Topic 1

ACCOUNTING ENVIRONMENT
 • What is Accounting • Professional Accounting
• Accounting Profession Bodies and Standard
Learning • Process and flow of
Setting in Malaysia
• Statutory and Capital
Objectives accounting information
• Accounting as a business
market requirements
language - Companies Act 1965
(Revised)
• Internal and External
users of Accounting - Bursa Malaysia Listing
Information Requirements
• Financial accounting vs -Financial Reporting Act
Management accounting 1997
• Generally Accepted • International Accounting
Accounting Principles Standards Board (IASB)
(GAAP) • Nature, characteristics
and type of business
“….it is a process”

• Identifying
• Recording
• Communicating

3
 What is Accounting?

is a
Accounting Identifies
system that

Records

information
Relevant Communicates
that is

Reliable
to help users make
Comparable better decisions.
 Importance of Accounting

is a
Accounting Identifies
system that

Records

to help users make information

Communicates
better decisions.
Why accounting is known as the ‘business
language?
 Users of Accounting Information

External Users
Internal Users

Financial accounting provides

external users with financial Managerial accounting provides
statements. information needs for internal
decision makers.
 Financial vs Management
Accounting
Financial Accounting
• The area of accounting that provides
external users with information is called
financial accounting.
• The objective of financial accounting is to
provide relevant and timely information
for the decision-making needs of users
outside of the business.
• General-purpose financial statements are
one type of financial accounting report
that is distributed to external users.
• Management Accounting
• The area of accounting that
provides internal users with
information is called managerial
accounting, or management
accounting.
• Managerial accountants
employed by a business are
employed in private accounting.
 Generally Accepted Accounting Principles

• The general guidelines and principles, standards and detailed rules,

plus industry practices that exist for financial reporting.

• is a collection of commonly-followed accounting rules and standards

for financial reporting.

• is based on established concepts, objectives, standards and

conventions that have evolved over time to guide how financial
statements are prepared and presented.
 Malaysian Institute of
Malaysian Institute of Certified Public
Accountants (MIA) Accountants (MICPA)
Accounting
Professional
bodies in
Malaysia
Malaysian Accounting Financial Reporting
Standards Board Foundation (FRF)
(MASB)

10
 Characteristics of Accounting Information (IFRS
Conceptual Framework, 2018)
USEFUL
FINANCIAL
INFORMATION

Fundamental Enhancing
Qualitative Qualitative
Characteristics Characteristics

Relevance: Faithful • Comparability &

 Predictive representation: Consistency
value  Complete • Verifiability
 Confirmatory  Neutral • Timeliness
value  Free from error • Understandability
 Materiality
 • Fundamental Quality—Relevance

• To be relevant, accounting information must be

capable of making a difference in a decision.

Qualitative
Characteristics
of Accounting
Information
Qualitative Characteristics of Accounting Information

• Fundamental Quality—Relevance

Financial information has predictive value if it has value as an input to

predictive processes used by investors to form their own expectations
about the future.
 Qualitative Characteristics of Accounting Information
• Fundamental Quality—Relevance

Relevant information also helps users confirm or correct prior expectations.

Qualitative Characteristics of Accounting Information

• Fundamental Quality—Relevance

Information is material if omitting it or misstating it could influence decisions

that users make on the basis of the reported financial information.
• Fundamental Quality—Faithful Representation

Faithful representation means that the numbers

and descriptions match what really existed or
happened.
Qualitative
Characteristic
s of
Accounting
Information
Qualitative Characteristics of Accounting Information

• Fundamental Quality—Faithful Representation

Completeness means that all the information that is

necessary for faithful representation is provided.
Qualitative Characteristics of Accounting
Information
• Fundamental Quality—Faithful Representation

Neutrality means that a company cannot select

information to favor one set of interested parties over
another.
Qualitative Characteristics of Accounting Information

• Fundamental Quality—Faithful Representation

An information item that is free from error will be a

more accurate (faithful) representation of a financial
item.
 Qualitative Characteristics of Accounting Information
• Enhancing Qualitative Characteristics

Information that is measured and reported in a similar

manner for different companies is considered comparable.
 Qualitative Characteristics of Accounting Information
• Enhancing Qualitative Characteristics

Verifiability occurs when independent measurers,

using the same methods, obtain similar results.
 Qualitative Characteristics of Accounting Information
• Enhancing Qualitative Characteristics

Timeliness means having information available to

decision-makers before it loses its capacity to influence
decisions.
 Qualitative Characteristics of Accounting Information
• Enhancing Qualitative Characteristics

Understandability is the quality of information that

lets reasonably informed users see its significance.
 RECOGNITION, MEASUREMENT, AND DISCLOSURE
CONCEPTS (MFRS)

• These concepts explain how companies should recognize, measure,

and report financial elements and events.

ASSUMPTIONS PRINCIPLES
1. Economic entity 1. Measurement
2. Going concern 2. Revenue recognition
3. Monetary unit 3. Expense recognition
4. Periodicity 4. Full disclosure
5. Accrual

Previously under GAAP:-

Other principles: Historical cost, matching principle
Other constraint: Conservatism and materiality
 Opportunities in Accounting

Financial Managerial Taxation

Preparation General Preparation
Analysis accounting Planning
Auditing Cost accounting Regulatory
Regulatory Budgeting Investigations
Consulting Internal auditing Consulting
Planning Consulting Enforcement
Criminal Controller Legal services
investigation Treasurer Estate
Strategy planning
Lenders FBI investigators
Consultant Market
s researchers
Accounting- Analysts Systems
related Traders designers
Directors Merger services
Underwriter Business
s valuation
Planners Human services
 Professional Accounting Bodies and Standard
Setting in Malaysia

• Malaysian Institute of Accountant (MIA)

http://www.mia.org.my
• Malaysian Institute of Certified Public Accountant
(MICPA)
• Malaysian Accounting Standards Board (MASB)
http://www.masb.org.my
• Financial Reporting Foundation (FRF)
 • established under the Accountants Act 1967
• regulating the accounting profession.
• play a significant role in the development and
advancement of accounting profession globally.
Malaysian • Its membership in such bodies include the:
Institute of • Asean Federation of Accountants
(AFA)
Accountant • Confederation of Asian and Pacific
(MIA) Accountants (CAPA)
• International Federation of
Accountants (IFAC)
• Intergovernmental Working Group of
Experts on International Standards of
Accounting and Reporting (ISAR)
  Objectives:

• To promote and regulate

Malaysian professional and ethical
standards
Institute of • To enhance competency through

Accountant continuous education and

training to meet the challenges
(MIA) of the global economy
• To enhance the status of
members
• To lead research and
development for the
enhancement of the profession
 Objectives:
Malaysian
• To advance the theory and practice of accountancy in all its
aspects. Institute of
• To recruit, educate, train and assess by means of examination
or otherwise a body of members skilled in these areas. Certified
Public
• To preserve at all times the professional independence of
accountants in whatever capacities they may be serving.
• To maintain high standards of practice and professional
conduct by all its members.
• To do all such things as may advance the profession of
Accountant
accountancy in relation to public practice, industry,
commerce, education and the public service. (MICPA)
 Established under the Financial Reporting Act 1997
(Act), as an independent body that comprises
representation from all relevant parties in the
standard setting process, including preparers, users,
Financial regulators and accountancy profession.
The FRF and the Malaysian Accounting Standards
Reporting Board (MASB) are part of the financial reporting
Federation framework in Malaysia. 
Oversight the MASB's performance, financial and
(FRF) funding arrangements, and as an initial source of
views for the MASB on proposed standards and
pronouncements. It has no direct responsibility with
regard to standard setting. This responsibility rests
solely with the MASB.
Malaysian Accounting Standards Board (MASB)

• Established under the Financial Reporting Act 1997 (the Act) as an

independent authority to develop and issue accounting and financial
reporting standards in Malaysia.

• Working with FRF to make up the new framework for financial reporting in
Malaysia, with representation from all relevant parties in the standard-
setting process, including preparers, users, regulators and the accountancy
profession.
 33

Statutory and Capital market requirements:

 Companies Act 2016 (Revised) vs 1965

 Bursa Malaysia Listing Requirements
 Financial Reporting Act 1997
 Business Entity Forms

Sole- Partnership Corporation

Proprietorship
 Sole-
Proprietorship

Owned by a single individual who often

manages the business itself.

The owner is NOT a legally separate entity

the business.

Profits (or losses) are taxable as an individual.

Personally liable for all business’s debts.

 Corporation

Owners of a corporation are called

shareholders (or stockholders).

When a corporation issues only one

class of share, we call it common
share (or capital share).
Corporation

Corporation is a separate legal entity.

Corporation is a taxed separately from the

owners (shareholders) and thus cannot
be held liable more their investments.

Private corporation is owned by small

number of individuals.

Public corporation is owned by shareholders

openly traded in the stock/share market
Characteristics of Businesses
https://www.youtube.com/watch?v=oU0S4IG
--Rc

https://www.youtube.com/watch?v=p6q-05U-
-Pc
The End