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ADVANCED FINANCIAL ACCOUNTING BBFA 4403

FACULTY OF BUSINESS AND MANAGMENT BBFA 4403 ADVANCED FINANCIAL ACCOUNTING

SAMPLE ASSIGNMENT

MAY 2011

ADVANCED FINANCIAL ACCOUNTING BBFA 4403

CONTENTS

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1.0 INTRODUCTION

2.0. REQUIREMENTS OF FRS 119

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3.0 FRS 119 COMPLIANCE AND FORMAT OF DISCLOSURE

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4.0 EVALUATE SIMILARITIES & DIFFERENCES

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5.0 RECOMMENDATIONS AND CONCLUSION ON FRS 119

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6.0 REFERENCES

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ADVANCED FINANCIAL ACCOUNTING BBFA 4403

1.0

INTRODUCTION 1.1 Finance Sector Malayan Banking Malayan Banking Berhad Maybank was incorporated in Malaysia on 31 May 1960 and

commenced operations on 12 September 1960. On 17 February 1962, Maybank was listed on the then Kuala Lumpur Stock Exchange. Maybank is today among the top companies by market capitalisation on Bursa Malaysia. Maybank is Malaysias largest financial services group with total assets exceeding RM330 billion. The Group has an extensive global network of 1,750 offices in 14 countries namely Malaysia, Singapore, Indonesia, Philippines, Brunei Darussalam, Vietnam, Cambodia, China, United Kingdom, U.S.A., Bahrain, Papua New Guinea, Pakistan and Uzbekistan. The Group offers a comprehensive range of financial services and products ranging from commercial banking, investment banking, Islamic banking, cards issuance, offshore banking, leasing and hire purchase, insurance, factoring, trustee services, asset management, stock broking, nominee services, venture capital and Internet banking. Today, the Maybank Group has over 40,000 employees who serve over 18 million customers worldwide, with 9.5 million customers in Malaysia alone. Maybank has been consistently ranked among Malaysias most valuable brands. It is also ranked first among Malaysian banks by Brand Finance in its Global 500 survey and 118th among the top 1,000 banks in the world by The Banker Magazine. The Maybank Group is the largest banking group in Malaysia and has been leading the banking industry for over three and a half decades. Globally, Maybank is present in 12 countries. In the ASEAN region, Maybank is among the top five banks with total assets of S$75 billion and the Bank's biggest overseas presence is in Singapore. Maybank started its operations in Singapore in 1960 and is a qualifying full bank with the most extensive network amongst the QFBs with 21 branches, 31 ATMs and 61 QFB shared ATMs
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ADVANCED FINANCIAL ACCOUNTING BBFA 4403

ADVANCED FINANCIAL ACCOUNTING BBFA 4403

Actually the turnover of Maybank on 2008 is 23.4, 2009 is 25.6 and 2010 29.8. That mean every year the percentage of Maybank is higher and also the profit is also increase and can turn over the capital.

1.2

Plantation sector

Sime Darby Almost 200 years ago, pioneering English planters established rubber plantations in Malaya, most of which were later converted to oil palm. Among those pioneers were Alexander Guthrie, Daniel and Smith Harrison, Joseph Crosfield, William Sime and Henry dEsterre and Herbert Mitford Darby - founders of three great companies that today live on in Sime Darby Berhad. Alexander Guthrie founded Guthrie & Co. in 1821 as one of the first British trading enterprises in South East Asia. Daniel and Smith Harrison and their friend Joseph Crosfield, on
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the other hand, formed a tea and coffee trading partnership called Harrisons & Crosfield in England in 1844. Sime Darby came to be when European businessmen William Sime, Henry dEsterre Darby and Herbert Mitford Darby established Sime, Darby & Co. in 1910. The Sime Darby brand is more than 100 years old though the company bears little resemblance to the small outfit that started life in Malacca in 1910. It is the legacies of all three companies that very much make up todays Sime Darby. Sime Darby is a Malaysia-based diversified multinational involved in key growth sectors, namely, plantations, property, motors, industrial equipment and energy & utilities, with healthcare as a growing business. Founded in 1910, its business divisions seek to create positive benefits in the economy, environment and society where it has a presence. With a workforce of over 100,000 employees in over 20 countries, Sime Darby is committed to building a sustainable future for all its stakeholders. It is one of the largest companies on Bursa Malaysia with a market capitalisation of RM54.44 billion (USD17.89 billion) as of 25 May 2011.

ADVANCED FINANCIAL ACCOUNTING BBFA 4403

On a nut shell, the turnover of Simedarby is higher which is 2008 is 14.5, 2009 is 15.7 and lastly on 2010 is 17.3. We know that every year of turnover is increasing and can turn over the capital.

ADVANCED FINANCIAL ACCOUNTING BBFA 4403

1.3

Trading Sector Dutch Lady

Dutch Lady Milk Industries Berhad ("Dutch Lady Malaysia") is a leader in the quality branded dairy business in Malaysia. It was incorporated in 1963, and was the first milk company in Malaysia to be listed on Bursa Malaysia, the local Stock Exchange in 1968. Its holding company is Royal FrieslandCampina, a Dutch multinational corporation and one of the largest milk companies in the world. Permodalan Nasional Berhad is the second largest shareholder in the Company. Dutch Lady Malaysia manufactures and sells a wide range of quality dairy products and fruit juices for the home and export market such as Infant Formula, Growing-up Milk, Powdered Milk, Condensed Milk, UHT Milk, Sterilised Milk, Pasteurised Milk, Cultured Milk, Yoghurt and Fruit Juice Drinks. The Company's dairy products have a strong consumer following and are represented by strong brands such as Dutch Lady, Frisolac, Friso, Completa, Omela and Joy. The Company believes in product innovation and is well supported by its holding company, Royal FrieslandCampina. The Company constantly strives to improve its processes in order to deliver nutritious products of high quality to its consumers. It was the first company in the world to introduce a growing up milk powder specifically formulated for children from ages one to three. These products are currently marketed in Malaysia as Dutch Lady 123 and Dutch Lady 456. Besides supporting local industries by using substantial amount of local ingredients in its products, Dutch Lady Malaysia is also the largest purchaser of local fresh milk from the Veterinary Services Department. This is done via the Companys Dairy Development Programme, carried out in collaboration with the DVS with the assistance of the Netherlands Embassy.

ADVANCED FINANCIAL ACCOUNTING BBFA 4403

The quality of the Company's products is paramount. Quality Control and Quality Assurance are prime considerations. In line with this, the Company has continually been accredited with ISO 9001 certification since 1995. Strong emphasis is also placed on food safety with HACCP (Hazard Analysis Critical Control Point) System covering all its plants. In addition, the Company also has in place ISO 14001 Environment Management System and OHSAS 18001 (Occupational Health and Safety Assessment Series). The Companys products are all halalcertified. Dutch Lady Malaysias annual revenue in 2009 is RM692 million. The Companys factory is located in Petaling Jaya and it employs 600 Malaysians. Currently, Dutch Lady Malaysia is the market leader in key milk categories such as UHT milk, Sterilised milk and Growing-Up Milk. Lastly, the trend over of Dutch Lady is higher over the three years ago.

The turnover of Dutchlady is also increasing by this year which on 2008 is 12.3, 2009 is 13.5 and 2010 is 13.9. Dutchlady is stable company because the turnover is very high.
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2.0

REQUIREMENTS OF FRS 119 The objective of this Standard is to prescribe the accounting and disclosure for employee benefits. The Standard requires an entity to recognize. The liability when an employee has provided service in exchange for employee benefits to be paid in the future and an expense when the entity consumes the economic benefit arising from service provided by an employee in exchange for employee benefits. The MASB approved standard for treatment of employee benefits is FRS 119 Employee Benefits. Such benefits can be either short term or long term and termination benefits. Short-term employee benefits are employee benefits which fall due wholly within twelve months after the end of the period in which the employees render the related service. Other long-term employee benefits are employee benefits which do not fall due wholly within twelve months after the end of the period in which the employees render the related service. Then termination benefits are employee benefits as a result of either an entity's decision to terminate an employee's employment before the normal retirement date or an employee's decision to accept voluntary redundancy in exchange for those benefits. The short term benefits include such as wages, salaries and social contributions such as EPF and SOCSO. Short term compensated absences, such as paid annual leave and paid sick leave. Profit sharing and bonuses payable within twelve months after the end of the period in which the employees render the related service. Non-monetary benefits for current employees such as medical care, housing and cars. A companys employees generally enjoy a specific number of paid annual leave, maternity, paternal and others. Entitlement to these compensated absence falls into two categories which are accumulating and non accumulating. The first one is accumulating compensated absences are those that are carried forward and can be used in future periods if the current periods entitlement is not used in full. The employees are entitled to cash payment as compensation for any unconsumed leave. Where this procedure is practiced,
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the entity has to measure the expected cost of accumulating compensated absences at the balance sheet date. The cost is charged as an expense of the current period in which the leave consumed. The second is non accumulating compensated absences do not carry forward like they lapse if the current periods entitlement on leaving employment. Under this procedure, no liability or expense is recognised. Para 17 FRS 119 provides that an entity should recognised the expected cost of profit sharing and bonus payment when, and only when, the entity has a present legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can be made. An obligations exits when, and only when, the entity has no realistic alternative but to make the payments. Under some profit sharing plans, employees receive a share of the profit only if they remain with the entity for a period, such plans create a constructive obligation as employees render services that increase the amount to be paid if they remain in service until the end of a specified period. Another benefits under the employment benefit is the post employment benefit. Post employment benefits are benefits paid to employees after retirement. Post employment benefits include retirement, like as pension. Other post employment life insurance and medical care.

3.0

FRS 119 COMPLIANCE AND FORMAT OF DISCLOSURE

Maybank The following is given about a funded benefit plan: 2010


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ADVANCED FINANCIAL ACCOUNTING BBFA 4403

(RM000) To Employees: Personal Costs To the Government: Taxation To Providers of Capital: Dividend Paid to Shareholders Minority Interest To Reinvest to the Group: Depreciation and Amortisation Retained Profits Total Value 334,788 2,289,554 8,623,617 1,008,613 150,283 1,401,958 2,918,421

According to Malaysian Accounting Standard (MASB) in Maybank was accordance with terms in above which is short term employee benefits, such as wages, salaries, paid sick leave and bonus. Actually this company paid to employee which is bonus depend how long they work which mean that if the workers work less than 1 year the company did not paid bonus, if the workers work more than 1 year company was paid the bonus. An employee may provide to on a fulltime, part time, permanent, casual or temporary basis. For the purpose of this standard employees include directors and other management personnel. As required by law, companies in Malaysia which is Maybank make contributions to the Employees Provident Fund (EPF). Certain foreign branches schemes such contributions are recognized an expense in the income statement when incurred.

Sime Darby The following is given about a funded benefit plan:


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ADVANCED FINANCIAL ACCOUNTING BBFA 4403

2010 (RM) Expected Rate of Return at Start of Year Current Service Cost Benefits Paid Contributions Paid Present Value of Plan Asset at 31 December Fair Value at Plan Asset at 31 December Expected Average Remaining Working 10.0% 130 150 110 1,295 1,093 10

Sime Darby also paid wages, salaries and social associated contributions are recognized as an expense in the year in which the associated services are rendered by employees. Short term accumulating compensated absences such as paid annual leave are recognized when services are rendered by employees that increase their entitlement to future compensated absences. Short term non accumulating compensated absences such as leave are recognized when the absences occur. That company also provided to either employees or their dependents and may be settled by payments made their directly to the employees, to their spouse, children or other dependents or to others such as insurance companies.

Dutch Lady The following is given about a funded benefit plan: 2010 (RM) Expected Rate of Return at Start of Year 8.0%
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ADVANCED FINANCIAL ACCOUNTING BBFA 4403

Current Service Cost Benefits Paid Contributions Paid Present Value of Plan Asset at 31 December Fair Value at Plan Asset at 31 December Expected Average Remaining Working

140 120 140 1,400 1,120 10

Thus Dutch Lady also pays the wages and salaries according the Malaysian Accounting Standard (MASB) and Government Law. That company was paid annual leave and medical care but never paid the bonus because Dutch Lady only food and beverage which is manufacturing. According to Mohd Sarif Ibrahim and friends, that company also make contributions to Employee Provident Fund (EPF) which is SOCSO and KWSP to protect the employees if anything happens.

4.0

EVALUATE SIMILARITIES & DIFFERENCES Globalization all company in Malaysia was paid salary and wages according to

Government Law and Malaysian Accounting Standard (MASB) for example Maybank, Sime Darby and Dutch Lady. In my research that company also was made contributions to the employees provident fund EPF which is SOCSO and KWSP which is to protect the workers like accident, died or disabled and others.
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Normally the government sector paid the pension which is Sime Darby paid the pension but Maybank and Dutch Lady did not paid. According to Mohd Sarif Ibrahim and friends a pension plan is an arrangement whereby an employer provides benefits to retired employees for services in their working years some pension are contributory. In these, the employees bear part of the cost of the stated benefits or voluntarily make payments to increase their benefits. The account for a deferred contribution plan is straight forward. The employee gets the benefit of gain from the asset contributed to the pension plan. The employer simply contributes each year based on the formula established in the plan. Thus, only Maybank which is an entity settled based compensation plan that allows the Groups Director and employees to acquire shares of the Bank. The total fair value of share options granted to employees is recognized as an employee cost with a corresponding increase in the share option reserve within equity over the vesting period and taking into account the probability that the options will vest. The similarities of that company which is the absence such as paid annual leave and paid sick leave where the compensation for the absence is due to be settled within twelve months after the end of the period in which employees render the related employees service. In addition, only Maybank entity may be committed, by contractual other agreements with employees to employees when its terminates their employment. Such payments are termination benefits.Termination benefits are typically lump sum payments. In some cases, the company acquires an insurance policy to fund some or all of the employee benefits relating to employee service in the current and prior periods. The acquisition of such a policy is not a settlement if the entity retains a legal to pay further amounts if the insurer does not pay the employee benefits specified in the insurance policy. 5.0 RECOMMENDATIONS AND CONCLUSION ON FRS 119 In Malaysia, retirement benefits are normally a Defined Benefit or a Defined Contribution plans. Hybrid plans are virtually non-existent. In most cases, disclosures of
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retirement benefits are simple and straight-forward and thus may not add any significant meaning to stakeholders. Disclosures of retirement benefits in Malaysia are still inadequate with current requirements of MASB 29 or IAS 19 with some companies use disallowed actuarial method. Most of the companies with a DB plan were under funded and thus require investors to be sceptical on how these companies would finance its plans in near future since it involve future cash flows. Under funding of pension accounts also signal the performance of pension plan. Investors would then should look into how well do these plans work and inquire the medium they are invested in whether in shares, insurance premiums or debt securities. It is still unclear whether MASB 29 would receive the same fate as FRS 17 or FASB 87, 106 and 132 where business community replies with Dont fix what isnt broken. However, this research has not answered several fundamental issues of retirement benefits in Malaysia. Firstly, it did not answer on the objectives of having a retirement benefits in the first place. Such study would be a possible avenue to step forward in this area. Secondly, it did not answer whether different schemes are design for specific reason or a specific target group of employees. A study to understand why companies opt for a Maybank, a Dutchlady or Sime Darby even a hybrid schemes would be another interesting avenue as it could give due understanding to practitioners, researchers and academicians of the behavioural aspects of retirement benefits accounting.

As in the conceptual framework adopted by various jurisdictions such as Frs the proposed framework identifies and describes a similar list of characteristic of accounting information that contribute to its usefulness. Four key qualities identified are understandability, relevance, reliability, and comparability. The understandability is to comprehend its meaning. It must be acknowledged that the users ability to understand financial information will depend in part on their own capabilities and in part on the way in which the information is presented. Thus, the meaning of relevance it can use to confirm or correct prior expectations about past events and assist in forming, revising or confirming expectations about the future.
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Hence, the reliability is considered to embody the concepts of faithful representation verifiability, neutrality and completeness. Lastly, the comparability is to identify the real similarities and differences in economic phenomena because these differences and similarities have not been obscured by the use of non-comparable accounting method.

6.0

REFERENCES

1. Miranda Steel (2009), New Oxford Dictionary, 2 edition, Oxford Fajar 2. Mike Hart, Tim Frishener, (2002), Plagiarism and Poor Academic Practice A treat to the Extension of e-Learning in Higher Education? , King Alfreds University College, Winchester, UK, University College, UK. 3. Khalijah Nur Mohamed, Dr. Madhubala Bava Harji, Siti Khadijah Abdul Wahab, (2006), Traces Alpha 2 English For University Students, Revised Edition, Multimedia University, Mc Graw Hill. 4. J.S.Solomon, Chuah Ai Bee, Susila S. Solomon, (2008), English for Malaysians, Pelanduk Publications. 5. Abraham Sung, (2007), 170 More English Essays, 2 Edition, Minerva Publications.

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6. Elizabeth Beizei, Rosalind Combley, Sheila Dignen, Elizebt Manning, Evadne Adrian-Vallence, Laura Wedgeworth, Deborah Yuill, (2001), Wordwide Dictionary for pre-intermediate to intermidiete learners, Edinburgh Gate, Harlow, Essex CM20 2JE, England, Pearson Longman. 7. Stephen W.K.Tan, 100 Inspirational For Students,(1997), 5 Edition, Thinkers Library Sdn. Bhd. 8. Mohd Sarif Ibrahim, Assoc Prof Dr Ku Nor Izah Nor Ismail, Assoc Prof Dr Zuani Ishak, Advanced Financial Accounting, Fifth Printing 2011

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