FRSIC Consensus 11 – When A Company Changes The Measurement Basis For Its Assets Which Warrants A Prior Year Adjustment, Should The Related Depreciation Charges Be Adjusted Retrospectively Based On The Revised Definition Of Residual Value In Accordance With FRS 116? (31 July 2008)

The effective date of the application of this FRSIC CONSENSUS was 31 July 2008.

The release of FRSIC Consensus 11 – When A Company Changes The Measurement Basis For Its Assets Which Warrants A Prior Year Adjustment, Should The Related Depreciation Charges Be Adjusted Retrospectively Based On The Revised Definition Of Residual Value In Accordance With FRS 116? provides guidance, on the issue in the event that there is a change in the measurement basis of a property, plant and equipment from revaluation model to cost model (which is a change in accounting policy), how should the retrospective application be computed had paragraph 54 and 55 of FRS 1162004 been applied previously.  The change in the measurement basis takes place in the first year of adoption of FRS 116. The issue is in the event that there is a change in the measurement basis of a property, plant and equipment from revaluation model to cost model (which is a change in accounting policy), how should the retrospective application be computed had paragraph 54 and 55 of FRS 1162004 been applied previously.  The change in the measurement basis takes place in the first year of adoption of FRS 116.

You can download FRISC Consensus 11 here:

Sample Disclosure – Note On Significant Event During The Year On Affected Listed Issuer Status (1 December 2010)

Significant Event – Affected Listed Issuer Status

Pursuant to the Listing Requirements (“LR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) in relation to the Amended Practice Note No. 17/2005 (“PN 17”), the Company had on 20 February 2009 announced that it is deemed an Affected Listed Issuer as defined in PN 17 as the Group and the Company have defaulted in their interest payments as announced in pursuant to Practice Note No. 1/2001 (“PN 1”).

As an Affected Listed Issuer, the Company is required to comply with the following obligations pursuant to paragraph 3.1 (a)(ii) of the Amended PN17:

a)    To announce details of the regularisation plan as referred to in paragraph 8.14C(3) of the Listing Requirements and the announcement must fulfil the requirements set out in paragraph 3.1A of the Amended PN17/2005;

b)    To submit the regularisation plan to Bursa Securities and other relevant authorities (“Approving Authorities”), for approval within eight months from the date of the announcement; and to implement the regularisation plan within the time frame stipulated by the relevant Approving Authority;

c)    To announce the status of its plan to regularise its condition and the number of months to the relevant timeframes referred thereto, as  may be applicable, on a monthly basis until further notice from Bursa Securities; and

d)    To announce its compliance or non-compliance with a particular obligation imposed pursuant to the Amended PN17/2005 on an immediate basis.

In the event that the Company fails to comply with the obligation to regularise its condition, all its listed securities shall be suspended from trading from the 5th market day after the submission time frame or implementation time frame, as the case may be, and delisting procedures shall be taken against the Company by Bursa Securities.

Sample Disclosure – Accounting Policy Of Operating Segments Reporting (25 November 2010)

Operating Segments Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker of the Group. The chief operating decision-maker of the Group, who is responsible for allocating resources and assessing performance of the operating segments, is the Chief Operating Officer (“COO”) of the Group who has the authority to make strategic decisions on the operations of the Group.

An Article On How GST Affects Small and Medium Businesses (23 November 2009)

An article by KPMG Tax Services Sdn. Bhd. on how implementation of Goods and Services Tax (“GST”) would affect small and medium businesses:-

“The Star, Monday November 23, 2009

How GST affects small, medium businesses


Awareness of compliance requirements vital before it’s introduced

THE goods and services tax (GST), if implemented, will not only affect big businesses. The compliance requirements apply once a business achieves a certain prescribed annual sales turnover level. This registration threshold has not been announced.

However, it is worthwhile noting that the licensing threshold for sales tax and service tax, which GST will replace, currently ranges from RM100,000 to RM300,000. If this is any indication, GST registration will be an obligation for many smaller businesses. This is taking into account that GST will be imposed on practically all supplies of goods and services and at every stage of the supply chain.

Credit offset mechanism: In simple terms, businesses supplying taxable goods and services have to charge GST on supplies made (referred to as output tax). The GST paid on purchases (input tax), including capital equipment, supplies and materials can be offset against the output GST. This is referred to as the credit offset mechanism.

The net amount would have to be remitted to the Royal Malaysian Customs. Businesses that are largely export-oriented are likely to be in a refund position. To claim the credit offset, businesses are required to obtain and keep tax invoices from suppliers. While this may sound simple, the tracking, record keeping and reporting can be a challenge to many businesses.

Below are some thoughts for small and medium-scale enterprises (SMEs) as the Government ponders on the implementation of the GST, particularly the registration threshold.

Awareness of responsibilities: Notwithstanding the size of the business, the law imposes the same compliance obligations once the registration threshold is reached. Once the registration threshold is announced, affected businesses will need to follow closely the developments and to understand their responsibilities under the GST regime.

While the business is essentially just collecting and remitting GST for the Government, non-compliance will result in penalties on the business itself.

It is hoped that the Government would leverage off the experience from other countries that have successfully implemented GST and roll out comprehensive awareness programmes to help, in particular SMEs, prepare for the GST. These could include organising briefings at various locations, setting up small offices, kiosks, helpdesks and hotlines throughout the country.

Compliance cost: GST imposes additional compliance costs for businesses. These come in the form of additional work to account for the tax, tracking of the input taxes paid, undertaking reconciliations and filings of GST returns.

In addition, where a business pays cash or has short credit periods from its suppliers, this may result in the business needing extra finances to purchase supplies when GST is first introduced. This is a timing issue which should iron itself out over time as credits are claimed. In this respect, there have been requests that the tax return cycles for SMEs be extended to ease the cashflow burden under the GST regime.

Customer reactions: As often happens, customers react to news of discounts or price increases. It is generally anticipated that GST will result in a price hike on certain goods.

The level of increase depends partly on the rate of tax announced. Experiences in other countries have shown that customers generally go on a shopping spree shortly before the introduction of the tax, followed by a period of relative inactivity after the tax is introduced.

Anticipating this, it may be necessary to do some stock planning to cater for a pre-GST rush. This, however, has to be balanced by the fact that stock in hand when GST is introduced, may not be entitled to any input tax credit.

Purchase of business assets: Like customers, businesses should also plan their purchases during the GST transition period. This is because currently many goods (particularly capital goods) have an embedded sales tax in them which is not deductible or creditable.

On the other hand, buying the same goods by the business after GST would allow the business to claim a credit for the GST (which will replace sales tax). This is an advantage for the business and the effective cost of the goods would then be lower (other things remaining equal).

As a rule of thumb, while household consumers are likely to shop before GST is introduced, businesses which are GST registration candidates should perhaps delay purchases to a time when GST is effective. This does, however, require some assumption that prices will otherwise remain static.

To register or not to register: Some businesses will inevitably fall below the registration threshold. While it may appear a good thing that the business is not subject to the compliance burden of the tax, other factors need to be taken into consideration whether or not to register.

For one, unless the business is licensed, it would not be entitled to claim the input tax credits on purchases. This leads to input tax paid being a cost to the business (this may be a good thing from the customers’ perspective; GST is not imposed when they purchase the goods).

However, in a situation where the customers of the business are other GST registered businesses, the supplier may be obligated to license itself as it is likely that the customer would insist on buying from another registered person to enable him to claim the input tax credit.

Noting the additional burden that GST puts on SMEs, the Government could consider making concerted efforts in conducting education campaigns as well as addressing and deciding on compliance issues before the introduction of GST. Treatment of specific transitional issues needs to be announced upfront to facilitate a smooth transition to the GST regime.

The writers are executive directors of KPMG Tax Services Sdn Bhd.

Sample Disclosure – Auditors’ Report With Disclaimer Opinion (28 September 2009)



We were engaged to audit the financial statements of ABC Berhad, which comprise the balance sheets as at day/month/year of the Group and of the Company, and the income statements, statements of changes in equity and cash flow statements of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages XX to XX.

Directors’ Responsibility for the Financial Statements

The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Because of the matters described in the Basis for Disclaimer of Opinion paragraphs, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Basis for Disclaimer of Opinion

As disclosed in Note X to the financial statements on Basis of Preparation, the Company has defaulted on the repayment of bank borrowings amounting to RMXXX,XXX,XXX which was due for payment on day/month/year and the solicitors representing the financier of the borrowings issued a notice of demand to the Company for full settlement of the outstanding borrowings and interests due as at day/month/year. At the date of this report, the Receiver and Manager appointed is  assessing a number of proposals in respect of the borrowings but no decision has been made. We could not obtain sufficient appropriate evidence on the following:

(a)           the appropriateness of the use of the going concern assumption in the preparation of the financial statements. As disclosed in Note X to the financial statements. The default of the borrowings and the relevant events occurred subsequently together with the lack of clear evidence to support the ability of the Group and of the Company to meet the repayment of the borrowings and the interest thereon have casted significant doubt on the Group and the Company’s ability to continue in operations and therefore the Group and the Company may be unable to realise its assets and discharge its liabilities in the normal course of business;

(b)           the recoverability of the carrying value of the property, plant and equipment of the Group amounting to RMXXX,XXX,XXX, as disclosed in Note X to the financial statements; and

(c)           the Company’s ability to recover the entire carrying value of its investments in subsidiaries and advances to subsidiaries. As at day/month/year.

Disclaimer of opinion

Because of the significance of the matters referred to in the Basis for Disclaimer of Opinion above, we do not express an opinion on the financial statements.


In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that, in our opinion:

(a)           the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(b)           we have considered the financial statements and the auditors’ report of the subsidiary of which we have not acted as auditors,

(c)           we have not been able to satisfy ourselves that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group due to the matters referred to in Note X to the financial statements. We have not received satisfactory information and explanations required by us for those purposes.

(d)           the audit reports on the financial statements of all the subsidiaries were qualified in the manner as disclosed in Note X to the financial statements.


This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.


DEF & Co.


(No. AF: 1234)

Chartered Accountants



(No. 1234/1/10 (J))

Chartered Accountant