
there should be sufficient cash in the bank for making daily transactions. The financial
statements prepared by the bank accountant are income statement, balance sheet, and cash
book, pass book, cash flow statement along with the statement of changes in equity and
retained earnings. In addition to this, the accountant needs to make sure that the accounting
practices are carried out as per the standards and are complied with government rules and
external auditors (Information Resources Management Association. 2014).
The accounting function in CIMB is mainly concerned with the planning and control of
finance in order to ensure equitability, accountability and proprietary. To enhance this
function, CIMB has made an Audit committee which looks after the financial reporting, risk
management and internal control system. CIMB bank prepares its financial reports as per the
standards approved by the Malaysian Accounting Standards Board (MASB), followed by
Companies Act 1965, Islamic Financial Services Act 2013 and Financial Services Act 2013.
These reports shows the true and fair view of bank’s financial position and also helps users of
financial information to take appropriate decisions (CIMB. 2018i). As the bank provides
several financial services to its clients, so it become necessary for it to maintain all the
records of its services and also to calculate cost of rendering them. Cost accounting
techniques are been followed to measure the cost of services. It helps in establishing the
budgets and the cost of procedures, operation and various departments. The cost account
provide financial and non-financial information related to the cost incurred by the company.
CIMB also practices management accounting which is concerned with the information that is
useful for the managers in taking correct business decisions, which will result in better
internal control and efficient and effective execution of the strategies made. Apart from this,
the accountant in CIMB performs financial accounting function which deals with the
preparation of financial reports, provided to the external users. It records and evaluate the
daily transactions and prepare the report on the basis of Malaysian Accounting Standards.

Accounting and Financial reporting 10
These reports are then submitted to the investors, shareholders, government and other users.
On a whole, it can be said that, the accounting function plays a vital role in the success of
CIMB and it is very necessary for the bank to pursue the same in the long run (CIMB.
2018i).
Conclusion
From the above report it can be concluded that, it is very necessary for each and every
organization, whether company, partnership or sole trader, to have an accounting function in
its business. This function is very important for the success of an organization as it
harmonizes all the business transactions and present a true position of the entity. Accounting
plays an important role in the success of Malaysian bank CIMB. The bank has practiced
different type of accounting functions, which makes its working more effective and efficient.
So on a whole it can be said that, every form of business ownership must apply accounting
function, in order to operate smoothly and to survive in the competitive market.
References

Accounting and Financial reporting 11
Boone, L. E., & Kurtz, D. L. (2013). Essentials of Contemporary Business, Binder Ready
Version. (1st ed.). USA: John Wiley & Sons.
Bull, R. J. (2014). Accounting in business. (5th ed.). UK: Butterworth-Heinemann.
Carey, M., Knowles, C., & Towers-Clark, J. (2017). Accounting: a smart approach. (3rd ed.).
UK: Oxford University Press.
CIMB. (2018a). Who We Are. Retrieved 21 February 2018, from
https://www.cimb.com/en/who-we-are.html
CIMB. (2018b). CIMB Bank Investments. Retrieved 21 February 2018, from
https://www.cimbbank.com.my/en/personal/products/investments.html
CIMB. (2018c). Priority Banking. Retrieved 21 February 2018, from
https://www.cimb.com/en/individuals/priority-banking.html#read
CIMB. (2018d). Private Banking. Retrieved 21 February 2018, from
https://www.cimb.com/en/individuals/private-banking.html#read
CIMB. (2018e). Corporate Governance. Retrieved 21 February 2018, from
https://www.cimb.com/en/who-we-are/overview/corporate-governance.html
CIMB. (2018f). Directors. Retrieved 21 February 2018, from https://www.cimb.com/en/who-
we-are/overview/corporate-governance/directors.html
CIMB. (2018g). Board Committees. Retrieved 21 February 2018, from
https://www.cimb.com/en/who-we-are/overview/corporate-governance/board-
committees.html