2.

1 DEVELOPMENT OF ACCOUNTING IN MALAYSIA

In Malaysia, the politics of multiculturalism has become the main focus in studies of

accounting development. The definition and the content of development in the 1970s and the

years after that was mentioned in the New Economic Policy (NEP) which expressed out two

main objectives of socio economic development for national unity. They are, i) the eradication

of poverty irrespective of race; and ii) the restructuring of society.

Malaysian Institute of Certified Public Accountants (MICPA), Malaysian Institute of

Accountants (MIA), and Malaysian Accounting Standard Board (MASB) have been playing

important role in accounting development in Malaysia are

MICPA has been developing the accounting profession in Malaysia by providing

accounting graduates with an avenue to become a Certified Public Accountant (CPA) since

1958. MICPA has been a cornerstone in the setting of accounting standards since then and has

played a technical advisory role for Malaysian regulatory bodies responsible for carving out

the business and financial landscape of this nation since its formation (MICPA).

MIA was established to regulate and develop the accountancy profession in Malaysia.

The establishment of MIA was under the Accountants Act, 1967. The profession credibility is

the responsibility of MIA and hence, MIA is the one to provide education and quality assurance

(MIA).

Lastly, the Malaysian Accounting Standards Board (MASB) is an independent

authority established under the Financial Reporting Act 1997 (the Act) to develop and issue

accounting and financial reporting standards in Malaysia. The MASB, together with

the Financial Reporting Foundation (FRF), make up the frameworks for financial reporting in

Malaysia (MASB).
In accounting development in Malaysia, there are eight new and amended MFRSs that are
effective for annual financial statements commencing on or after on 1 January 2018 and four
new and amended MFRSs for annual financial statements commencing on or after 1 January
2019. Firstly, MFRS 15 supersedes MFRS 118 Revenue, MFRS 111 Construction Contracts
and all the revenue-related Interpretations. It provides for a systematic five-step approach to
revenue accounting that would resolve concerns about revenue recognition in real estate
development, contracts with multiple components and licensing arrangements. Provided the
specified criteria are met, revenue from real estate development shall be recognised over time
using the percentage of completion method.

Besides, The MASB has also issued MFRS 9 (2014 version) Financial Instruments that
replaces MFRS 139 in its entirety. This revised MFRS is a principle-based standard that
simplifies the classification of financial assets based on an entity’s business model for
managing those financial assets and there are only three measurement models. It has removed
many of the rule-based treatments in MFRS 139. It also introduces a new hedge accounting
model that is aligned to the way an entity manages its financial risks. It applies an expected
credit loss model for financial assets subject to impairment and that uses more forward looking
information for measurement of impairment losses. MFRS 16 Leases uses a right-of-use
approach for lessee accounting that requires all assets and liabilities under lease arrangements
shall be recognised on the balance sheet. This MFRS becomes effective beginning on or after
1 January 2019.

1. ECONOMIC GROWTH

In the first quarter of 2019, the Malaysian economy grew by 4.5 percent, driven mainly
by the expansion in domestic demand. On a quarter seasonally adjusted basis, the economy
grew by 1.1 percent. Meanwhile, Malaysia quarter two GDP Growth Strongest in Over a Year.
Malaysia's economy expanded 4.9 percent year-on-year in the second quarter of 2019,
following a 4.5 percent growth in the previous three-month period and beating market
expectations of 4.8 percent. Private consumption and net external demand contributed
positively to the GDP growth, while fixed investment continued to contract. Private
expenditure went up by 7.8 percent in the second quarter, following a 7.6 percent gain in the
previous period; and net external demand contributed positively to the GDP as exports
increased 0.1 percent while imports fell 2.1 percent. On the other hand, government spending
growth slowed sharply (0.3 percent vs 6.3 percent in Q1), while gross fixed capital formation
continued to contract (-0.6 percent vs -3.5 percent).

On the production side, mining & quarrying activity rebounded (2.9 percent vs -2.1
percent), driven mainly by the recovery in natural gas output. In addition, output expanded at
a faster pace for manufacturing (4.3 percent vs 4.2 percent), supported by better performance
of the domestic-oriented industries; and construction (0.5 percent vs 0.3 percent). Meanwhile,
growth slowed for both services (6.1 percent vs 6.4 percent) and agricultural sectors (4.2
percent vs 5.6 percent).On a quarter-on-quarter seasonally-adjusted basis, the GDP grew by
1.0 percent in the second quarter, following a 1.1 percent expansion in the previous period.
Considering the first half of the year, the economy grew 4.7 percent compared with the same
period of 2018. For 2019, the GDP growth is forecast to come in within the central bank's 4.3-
4.8 percent target range, driven mainly by domestic demand while an escalation in global trade
tensions could weigh on external demand. GDP Annual Growth Rate in Malaysia averaged
4.79 percent from 2000 until 2019, reaching an all time high of 10.30 percent in the first quarter
of 2010 and a record low of -6.20 percent in the first quarter of 2009.