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2.

0 Benefit of the convergence to MFRS


2.1 MFRS framework is internationally recognized
MFRS framework also known as Malaysian Financial Reporting Standard is recognized as an
International financial reporting standard compliant framework, which means this framework is
internationally

recognized.

(https://www.kpmg.com/MY/en/IssuesAndInsights/ArticlesPublications/Documents/2012/Insights
-into-Msia-IFRS-ConvergenceV2.pdf) Since this MFRS framework is internationally recognized,
the account statement prepared by presuming Malaysia can be accepted in the eyes of foreign
countries and the account statements prepared by Malaysia is not secluded to only domestic
use. Therefore by switching to MFRS framework will help companies, investors, and the public
to globally compare their financial statements easier because it is internationally understood,
and it helps multinational businesses to stay up-to-date and stay competitive in the globalization
of markets. To further strengthen my point, interestingly, not much financial impact was
observed upon the convergence to MFRS because it is identical to IFRS framework in all major
aspects. (https://www.crowehorwath.net/uploadedfiles/my/insights/insights-assets/james.pdf)

2.2 Consistency can be achieved in comparing financial statements


According to an article published by David Albrecht, it is said that by adopting IFRS framework,
a business can present its financial statements on the same basis as its foreign competitors,
making comparisons easier. (https://profalbrecht.wordpress.com/2008/12/20/why-switch-to-ifrsfrom-gaap/) So as to speak, if every country has a different set of financial standards, while
multinational companies exist in different countries, it is difficult to compare how each company
stands because there is no consistency. Consistency can only be achieved when both parties
have the same thing to compare with. That is how consistency becomes a key factor in
comparing financial statements.
Without the one set of global standards, there wont be any consistency and it will be more
difficult, if not impossible, to compare with other competitors due to extra finances and time. A
global standard is just like an international standard or guideline where everyone around the
world operates under it and with that allows companies and competitors to be able to compare a
particular thing among each other with ease. Presuming a locally operated firm in Malaysia is
able to compare its financial statements with foreign firms from foreign countries accurately due

to both firms applying the same financing reporting standard framework to their accounting
statements.

(http://smallbusiness.chron.com/international-financial-reporting-standards---

advantages-disadvantages-2167.html)
Moreover, consistency is not only important for comparability but it also brings unity all over the
globe in preparing financial statements. With all the countries that are reporting with IFRS, each
country can watch over each other when it comes to following the accounting standards.
(https://profalbrecht.wordpress.com/2008/12/20/why-switch-to-ifrs-from-gaap/ )

2.3 Accounting information can be easily understood


MFRS framework includes new disclosures of both quantitative and qualitative information to
help business owners or investors better understand the nature, amount, timing and uncertainty
of revenue and cash flows from contracts with customers. By converging to MFRS framework,
the accounting information will be prepared and disclosed in an understandable fashion. This is
an important characteristic which benefits for small business owners as majority of the small
business owners do not have a strong accounting background. Financial information that is too
technical or cannot be understood by a layperson can be ineffective for business owners as
business owners will most likely fail in executing effective decisions. Therefore, small business
owners or small companies often have to hire professional accountants or other outside
consultants

to

help

complete

various

accounting

functions

which

deem

costly.

(http://smallbusiness.chron.com/international-financial-reporting-standards---advantagesdisadvantages-2167.html)
With the new convergence of MFRS framework, financial information can be easily understood
by not only small business owners even others who have no accounting background as well.
And this will help save the cost of hiring actual professional accountants to assess the financial
accounting statements. Moreover, when owners or investors have a grasp on the financial
accounting

information,

good

decisions

(http://www.masb.org.my/press_list.php?id=16)

can

be

made

and

executed

effectively

2.4 MFRS reporting framework uses income approach to prescribe government grants (I
dont know what Im typing :/ )
MFRS reporting framework use the income approach rather than the capital approach to
prescribe requirements for government grant accounting. MFRS framework allows an entity to
record the land at the nominal amount as an alternative to fair value; and MFRS require that the
benefit of a government loan at below market rate of interest be treated as a government grant.
This means that on initial recognition, the loan itself would need to be measured at fair value
which is by discounting the future payments at the entitys current borrowing cost and accounted
for as a financial liability.
(http://masb.org.my/pdf/MPERS%20article_A%20Comparative%20Analysis%20of%20PERS
%20MPERS%20and%20MFRS%20Frameworks.pdf)

MFRS framework applies to all business entities (Not sure)


This new accounting framework applies to all entities other than the following such as the
private entities and those engaged in the agriculture and real estate industries, including their
parents,

significant

investors

and

transitioning

entities

or

venturers.

(http://www.mia.org.my/new/1_tech_detail.asp?tid=6&rid=5&id=981)

Provide better clarity and revenue recognition (Not sure)


The objective of MFRS framework is to improve the financial reporting of revenue and
comparability of the financial statements among companies globally. Therefore, converging to
this new accounting framework provides better clarity on revenue recognition for companies
especially on areas where existing requirements unintentionally created diversity in practice. It
also

provides

new guidance

for

transactions

that

were

not

previously addressed

comprehensively.
For the real estate industry, MFRS is expected to enable property developers to recognize
revenue progressively. For many straightforward retail transactions, the Board expects IFRS 15
to have little, if any, effect on the amount and timing of revenue recognition. For other contracts,
such

as

long-term

service

contracts

and

multiple-element

arrangements

example

telecommunications and automobile sectors, MFRS 15 could result in some changes either to
the amounts or timing of the revenue recognized.

More Flexibility (Not sure)


IFRS uses a principles-based, rather than rules-based, philosophy. A principles-based
philosophy means that the goal of each standard is to arrive at a reasonable valuation and that
there are many ways to get there. This gives companies the freedom to adapt IFRS to their
particular

situation,

which

leads

to

more

easily

read

and

useful

statements.

(http://smallbusiness.chron.com/international-financial-reporting-standards---advantagesdisadvantages-2167.html)
Reference purposes
Benefits of Accounting Convergence
(https://www.crowehorwath.net/uploadedfiles/my/insights/insights-assets/newsletter%20%20ifrs%20convergence%20_final_.pdf)
(https://www.kpmg.com/MY/en/IssuesAndInsights/ArticlesPublications/Documents/2012/I
nsights-into-Msia-IFRS-ConvergenceV2.pdf)