Advanced Accounting Practice: MFRS 124 Scandal Analysis Report

This report delves into the requirements of MFRS 124, Related Party Disclosures, as formulated by the Malaysian Accounting Standards Board (MASB), aligning with IAS 24. It provides guidelines for disclosing financial transactions with related parties in financial statements, including compensation to key management personnel. The report analyzes an accounting scandal involving Megan Media Holding Bhd, where executives manipulated financial statements. The investigation revealed non-disclosure of a substantial amount due from a subsidiary, violating MFRS 124. The analysis highlights the direct relationship between the parent company and its subsidiaries, emphasizing the importance of transparent disclosure in financial reporting to ensure accurate representation of related party transactions. The report references relevant literature and case studies to support its findings, underscoring the critical need for adherence to accounting standards to prevent financial misrepresentation and maintain stakeholder trust.

Running head: ADVANCED ACCOUNTING PRACTICE
Advanced Accounting Practice
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Contents
Discussion and analysis:..................................................................................................................2
References:......................................................................................................................................4

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Discussion and analysis:
MFRS 124, Related Party Disclosures, has been developed and formulated by the
Malaysian Accounting Standards Board (MASB) by ensuring that it is in line with the
International Accounting Standard on the topic issued by the IASB, i.e. IAS 24.
MFRS 124 provides the guidelines to be followed in disclosing the financial transactions with
the related parties of an entity in its books of accounts and financial statements. Disclosures
required in respect of related party transactions including disclosures to be made for payment of
compensation to key management personnel have been provided in the standard.
The accounting scandal in Megan Media Holding Bhd involved two key executives of the
company. Kenneth Kok Hen Sen and Dato Dr Hj Mohd Adam Che Harun, former financial
controller and Executive Chairman of the company respectively window dressed the financial
statements of the company to inflate the revenue figures (Hsu, 2018).
The investigation by the Securities Commission has found that one of the subsidiaries of Megan
Media Holding Bhd did not paid an amount of RM 893.97 million. This amount due from one of
the subsidiaries of the company had a maturity facility for principal only. The former financial
controller and the executive chairman collided to not disclose the effects of nonpayment of this
due by one of the subsidiaries of the company ("IAS 24 — Related Party Disclosures", 2019).
This was a related party transaction as it involved one of the subsidiaries of the company and
should have been disclosed following the guidelines provided in MFRS 124 to ensure that the
financial statements show the effects of such transactions correctly. Thus, it is clear that the

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parties involved in this case are related because the amount of RM 893.97 million is from one of
the subsidiaries of Megan Media Holding Bhd.
The diagram below shows the direct relationship between the subsidiaries and parent company
along with the role of executives. It is clear from the diagram below that the subsidiaries are
related parties to the parent company, i.e. Megan Media Bhd.
Megan Media Bhd
Kenneth Kok Hen Sen
(executive)
Dato Dr Hj Mohd
Adam Che Harun
(Former financial
controller)
Other executives
Subsidiaries

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References:
Hsu, J. (2018). Related Party Transactions, Parent Company Statements, and International
Financial Reporting Standards. SSRN Electronic Journal, 2(2), 11-29. doi:
10.2139/ssrn.3107397
IAS 24 — Related Party Disclosures. (2019). Retrieved from
https://www.iasplus.com/en/standards/ias/ias24