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April 2008 www.micpa.com.my KDNPP 3809/3/2009

The Malaysian AccountantAPRIL 2008EDITORIAL BOARDDatuk Robert Yong Kuen Loke (Chairman)Dato’ Nordin BaharuddinDato’ Hj Maidin Syed AliLoh Lay ChoonNg Kim TuckSee Huey BengSam Soh Siong HoonTan Chin HockChia Kum Cheng (Co-opted)Chong Kian Soon (Co-opted)PRINCIPAL OFFICE BEARERSPresidentDato’ Nordin BaharuddinVice PresidentDato’ Ahmad Johan Mohammad RaslanPRINCIPAL OFFICERSExecutive DirectorFoo Yoke Pin (ypfoo@micpa.com.my)Technical ManagerMelissa Yeoh (melissa.tech@micpa.com.my)Training ManagerJoseph Leong (joseph.edu@micpa.com.my)Education & Research ManagerJenny Chua (jenny.edu@micpa.com.my)Public Affairs& Communications ManagerVicky Rajaretnam (vic.pr@micpa.com.my)Examination OfficerLee How Lai (hl.exam@micpa.com.my)Single Copy: RM7.50Subscription: 6 issuesRM43.50 per annum(including P&P within Malaysia only)The Malaysian Accountant is publishedby: The Malaysian Institute ofCertified Public Accountants (3246-U)15, Jalan Medan Tuanku50300 Kuala Lumpur, MalaysiaTel: 03-2698 9622 Fax: 03-2698 9403E-mail: micpa@micpa.com.myWebsite: www.micpa.com.myNote: The views expressed in this journal are notnecessarily those of the Institute or the Editorial Board.All right reserved; no part of this publication may betransmitted in any form or by any means, electronic,mechanical, photocopying, recording or otherwise,without prior pernission of the Institute or the EditorialBoard.Concept & DesignDigibook Sdn BhdReign Associates Sdn BhdPrinterThumbprints Utd Sdn BhdFEATURE page 3FEATURE page 8LIFESTYLE page 36PERSPECTIVE 2FEATURESDisaster Recovery Planning 3“What have we been missing in our planning?” 6Subprime Mortgage and Present Financial Turmoil: Part I 8Malaysian Tax Updates 11INSTITUTE NEWSMembership Update 18Evening Talk & Public Practice Forum 20CPD 2008 20MICPA Participates in Career Fairs and Exhibitions 21Career Talks at Secondary Schools 21Collaboration with Universities 21Universiti Tenaga Nasional: Financial Reporting Symposium 21PROFESSIONAL NEWSIASB Update 22IFAC Update 26CASE LAW HIGHLIGHTSAbric Project Management Sdn Bhd v Palmshire Palza Sdn Bhd & Anor 30GLOBAL INSIGHTNews from Down Under 31World News 33LIFESTYLEPreparing For Exams 36

PERSPECTIVEBeing prepared! Accountants practise this all the time. They prepare budgets,forecast requirements and cash flow needs, perform tax planning, formulatepolicies and procedures, set up internal controls and so on, all for the sake ofpreparing to face an uncertain future. Whether the actual numbers are the sameor not, the fact remains that most Accountants feel that having plans andsafeguards are better than none at all.Business organisations rely on mission-critical computer systems like banks, stock-broking,manufacturing, etc spending large amounts of money to develop a Disaster Recovery Plan(DRP). A DRP ensures that there will be little or no serious disruptions to the organisation’songoing business processes in the event of a breakdown in the main hardware systems.It will also spell out the necessary procedures and the persons involved in the businessrecovery process so that everyone will know exactly what to do in the event of a contingency.A few hours or even minutes of systems down-time may cost the loss of revenue in terms ofmillions of ringgit, not to mention the loss of customer goodwill. This is then translated intoloss of profits and ultimately, shareholder wealth. The cost of developing a DRP would be afraction of that, so it makes sense to develop one.In the same vein, when it comes to personal wealth planning, we need to ascertain thefamily issues that will arise from unwanted events like premature death, a disability, or a majorillness. If we really spend a bit of time thinking, we would realise that the issues would extendbeyond just the financial aspect.A “family tsunami” can take place due to a lack of preparation, i.e. where there is nofamily DRP in place. What most people would have missed is the importance of planning fora succession of the assets that they have acquired during their golden years. Of course in thiscase it is the basis of having a Will written.It is often said that financiers have short memory; hence they repeat their errors. One cansee a repeat of one financial crisis after another, with almost clockwork precision, every ten yearsover the last three decades.In the late 1980’s, the U.S. economy was severely affected by the fall-out of the savingsand loans association bankruptcy. In the late 1990’s, the Asian financial crisis brought downmany Asian banks and corporations. Today, ten years later, the world is confronted withanother financial crisis emanating from the collapse of subprime mortgages in the U.S. housingindustry. Read more inside.So far, 2008 has been an extremely interesting year. Alongside political developments,there continues to be developments in the fiscal arena. The Malaysian Tax Update featureprovides readers with an update of tax developments arising towards the end of 2007 and inthe first quarter of 2008.And on being prepared, just how well-prepared are you for your exams? Read the lifestylearticle inside to get some tips on how to be prepared for your coming exams.2 | The Malaysian Accountant | April 2008 www.micpa.com.my

Unfortunately, there can never be an exact replacement of onewho assumes the role of someone’s husband, father, son,employer or business partner. It is sometimes difficult to imaginewhat would happen if a parent who is the leader of thehousehold is no longer around.of the right guardian will be crucial in assisting thedeceased parent to bring up his children with largelysimilar values and principles.Identification of possible risks areasThis is a simple exercise where one identifies who his/herdependents for financial provision and leadership are,perhaps a homemaker wife, minor children, parents,business partner and so on. If it is hard for you to imagine,just think for a minute what might happen to your familyor business if you are taken out of the equation. Whatwould become of your children? What will happen to theprofitability of the business?Establish/affirm theleadership of the householdI have encountered too many cases where the husbandsleave financial planning matters to their wives while theyjust focus on their jobs and business. And when thehusband takes a look at the plan later on, he usually feelsthat the benefits are skewed more towards the wife andchildren. The husband-wife relationships may be strainedbecause the husband refuses to assume his leadershipposition in the household. If I may quote the Scriptureswhich I believe is God’s manual for life, it says that wivesare to submit to their husbands and husbands are to lovetheir wives. It is believed that if each were to play their roletruthfully and sincerely, the family DRP would bedeveloped in a more effective and coherent manner.Determine core valuesand principles of the familyJust like the corporate culture, the family culture can bebuilt upon values such as honesty, integrity, loyalty, trustand so on. The family leadership can build these valuesinto his family wealth distribution plans as a legacy incontinuing his leadership role even in his absence. In thisway, the decisions by him would be fully understood by thebeneficiaries and the chances of potential family conflictswould be minimal. For younger families, the appointmentQuantification of financial needsThis exercise will stem from your identification of thepossible risk areas described above. The assistance of afinancial planner will be useful as he/she can calculate amore accurate figure using a financial calculator, wherepresent values, inflation, investment returns and timehorizons are taken into account. The financial needs arethen matched to your existing resources and any shortfallto be made good will be part of the solution that thefinancial planner will deliver.Identification of suitable personsto assume your position of responsibilityAs mentioned earlier, there can never be one personwho can undertake all that you do in your lifetime. It istherefore imperative that you identify suitable persons toassume responsibilities of cash management, investments,distributions, financial decision-making, estateadministration, guardianship of children and even yourbusiness. If you find it a cumbersome exercise, can youimagine what would happen if you are no longer aroundand no one has been appointed to take over your role?Is there a need for a DRP for your family?Alan Chew is a licensed financial planner with theSecurities Commission (CMSRL/A8768/2008). He has beeninvolved in financial advisory in the areas of personal financialand business succession planning for the last 9 years. He is alsoactive in public speaking and training. He can be reached atalan.chew@oskwp.com.mywww.micpa.com.myApril 2008 | The Malaysian Accountant |5

FEATURE“What have we beenmissing in our planning?”BY SEE CHIEN LOU“I do not have time to write a Will.”“I am not rich enough to write a Will.”“I can’t find anyone who specialises in Will-writing.”“It has been awhile since I wanted to write a Will, but…”etc, etc, etcThe above statements seem common butreal. At many times, we have put aside thismatter while we are busy with our business,career, family, friends, colleagues and thelist goes on.What most people would have missed is theimportance of planning for a succession of the assets thatthey have acquired during their golden years. Of course inthis case is the basic of having a Will written.Let’s look at a real-life situation of a working adultand his lifestyle:“Mr. Chong (not his real name) is a senior partnerwith an accounting firm, has 3 children who are aged 5, 8and 10. His wife is a homemaker. He works hard day andnight to save up to buy his dream bungalow in DamansaraHeights and a few properties for investment. All hisproperties are jointly held with his wife. During his activeyears, he also invests in shares listed on Bursa MalaysiaBhd, unit trusts and has some savings in Fixed Deposit.Due to his nature of work which requires him totravel, he never has time for himself. When he is back, hewill spend quality time with his wife and the 3 lovelychildren which he adores. Never did he imagine thatdrastic things could happen.One day, he is involved in an accident which leaveshim in a very critical state and his brain is not functioningproperly. The doctor tells the family to be prepared for theworst-case scenario. Two days later, Mr Chong passes away.Mrs Chong has no choice but to accept her husband’suntimely death. Circumstances change after the incident.Neither she nor the family expects what happens next - Mr.Chong’s estate has been frozen and suddenly from a wellto-dofamily, they become poor. Mr. Chong has no Will andtherefore, the family needs to apply for a Letter ofAdministration (LA) for the distribution of his estate.Little does she know that Mr. Chong’s mother is alsoentitled to a certain share of his estate! Mrs. Chong alsoexperiences the unpleasant antics of Mr. Chong’s siblingwho come along to “assist” in administering his estate. Thereal intention is for his mother to inherit her share that shecould eventually pass on to the sibling when she is nolonger around.Instead of solving her immediate financial needs, sheis left with the sibling pressuring for estate distribution. Noone comes to offer any financial help, and eventually shehas to resort to “borrowing” from them as she needs tomaintain the standard of living for the children i.e.6 | The Malaysian Accountant | April 2008 www.micpa.com.my

attending international school, tuition classes, etc. Thechildren’s education is important to her.Mr. Chong is no longer there, but his wife has a long wayto deal with the situation as the LA will take many years.What would Mr. and Mrs. Chong have done if givenanother chance? By having a Will written, the familymembers intended for the estate would be protected. Atestator can include in his Will the appointment of a trusteeof his choice and distribute his assets according to hiswishes.According to the Wills Act 1949, Will is defined as“a declaration intended to have legal effect of the intentions ofa testator with respect to his/her properties or other matters,which he/she desires to be carried into effect after his/her deathuntil which time it is revocable.”The testator has the freedom to amend his Will inaccordance to his wishes considering the changes in assetsand/or circumstances. Therefore it is beneficial for one toappoint a Professional Estate Planner for a comprehensiveand holistic estate planning. A qualified and professionallytrained Professional Estate Planner will be able to adviseone after going through a thorough consideration of thesituation, thereby recommending solutions to him.However, when it comes to the appointment of atrustee many people tend to choose their family member orfriend without giving much thought to the matter. Theyfeel more secure to have someone they know, but this canbe a false sense of security as they assume that theappointed trustee would be able to carry out the requiredduty.Nevertheless, the misperception on the duties andresponsibilities of a trustee is common. As the task is notjust executing the estate, as it seems, there are also legalliabilities involved in the estate administration process,and hence it may not be such a simple task.As a matter of fact, whether an estate is small or large,a trustworthy trustee’s role can prove overwhelming foranyone who lacks the time, experience and expertise to dothe job right. Therefore it is common for a trustee torenounce when he finds out the actual work involved.Many realise the potential problems if the Will is not doneproperly.Unlike a well-thought and comprehensive Willprepared by a Professional Estate Planner, the Will shallencompass the suitable substitutes and it is able to cater forcontingency needs. It also minimises the unnecessarydelays to the estate administration. Hence, the advice by aProfessional Estate Planner is of paramount importance.Contrary to the above option, some testators haveacknowledged the fact that the appointment of a corporatetrustee, such as Rockwills Trustee Bhd, is a better choice, asit is able to manage efficiently and professionally.A corporate trustee acts impartially to allbeneficiaries when it comes to the management of theestate as there are no personal preferences involved. It doesnot favour one over the other. It merely manages accordingto the wishes laid down in the Will and this requires a highstandard of understanding the legal context.Some may weigh the cost factors in the appointmentof trustee during the estate administration process. Thiscost is inevitable. If the estate is managed by someone whois not competent, the cost can go beyond expectation asmany factors are uncertain! As opposed to that, the cost ofmanagement of the estate by a corporate trustee isstructured and with its efficiency, many unnecessary costsare eliminated. Essentially, it will be able to provide morevalue as compared to its cost.Furthermore, a corporate trustee with its expertisewould have its system in place to ensure every aspect of theadministration is taken care of. It would also have itsinternal and external checks and balances to ensure theestate it is holding as trustee is accounted for.As laid in Trustee Act 1949, a corporate trustee likeRockwills Trustee Bhd shall provide regular statement ofaccounts to the beneficiaries during the administrationperiod and also upon conclusion of the administration.This allows the beneficiaries to inspect the details of theadministration and make inquiries on any areas ofconcern.By the nature of trust law, the corporate trustee willhave to ensure that there is a separation of accountsbetween the various estates and that of the corporatetrustee’s own account. Therefore there is an inherent andsolid protection to the estate held.In view of the benefits of the appointment of acorporate trustee, below are the benefits of the appointmentof a corporate trustee as opposed to an individual:CORPORATE TRUSTEE Corporate Individualvs INDIVIDUAL?trusteeLegal Knowledge ✓ ?Professionalism and Expertise ✓ ?Perpetuity and Continuity ✓ ?Efficiency to administerthe entire estate ✓ ?Impartiality ✓ ?Trustworthiness andAccountability ✓ ?In the course of estate planning, many factors ofconsideration are to be incorporated. It makes a whole lotof difference between a planned and an unplanned estate.With the professional advice of an experienced and trainedProfessional Estate Planner, one can be more certain andconfident in the implementation. It is a process thatinvolves active participation from the parties involved andultimately attaining the actual objectives in mind.Therefore it is important to appoint a Professional EstatePlanner who can meet your requirements and able toadvise you holistically.See Chien Lou is a Senior Professional Estate Planner ofRockwills International Group, a leading estate planningcompany in Malaysia. Chien can be reached at estateplanners@gmail.com.www.micpa.com.myApril 2008 | The Malaysian Accountant |7

FEATURESubprime Mortgage and PresentFinancial Turmoil: Part IBY DR. MICHAEL LIM MAH HUIIt is often said that financiers have short memory; hencethey repeat their errors. We see a repeat of one financialcrisis after another, with almost clockwork precision,every ten years over the last three decades. In the late1980’s, the U.S. economy was severely affected by the falloutof the savings and loans association bankruptcy thatcosts the U.S. tax-payers up to US$200 billion to clean upthe mess. In the late 1990’s, we witnessed the Asianfinancial crisis that started with the collapse of the Thaibaht that soon spread to other Asian economies andbrought down many Asian banks and corporations. Theclean-up cost many governments and ultimately thetaxpayers billions of dollars. Today, ten years later, we areconfronted with another financial crisis emanating fromthe collapse of subprime mortgages in the U.S. housingindustry that has generalised into a credit crunch in thefinancial industry.The subprime mortgage crisis blow-out began in June2007 with the collapse of two hedge funds managed byBear Stearns. It quickly affected other sectors of thefinancial markets not only in the U.S. but also throughoutthe world. It reached crisis proportion in August-Septemberwhen it temporarily froze up the money market sectorwhich is the lifeblood of the banking and financialindustry. That immediately prompted the EuropeanCentral Bank and the Federal Reserve Bank to pump-inclose to US$100 billion of liquidity into the system. After thefirst rate cut, the money market sector calmed down andthe stock markets recovered temporarily in October 2007.But the problems resurfaced in November 2007 and themarkets have been on a roller coaster even after the secondrate cut.Subprime mortgage simply means lending toborrowers with marginal or weak credit background topurchase houses. They did that by providing teasers likeminimal down payment, adjustable interest rates, and laxdocumentation and credit checks to entice borrowers totake house loans. Normally these mortgages charge aninterest rate of 3% or higher over the U.S. Treasury note ofcomparable maturity. In 2006, interest rate spread over8 | The Malaysian Accountant | April 2008 www.micpa.com.my

So what brought this booming party to a screeching halt?Housing markets go through boom and bust cycles. The housingboom in the U.S. has lasted more than 10 years, fuelled by lowinterest rates and excess liquidity.U.S. Treasury rose to 5.6%. Between 2004 and 2006, US$1.5trillion (or 15% of the U.S. total housing loans) of highinterest mortgage loans were booked, of which subprimemortgages are the biggest portion.These subprime loans were fine as long as the housingmarket continued to boom and interest rates did not rise.In fact, as house prices continued to escalate, homeownerspiled on more debt by taking out home equity loans, whichreached a high of US$700 billion or 5% of the U.S. GDP in2004. So what brought this booming party to a screechinghalt? Housing markets go through boom and bust cycles.The housing boom in the U.S. has lasted more than 10years, fuelled by low interest rates and excess liquidity. TheFed dropped short-term interest rate to 1% in 2003. Longterminterest rates were low as foreign countries like Chinaand Japan and petro-dollar countries accumulated hugetrade surpluses and the excess liquidity funded private andgovernment consumption in the U.S.Much of the private household debt was channelledto the housing industry and this led to a sharp rise in houseprices. The median house price in the U.S. shot up 40%between 2000 and 2006 to a high of US$234,000. In termsof ratio of median house price to median householdincome, this rose from a historically stable ratio of 3 times(from 1970 to 2000) to 5 times in 2006. Housing pricestapered off and started to decline by 2006 and are expectedto fall more sharply in 2007 and 2008. Concomitantlydefaults and foreclosure rates began to rise. In 2006, 1.2million household loans were foreclosed, up 42% from theprevious year. Another 2 million were expected to beforeclosed in 2007, and more in 2008 when 2.5 millionadjustable rate mortgages will reset higher.So why should defaults and foreclosures of subprimemortgages in the U.S. concern or affect us? First, financialand technological innovations in the past few decadeshave simultaneously globalise and shrunk theinternational financial system. The financial productsassociated with subprime mortgages have been distributedfar and wide through out the world. Second, financialinnovations through risks transfer and dispersion havelulled the players and regulators to accept higher level ofleverage and to take on more risks for the system as awhole, thereby increasing the volatility and fragility of theinternational financial system. Therefore, what started asa crisis in the subprime mortgage industry quickly becamea generalised credit crunch for other financial sectors likeprivate equity, leverage buy outs, conduits, and thecommercial paper and money market systems. Thirdly, thedecline in the U.S. house prices and industry will haveserious knock-on effects on the real economy which in turnwill negatively affect the rest of the economies in the world.One of the important financial instrumentsintroduced in the eighties that have become moresophisticated is the securitisation of assets. Simply put, itmeans bundling individual assets together (these assetscan be housing mortgages, student loans, corporate loans,car loans, credit card loans etc.) into a security, such as abond, and selling them to investors; hence the term AssetBacked Securities (ABS). This is also known as the“origination-distribution” model. Securitisation enabledbanks and other financial institutions, the originators ofthese loans, to take on more loans as they move thesecuritised loans off their books. It is also supposed totransfer some of the risks away from the banking system toother parts of the financial system. But these risks did notdisappear; they were just dispersed and, in fact, amplifiedfor the system as a whole as it encouraged more leverageand greater degree of risk-taking. Also the dispersion led toa lack of transparency as to who held these assets, whichcompounded the fear of lenders to extend credit. As WarrenBuffet puts it graphically, “we do not know who is nakeduntil the tide recedes.” As long as banks do not know whoholds and these assets and how much of them, they arereluctant to extend credit.In the early nineties, financial innovation took thisABS to a higher level in terms of complication and leveragewith the introduction of collateralised debt obligations(CDOs). CDOs are simply the bundling of a class of ABSinto a special purpose vehicle and then rearranging theseassets into different tranches with different credit ratings,interest rate payments, and priority of repayment. Forexample, a CDO could consist of 100 subprime mortgagebacked securities (MBS). Using historical rates of defaultand recovery, let us assume that in an extreme case ofdefault, the loss ratio is no more than 10%. Hence thesesubprime MBS are divided into AAA tranche (70%),www.micpa.com.myApril 2008 | The Malaysian Accountant |9

mezzanine tranche (20%), subordinated tranche (10%). Aninvestor, depending on his risk appetite, can choose whichtranche to invest in. The AAA tranche pays lowest interestrate but provides highest priority in terms of debtrepayment. The volume of CDOs issued almost tripledbetween 2004 and 2006 from US$125 billion to US$350billion per year. These CDOs were distributed far and wide.Not only banks throughout the world but also staidestablishments like town councils in far flung places likeAustralia that were chasing for higher yields bought theseCDOs. Bank of China alone is exposed to US$9 billion ofsubprime CDOs. Two German state banks investing inCDOs went bankrupt and had to be bailed out by thegovernment.These CDOs resemble a house built on a deck of cards.When the cards begin to crack, the house falls apart. Assubprime borrowers in the U.S. began to default, investorsin the subordinated tranche of the subprime CDOs took thefirst hit. This led to a loss of confidence even amonginvestors in the safer tranches who have not yet taken anyloss. As they head for the exit door together, this createdpanic and the sale of these assets led to a downward spiralof prices.Compounding this problem is the fact that manyoriginators of these mortgages engage in the classicstrategy of funding mismatch to enhance profit. Thesecompanies borrow on a short-term basis (at lower interestrates) to invest in long-term assets (at higher interest ratesand risk) in order to capture the differential in interestrates. This is profitable as long as short-term interest rate islower than the long-term rate. But when short-term ratemoves up more than long-term rate, the interestdifferential is reduced and a profit can quickly turn to aloss. This is exactly what happened to the savings andloans industry in the 1980s. A similar problem occurred inthe 1990s when Asian banks and corporations played thefunding mismatch game. They borrowed in U.S. dollars ata lower interest rate and invested in local currency assetsthat provided higher yields. The going was good until thedollar appreciated and many banks and companies wentbust, as they were unable to repay their debts. Today, thisproblem is haunting many financial institutions that playthis game, such as mortgage companies, conduits, andbanks including those like Northern Rock who have noexposure to the subprime mortgages. The problem withNorthern Rock was compounded because they receivedmost of their funds in large amounts from institutionallenders rather than small depositors who are a more stablesource of fund. Despite the financial innovations of the lasttwo decades, the underlying problem of funding mismatchis played over and over again; hence, old wine in newbottle. A new part of this game is the increased leveragethrough the extended use of derivatives.The fall out of the subprime mortgage affects not onlythe financial markets but also the U.S. housing market andthe real economy. Modern economy is essentially creditdriven. The total amount of debt in the U.S. as apercentage of its GDP rose from 150% in 1969, to 240% in1990, to 340% in 2006. In volume terms, U.S. total debtstands at US$45 trillion. U.S. economic growth has beenpowered 70% by household consumption. This, in turn,was made possible by the perceived increase in householdwealth, consisting significantly of house ownership. As wesaw earlier, U.S. consumers felt rich when house prices roseand took out home equity loans to spend. Now as houseprices begin to tumble, the reverse happens. Home equityloans shrink, consumer confidence plummets, andconsumption declines. This is likely to drag the country intoa recession that would have knock-on effects on the rest ofthe world. U.S. consumption still accounts for 20% of theworld’s GDP. It is, however, argued by some that there is adecoupling of the emerging market economies from theU.S. It remains to be seen to what extent this is true.The central banks of various countries have steppedin to support specific financial institutions, assist the ailinghousing industry, and support the battered financialindustry by cutting interest rates and pumping liquidityinto the economy. There is historical evidence to indicatethat such liquidity pumping serves to create anotherbubble down the road. Some refer to this phenomenon asthe rolling bubble. The U.S. Treasury Secretary, Paulson, aformer Wall Street banker, warned that the problem is notshort term and will be with us for a while.Dr. Michael Lim Mah Hui taught Sociology and PoliticalEconomy in Malaysian and U.S. universities. He then became acommercial, investment and development banker for twentyyears in international banks like Credit Suisse First Boston,Deutsche Bank, Chemical Bank (now J.P. Morgan), StandardChartered Bank and Asian Development Bank in different partsof the world. He is now Senior Fellow at the Asian PublicIntellectuals Program of the Nippon Credit Foundation.(PART 2 will be published in the June issue)10 | The Malaysian Accountant | April 2008 www.micpa.com.my

FEATUREThus far, 2008 has been an extremely interestingyear. Alongside political developments, there continuesto be developments in the fiscal arena. This articleis intended to provide readers with an update of taxdevelopments arising towards the end of 2007 and in thefirst quarter of 2008. These developments are outlined below:Finance Act 2007The Finance Act 2007 incorporating changes proposed inthe 2008 Budget proposals was gazetted on December 27,2007. The shift away from the imputation system to thesingle-tier system is arguably one of the most significantchanges in the Finance Act and indeed in the tax system inrecent years. Briefly, the imputation system, involving thepayment of franked dividends is to be replaced by a systemwhereby tax is only imposed at a single stage, i.e., at thecompany level. Dividends will therefore be tax exempt atthe shareholder level. A period of 6 years has been givento allow corporations to transition from the imputationsystem to the single-tier system i.e. to utilise their existingdividend franking credit balances. However, those whowish to switch to the single-tier system can elect(irrevocably) to do so from January 1, 2008. Generally, theshareholder’s profile would influence this choice, unlessthe company does not have sufficient dividend frankingcredits to frank dividends out of retained earnings (e.g.where the company has realised a large non-taxablecapital gain). From January 1, 2014, all companies willautomatically switch to the single-tier tax system.Corporate shareholders who have funded theirinvestments through interest bearing borrowings wouldgenerally prefer to receive franked dividends to facilitate atax refund arising from the dividend franking credit, aftertaking a tax deduction for interest costs against thedividend income. Likewise, individuals who are taxed atlower marginal tax rates than the corporate tax rate wouldbe entitled to tax refunds arising from dividend income.Such shareholders would wish to receive franked dividendsduring the transition period. The following table illustratesthe benefits of franked dividends to shareholders:ImputationsystemSingle tiersystemCompanyCompany income 100 100Company tax (26%) 26 26After-tax income 74 74Shareholder Corporate IndividualDividend 74 74 74Gross-up for 26 26 N/Acompany taxShareholder’s income 100 100 -Tax 26 28* 0Imputation credit 26 26 N/ANet shareholder tax 0 2 0* Assuming tax at the top marginal rateWhere the shareholders in the above table have directfunding costs to offset the dividend income, the result iswww.micpa.com.myApril 2008 | The Malaysian Accountant |11

more favourable as they would receive refunds of thedividend franking credit. During the transition period,individual taxpayers would also be entitled to deduct theircurrent year business losses (if any) and approveddonations in the computation of their chargeable incomesubject to tax.The provisions introduced to implement thetransition from the imputation system to the single tiersystem only allow the imputation system to work withdividend payments on ‘ordinary shares’. This means thatseveral forms of preference shares will be excluded from thetransitional treatment. It is understood that some form ofconcessionary treatment may be granted on a case-by-casebasis in respect of preference shares issued prior to theBudget date. Some relief may be afforded in respect of theadditional dividends that would have to be paid topreference shareholders so as to make up for the nonavailabilityof franking credits to shareholders.Unfortunately, the process of seeking approval on a case bycase basis does not afford taxpayers the certainty andtransparency necessary in a self-assessment environment.Further, the transition provisions only apply inrespect of dividends paid, and therefore exclude dividendswhich are credited but not paid. The Inland Revenue Board(IRB) in the post-budget dialogue with the tax/accountingprofessional bodies on December 14, 2007 indicated thatdividends which are ‘credited’ under a contra or set-offarrangement (e.g. against amounts owing from ashareholder) rather than being physically paid cannot befranked.Lastly, in an attempt to discourage ‘dividendstripping’ initiatives during the transitional period throughto December 31, 2013, a measure has been introducedwhich requires shareholders to have held shares (in nonlistedcompanies) for at least 90 days in order to offset thefranking credits.Financing and investment structures involvingpreference shares or those which have been structuredbased on dividend flows would need to be reviewed in thelight of the proposed changes.Aside from the above, the Finance Act, 2007 alsocontains other changes, including the reduction in thecorporate tax rate for the year of assessment 2008 to 26%,which will be reduced further to 25% for the year ofassessment 2009, and the change affecting LabuanOffshore Companies. An offshore company may now elect(irrevocably) to be taxed under the Income Tax Act, 1967as a chargeable offshore company, rather than under theLabuan Offshore Business Activity Taxes Act, 1990(LOBATA).Labuan Offshore CompaniesIn line with the changes in the Finance Act, 2007 referredto above, a new Income Tax (Exemption) (No.22) Order2007 has also been gazetted. This Order replaces theprevious Income Tax (Exemption) Order 1991 and theIncome Tax (Exemption) Order 2000 with effect from theyear of assessment 2007.The 2007 Order resolves the question as to whether anoffshore company which elects to be taxed as a “chargeableoffshore company” under the Income Tax Act, 1967 (ITA)would be able to avail itself of the benefits of the 1991Order, such as the withholding tax exemptions onpayments to non-residents, etc. An offshore companywhich elects to be taxed as a chargeable offshore companyshould continue to enjoy the withholding tax exemptionspreviously provided for under the 1991 Order.In addition, the new Order allows a Malaysianresident company which receives exempt dividend incomefrom a Labuan offshore company to credit the exemptincome into an exempt income account, thereby allowingit to flow the dividends received from the Labuan offshorecompany to its shareholders. This resolves the previouslyunsatisfactory position whereby a Malaysian holdingcompany of a Labuan offshore company was not able toflow exempt dividends to shareholders without dividendfranking credits, notwithstanding the fact that the 2000Order exempted the dividends from tax in the hands of theshareholders. However, the impact of this is less significantgiven the shift to the single-tier system.Labuan International Business andFinancial Centre (IBFC)The official launch of Labuan as an IBFC took place inKuala Lumpur on January 28, 2008. This re-branding ofLabuan as an IBFC is to enhance the visibility of Labuanamong international investors as well as Malaysiancompanies. Labuan is being repositioned as Asia’s mostconnected, convenient and cost-efficient IBFC, with a specificfocus on business incorporations.Dividend paymentsDividend voucherThe IRB has issued a sample of a dividend voucher to beused in respect of dividend payments under the single-tiersystem. The voucher allows for a mix of single-tierdividends, normal exempt dividends (e.g. from exemptpioneer income, etc.) and franked dividends. If a companycontinues to pay franked dividends, the only possiblesingle-tier dividends (i.e. unfranked dividends) that it islikely to pay would be dividends on preference shares ordividends in specie. If a company makes an irrevocableelection to switch to the single-tier system, it would nolonger be able to pay franked dividends.12 | The Malaysian Accountant | April 2008 www.micpa.com.my

Form/Borang R50Companies seeking to elect to switch to the single-tiersystem notwithstanding the availability of dividendfranking credits (under Section 108 of the ITA), must makethe election on the newly issued Form R50.Reporting of dividends paidUnder Section 45 of the Finance Act 2007 companies aresubject to the following in relation to dividend payments:i) for franked dividends paid between January 1, 2008to December 31, 2013, the company shall furnish astatement in the prescribed form within 30 days fromthe date of payment of such dividends;ii) for franked dividends paid during the period from the1st day of the basis period for the year of assessment2008 to December 31, 2007, Section 45 imposes arequirement on the company to furnish the statementto the IRB within 30 days from December 31, 2007 (i.e.by January 31, 2008).However, the IRB has, via a letter dated January 18,2008 granted a concession wherein companies fallingwithin (i) above are not required to furnish the abovementionedstatement, and companies falling within (ii)above are granted an extension of time to file thestatement. The IRB has issued a Form R31 which is to beused for reporting dividends falling within (ii) above. Itshould be noted that this form is to be completed by allcompanies with a non 31 December year-end, irrespectiveof whether dividends were paid between the financial yearendand December 31, 2007, with a view to determining thedividend franking credit balances of the company as atDecember 31, 2007. The deadline for submission of theForm R31 is April 30, 2008. It should be noted that therequirement to file a Form R within seven months from theclose of the financial year remains unchanged.(The sample of dividend vouchers, the Form R50 andthe Form R31 can be found on the IRB websitehttp://www.hasil.org.my)Unabsorbed Losses andCapital AllowancesThe Ministry of Finance (MOF) has recently issued adirective (via its letter of December 7, 2007) relaxing theapplication of the rules prohibiting the carrying forward oflosses and capital allowances following a substantialchange in shareholding. The MOF will now allowunabsorbed losses and capital allowances to be carriedforward despite a substantial change in shareholdingunless the unabsorbed losses and capital allowances arethat of a dormant company. Where there is a substantialchange in the shareholding of a dormant company, oneneeds to apply to the MOF for approval to utilise the carriedforward amounts. Such applications will be consideredbased on the merits of each case.Iskandar Development RegionThe tax incentives for the Iskandar Development Region(IDR) in the state of Johore were gazetted in December2007. The key features of the incentives are summarisedbelow:Approved Developers/Approved Development ManagersIncome Tax (Exemption) (No.19) Order 2007i) Approved Developer• An approved developer is an approvedMalaysian incorporated resident companywhich “purchases or acquires any right or rightsover part or the whole of the land to undertakedevelopment in an approved node inaccordance with the master plan for the node”• An approved developer will be granted:- Tax exemption on statutory income fromthe disposal of rights over land in anapproved node until the year ofassessment (YA) 2015;- Tax exemption on statutory income fromrental or the disposal of a building locatedin an approved node until the YA2020.ii)Approved Development Manager• An approved development manager is anapproved Malaysian incorporated residentcompany appointed by an approved developerto “provide management, supervisory ormarketing services” in relation to the approveddeveloper’s activity referred to above;• An approved development manager will begranted a tax exemption on statutory incomefrom the provision of the above services from thecommencement of the approved business untilthe YA2020;• For both (i) and (ii) above, losses can be carriedforward to be offset in the post-exempt period;• However, the exemptions will not apply wherethe developer and development manager do notobtain the requisite annual certification.IDR- Status Companies:Income Tax (Exemption)(No.20) Order 2007• 10 year tax exemption on statutory income fromwww.micpa.com.myApril 2008 | The Malaysian Accountant |13

qualifying activities provided to persons situatedwithin an approved node and those situated outsideMalaysia;• Losses can be carried forward to the post-exemptperiod;• The exemption will not apply to an IDR-statuscompany which commences its qualifying activityafter December 31, 2015.Withholding Tax ExemptionIncome Tax (Exemption)(No.21) Order 2007Non-residents are exempt from tax on:• Technical fees received from Approved Developers,Approved Development Managers and IDR-statuscompanies;• Royalty income received from Approved Developersand IDR status-companies;• Interest income from Approved Developers;• The exemptions from tax (for the non-resident)outlined above will be available for the followingtime-frames:- Payments received from Approved Developersand Approved Development Managers will beexempt until December 31, 2015;- Payments received from IDR-status companieswill be exempt for the 10 years for which theIDR-status companies are exempt from tax.Effectively, the payers will not be required to withholdtax on the payments to the non-resident during the aboveperiods of time.Income Tax (Deduction for Cost onAcquisition of a Foreign OwnedCompany) (Amendment) Rules 2008The above gazette order relates to the Income Tax(Deduction for Cost on Acquisition of a Foreign OwnedCompany) Rules 2003 (“2003 Rules”) which provide for adeduction for the cost of acquisition of a foreign ownedcompany at the rate of 20% per year, provided certainconditions are met. The 2003 Rules require the investorcompany to be a locally incorporated company with atleast 60% Malaysian equity ownership.The Income Tax (Deduction for Cost on Acquisitionof a Foreign Owned Company) (Amendment) Rules2008 amend the definition of “locally owned company”.The definition is now as follows:- At least 60% direct shareholding by Malaysians forcompanies which are not listed on the stockexchange; or- At least 50% direct shareholding by Malaysiancitizens for companies which are listed on the stockexchange and at least 60% of the equity is directlyowned by Malaysian citizens on the first day of listingon the stock exchange.The amended rules allow a deduction for the cost ofacquisition of a foreign owned company only in respect ofsubmissions made to the Malaysian IndustrialDevelopment Authority by December 31, 2008. It should benoted that the amended rules are expressly stated to bedeemed to come into operation from the year of assessment2005 and are therefore retrospective in nature.Malaysian Tax - Income TaxExemption for Participants of theMalaysian Technical Co-operationProgrammeThe Malaysian Technical Co-operation Programme(MTCP) is a bilateral technical co-operation programmethat was launched in the 1980’s for the exchange ofdevelopment experiences between Malaysia and otherdeveloping countries. The MTCP emphasises on thedevelopment of human resources through the provision oftraining in disciplines which are imperative to thedevelopment of the country e.g. public administration,agriculture, poverty alleviation, investment promotion,banking and English language.Recognising the contributions from the MTCP to thedevelopment of the nation, the Government exempts nonresidentindividuals from the payment of income tax inrelation to payments received in connection with his/herparticipation in the MTCP. This exemption is deemed tohave come into force effective from year of assessment2007.Advance RulingsThe Inland Revenue Board (IRB) has recently issued theIncome Tax (Advance Ruling) Rules 2008 which areeffective from January 1, 2007. The rules allow a taxpayerto seek an advance ruling pertaining to the tax treatmentof a particular transaction/arrangement. The IRB has alsoissued Guidelines on Advance Rulings which furtherexplain the procedures and requirements involved inapplying for an Advance Ruling.There are several requirements which the taxpayerneeds to take note of prior to applying for an advanceruling, for example, at the time of application, thetransaction concerned must not be effected/ entered intobut must be seriously contemplated. Further, the matter onwhich the advance ruling is sought must not involve theinterpretation of any foreign law or double taxation issues,etc.14 | The Malaysian Accountant | April 2008 www.micpa.com.my

There is no avenue to appeal against a ruling per se,but the normal appeal procedures relating to taxassessments would continue to apply in respect of mattersupon which a ruling has been given. The Guidelinesstipulate that Advance Rulings will be issued within sixtydays from the date of submission of (complete)applications.Personal Relief for Education Feesincurred in Pursuing a Tertiary LevelCourseUnder Section 46(1)(f) of the ITA, a relief up to a maximumof RM5,000 is given to individuals who have incurrededucation fees in pursuing tertiary level courses recognisedby the Government or approved by the Minister of Financein the fields of law, accounting, Islamic financing,technical, vocational, industrial, scientific or technologicalskills or qualifications. To provide guidance on this, theTechnical Department of the IRB has released a list ofprofessional bodies which are approved by the Minister ofFinance as follows:i) Malaysian Institute of Accountants (MIA);ii) The Malaysian Institute of Certified Public Accountants(MICPA);iii) The Institution of Engineers Malaysia;iv) Lembaga Jurutera Malaysia;v) Lembaga Arkitek Malaysia;vi) Pertubuhan Arkitek Malaysia;vii) Lembaga Juruukur Bahan Malaysia;viii) Lembaga Juruukur Tanah Malaysia;ix) Lembaga Penilai, Penaksir dan Agen Hartanah; andx) The Institution of Surveyors Malaysia.Public RulingsPublic Ruling No. 1/2008– Special allowances for small value assetsThe IRB has released its first new public ruling (PR) for2008. The new PR provides guidance on the specialallowances (100% allowance) available for small valueassets under Paragraph 19A, Schedule 3 of the ITA. The PRdefines “small value asset” as plant or machinery used forthe purpose of a business where the qualifying plantexpenditure of the assets is not more than RM1,000 but itdoes not include assets that have an expected life span ofless than 2 years. Further, the special allowance is onlyavailable in respect of RM10,000 worth of small valueassets per year. The special allowance under Paragraph19A is not applicable to small value assets acquired undera hire-purchase transaction. Taxpayers are given theoption of claiming the special allowance or claimingcapital allowances under the normal rules. A copy of thePR can be obtained at the IRB website at http://www.hasil.org.my.Withholding tax on Special Classes of Income– Addendum to Public Ruling 4/2005 (PR4/2005)An Addendum to PR4/2005 has been issued which providesclarification on Section 4A of the Income Tax Act, 1967(ITA) which relates to ‘Special Classes of Income’. TheAddendum seeks to provide further clarification on thetypes of rental payments subject to tax under Section 4A(iii)and clarifies (as per PR4/2005) that the following paymentsto non-residents will be taxable:- Slot hire – where the hirer has exclusive use of aparticular slot in a ship to the exclusion of others;- Leasing of ships – Charters of ships on a bare boatbasis, or with crew, time charters and voyage charters.The Addendum also specifies that following income of nonresidentsis not subject to tax due to specific exemptionorders:- Income consisting of payments made under anagreement for participation in a pool by a companyresident in Malaysia engaged in the business oftransporting passengers or cargo by sea [Income Tax(Exemption) (No. 25) Order 1995];- Income derived from a Malaysian shipping companyfor the use of a ship on a voyage, time or bare boatcharter [Income Tax (Exemption) Order 2007].Entertainment Expenses– Addendum to Public Ruling 3/2004 (PR3/2004)An Addendum has been issued to Public Ruling 3/2004 toincorporate the changes made in the Finance Act 2006,wherein the cost of the provision of a leave passage benefitto employees to facilitate a yearly event within Malaysiainvolving the employer, employee and immediate familymembers of the employee will be deductible with effectfrom the year of assessment 2007. The cost of all meals andaccommodation for the employees and their immediatefamily members is also deductible. It should be noted thatthe IRB agreed in their dialogue (with the professionalbodies) on October 5, 2006, that the above would alsoapply where the leave passage is not a yearly event (buttakes place once every 2 or 3 years for instance) and wherein view of the size of the company, such events are notarranged for all the employees, but perhaps on a divisionalbasis, etc. The IRB’s practice of allowing deductions in suchinstances amounts to a concession.Tax Treatment of Leave Passage– Addendum to Public Ruling 1/2003 (PR 1/2003)In connection with the above, an Addendum to PR 1/2003has also been released. The benefit of a local leave passage(not exceeding three times a year) provided to an employeewww.micpa.com.myApril 2008 | The Malaysian Accountant |15

and his immediate family members is not taxablepursuant to Section 13(1)(b)(ii)A of the ITA. The definitionof leave passage as provided in the original PR1/2003referred to the cost of the leave passage fares. This has nowbeen extended to include the cost of meals andaccommodation given pursuant to the leave passage.In summary therefore, employers will be entitled to adeduction for the cost of one leave passage (withinMalaysia) in a year and the cost of food andaccommodation, while employees will not be taxed onthese benefits (provided these fall within the scope ofSection 13(1)(b)(ii)A of the ITA).Computation of Income Tax Payable by a Resident Individual– Addendum to Public Ruling 2/2005 (PR2/2005)An Addendum to PR2/2005 has been issued to includevarious changes proposed in the Finance Acts 2006 and2007 with respect to personal deductions available to residentindividuals. Briefly, the Addendum covers the following:- Deduction for further education fees for residentindividuals pursuing tertiary education courses,professional courses in accountancy and law, andcourses in Islamic financing. The tertiary andprofessional courses must be undertaken in recognisedinstitutions or approved professional bodies. The listof such institutions and professional bodies hasrecently been issued (see above);- Deduction for reading materials which has beenincreased from RM700 per annum to RM1,000 perannum with effect from the year of assessment 2007;- Deduction for purchase of personal computers – theprevious rebate of RM500 for the purchase of apersonal computer for non-business use has beenreplaced with a deduction of RM3,000 with effect fromthe year of assessment 2007;- Deduction for children’s education – the deduction forchild relief in respect of children over 18 pursuingfull-time courses of study outside Malaysia (at degree,Masters or Doctorate level) has been increased toRM4,000 in line with the deduction for those pursuingsimilar courses in Malaysian universities and othereducational establishments (excluding matriculationand pre-graduate courses).Perquisites from Employment– Addendum to Public Ruling 1/2006 (PR1/2006)An Addendum to PR1/2006 has been issued to include thechange made in the Finance Act 2006 which incorporates anew paragraph 25C to Schedule 6 of the ITA. Schedule 6 of theITA covers income which is exempt from tax. The newparagraph 25C provides a tax exemption on up toRM1,000 of perquisites received by an employee in respect ofpast achievements, service excellence awards and long serviceawards. Amounts received in excess of RM1,000 will be taxable.Stamp Dutyi) New Exemption Orders:Three new Stamp Duty Orders have been gazetted whichenact the following:- Exemption from stamp duty on all instrumentsexecuted before December 31, 2011 pursuant to ascheme of merger or acquisition of public companiesapproved by the Securities Commission betweenJanuary 1, 2008 and December 31, 2010 [Stamp Duty(Exemption)(No.8) Order 2007];- Exemption from stamp duty on all instrumentsexecuted pursuant to the Vendor Petronas MergerScheme (i.e. a merger scheme between companieslicensed by Petronas under regulation 3, PetroleumRegulations 1974) on or after September 8, 2007 untilDecember 31, 2010. [Stamp Duty (Exemption)(No.9)Order 2007];- Exemption from stamp duty on all instrumentseffecting voluntary inter vivos transfers of propertybetween spouses. [Stamp Duty (Exemption)(No.10Order 2007].ii)Applications for Exemption from Stamp Duty under theStamp Act, 1949Effective from January 1, 2008, all applications forexemption from stamp duty pursuant to Sections 15 and15A of the Stamp Act, 1949 should be submitted to therelevant State Directors’ Offices of the IRB.Double Tax Agreement (DTA) UpdateDTAs which Malaysia entered into with Kuwait, Morocco,Saudi Arabia, Spain and Syria have been ratified. Thefollowing summarises the key features of these DTAs interms of withholding tax rates and some of the criteriawhich would give rise to a permanent establishment (PE):Kuwait:Withholding tax rates: Permanent Establishment:- Interest 10% - a building or construction site will- Royalties 10%/15% give rise to a PE where this exists(No Article onfor more than 12 monthsTechnical Fees) - an installation or assemblyproject will give rise to a PEwhere this exists for morethan 6 months- supervisory activities for morethan 6 months in connectionwith a construction,installation or assemblyproject will give rise to a PE16 | The Malaysian Accountant | April 2008 www.micpa.com.my

Morocco:Withholding tax rates: Permanent Establishment:- Interest 10% - a building site or construction,- Royalties 10% assembly or installation- Technical 10% project or supervisoryfeesactivities in connectiontherewith for more than8 months• Engineering services• Architectural services• Services of Surveyors, Valuers, Appraisers and EstateAgents• Consultancy services• Management servicesThe necessary changes have been made to the SecondSchedule of the Service Tax Regulations 1975 via theService Tax (Amendment)(No.2) Regulations 2007.Saudi Arabia:ii)New Customs FormsWithholding tax rates: Permanent Establishment:- Income from - a building site or construction,debt claims 5% assembly or installation- Royalties 8% project or supervisory(No Article onactivities in connectionTechnical fees)therewith for more 6 months- the provision of services(including consultancyservices) within either countryfor more than 6 monthswithin any 12 months period.Spain:Withholding tax rates: Permanent Establishment:- Interest 10% - a building site or construction,- Royalties 7% assembly or installation- Technical 5% project for more thanfees12 months or supervisoryactivities in connectiontherewith for more than6 monthsFollowing the announcement in the 2008 Budget, four newcomposite Customs forms have been released to replace thecurrent 16 forms. These are as follows:Form CJP No. 1Form JKED No. 3Form JKED No. 4Internal Tax Returns(for Sales Tax and Service Tax)Licences / Certificates:• Service Tax Licence• Sales Tax Licence• Warehouse Licence• Manufacturing WarehouseLicence• Duty Free Shop Licence• Excise Licence (to Distil,Ferment or Otherwisemanufacture Dutiable Goods)• Licence to Bottle / Blend /Compound / Vary IntoxicatingLiquorsInward Manifest, Outward Manifestand Transhipment ManifestSyria:Withholding tax rates: Permanent Establishment:- Interest 10% - a building site or construction,- Royalties 12% assembly or installation- Technical 10% project or supervisoryfeesactivities in connectiontherewith for more than9 monthsForm JKED No. 5ConclusionPermit to go Alongside a LegalLanding Place or Alongside anOcean-Going Vessel within thePorts Limits and Permit toCarry Dutiable or ProhibitedGoods by Local CraftIndirect Taxi) Abolishment of Service Tax Threshold for ProfessionalServicesWith effect from January 1, 2008, all professional servicefees from the following services are now subject to servicetax (5%) regardless of the turnover threshold:• Legal services of an Advocate and Solicitor• Accounting servicesThe above summarises the key changes and developmentsin the Malaysian tax arena over the last few months. It isimportant that reference be made to the relevantlegislation, guidelines and public rulings to ensure a clearunderstanding of the changes.Renuka Bhupalan is a Director at TAXAND MALAYSIASdn Bhd which is part of the TAXAND network of independenttax consulting firms in 41 jurisdictions. She can be contactedat rb@taxand.com.my. The views expressed are the personalviews of the writer.www.micpa.com.myApril 2008 | The Malaysian Accountant |17

INSTITUTE NEWSMEMBERSHIP UPDATEMICPA WELCOMES NEW MEMBERSADMISSION TO MEMBERSHIP IN MARCH 20081. Chai Lee Hwa (Ms)2. Endran bin Fadzil3. Harlina bte. Mansor (Cik)4. Junaidah bte Ladi (Cik)5. Koh Lee Ying (Ms)6. Lee Siok Kuen (Ms)7. Mageswari a/p Subramaniam (Ms)8. Assoc. Prof. Puan Sri DatinDr Mary Lee Siew Cheng9. Ng Heng Chee (Ms)10. Noraisyah bte. Mamat @ Omar (Cik)11. Nor Ariena bte Mohd Ritzal (Cik)12. Nurul Hafizah bte Abdul Manan (Cik)13. Shan Mohan Das a/l Narayanasamy14. Tan Chew Ming (Ms)15. Tan Gim Hoo16. Tan Lyn San, Andrew17. Teng King HueADMISSION TO PROVISIONAL MEMBERSHIP INMARCH 20081. Nik Azah Karimah bte. Nik Mustaffa (Cik)2. Wong Pei Tze (Ms)RESIGNATION OF MEMBERSHIP IN MARCH 20081. Anthony Rix2. Kee Cheng Kong3. Lian Sui Sim4. Lim Yew Chan5. Michael John Bucknall6. Ong Ah Hing7. Thomas Arundel Andrew Scott8. Tuan Haji Muhamad Radzi bin MahmoodCESSATION OF PRACTICE1. Chong Hai Heong wef January 2008from H.H Chong & Associates2. Ron P’ng Beng Hoe wef August 2007from Ron P’ng & CoOBITUARYThe Council and Members of the MalaysianInstitute of Certified Public Accountants notewith deep regret the demise of Mr Wong Fook Chew.They wish to extend their deepest condolences tothe late member’s family and friends on theirbereavementCessation of MembershipThe following members have been excluded from theregister of members for non-payment of annualsubscription/practising certificate fee:NameMembership No.Ahmad Kamal B Abd.Al-Yafii 499Ang Suan Chin 780Chan Hooi Poh 4178Chan Shang Pien 3383Chan Sow Kook 2839Chan Yew Chong 3110Chin Pui Hing 2675Chong Hock Choong 2138Chua Seng Lam 1092Ewe Poh San 3060Goh Ban Hwa, Annie 2939Goo Kim Hooi 2254Hashim Bin Othman 1251H'ng Boon Keng 3729Hoe Kah Soon 1859Kiew Jin Huey 3435Law Siew Ngan 2116Lee Ee Hua 3916Lee Pih Ling 2603Liew Sam Yin 4099Lim Chow Leng 2913Lio Jih Haur 4122Low Poh Choo 1914Mohammad Fairuz Bin Hashim 4102Mohd Sallehuddin Bin Othman 2597Munira Bt Mohammad Ariff 4111Neoh Chee Keong 402Ng Kim Hock 2260Ng Peng Choon 1678Nor Faizah Othman 3337Ong Chin Keng, Jimmy 2761Ong Chwee Peng 3475Ong Seng Hai 1886Poon Chee Keong 1003Poon Chee Yik 1884Seow Teck Swee 1283Siah Kah Hock 3684Soon Dee Hwee 1883Tan Cheu Keat 3559Teoh Cheng Kang 3321Tham Kok Wah 3545Tiew Tian Yew 2045Toh Kim Lian,Patricia 4241Tow Kim Teik 1809Woon Ooi Jin 211918 | The Malaysian Accountant | April 2008 www.micpa.com.my

Yap Kim Swee 2686Yeoh Hong Hwang 2356Yew Fooi 3521Yumin Osborne @ Jen-Mei Yap 2629Exclusion From Students RegisterThe following students have been excluded from theregister of students for non-payment of annual fees:NameMembership No.Ahmad Izral Bin Abdul Karim 1/6516Ahmad Najdan Bin Mahfodz 1/7100Aimie Dinsin 2/526Aizanura Binti Hazmi 2/642SAmirul Hakim Bin Mannan 2/407Amru Fahmi Bin Amranudin 2/641SAzizul Mahbob B.Ahmed @ Salleh 1/6858Azura Bt Zainal Abidin 2/598SBalamurugan a/l Sinapayan 2/588SCheah Choo Vai 2/561SCheong Yoke Yein 1/6915Chin Wei Yee 1/7098Chuah Eng Peng 1/7217Fairus Bin Md Yatim 1/6853Faizatul Farhah Bt.Ghazali 1/6650Fuddy Heruzady 2/593SGoh Chee Ping 1/6402Goh Joan Ling 1/6747Hafifah Mazni Binti Md Hamid 2/421Hafiza Binti Borhanualdin 1/6685Hanizah Binti Abd.Hamid 1/7186Hasliana bt Mohamad Razali 2/660SHo Man Hing 2/343Intan Fairuz Binti Hasni 2/579SIsnishofiah Bt Ahmad 2/577SJalwati Nadirah Bt.Abu Bakar 2/531SJazimin Izzat B.Wan Zoolkifli 1/6305Joazral Azam Bin Yusof 1/6498Johan Bin Abu Bakar 2/532SJuliana Binti Mohamad Ali 2/418Julinus @ Jeffrery Bin Jimit 1/6905Kamabarin Bin Musa 2/419Lau Mei Ling 1/5810Lily Suriati Bt.Zarairi 2/537SLim Hooi Nee 2/569SLim Poh Guat 2/558SLim Su Chew 1/6974Lim Sze Ching 2/585SLiu Ee San 2/500Logeshwary d/o Ayavu 1/6729Loh Yee Yng 2/673Mahazer Bin Mustafa 2/661SMarliza Binti Rahmat 2/638SMohamad Farizul Bin Yahaya 2/653Mohammad Faizal B.Sulaiman 2/365Mohd Faizol Bin Husain 2/634SMohd Ferdaus Bin Hasan Basri 2/639SMohd Hafis Bin Wahid 2/568SMohd Helmi Bin Abu Hassan 2/658SMohd Nuzli Bin Pazil 2/595Mordiana Binti Morni 2/563SMuhamad Shafiq B.Ramlan 2/580SMuhammad Azfizam B.Hamzah 1/6662Murugaretnam s/o Kanapathi 1/6266Musdarina Binti Mustafa 1/6968Natrah Binti Abdullah 2/538SNg Ian Tyii 1/6699Ng Kai Ling 1/6364Ng Kok Kin S3/375Ngam Lai Fong 1/6172Noor Hashimawati Binti Sapiee 1/7055Noor Hazrima Binti Hassan 2/460Noorhafiza Binti Anuar 2/565SNor Ashikin Bt Mohammad 2/578SNor Hafiza Binti Che Mahadzir 2/635SNor Hafiza Binti Musa 2/540SNor Sahlina Binti Othman 2/543SNorazlina Bt Abdul Halim 2/631SNorhaslinda Bt Abd.Hamid 2/541SNorlydia Binti Mohamed 2/570SNorsaliza Binti Mohamad Ali 1/7054Norzaitulhida Binti Zainal 2/583SNur Aziella Bt Mohd Zulkefli 2/544SNur Azwa Binti Mohd Kamis 1/6728Nur Fadhilah Bt Bakori 2/559SNur Fazlizah Binti Fazil 1/7044Nur Hidayah Binti Ishak 2/581SNurdiana Binti Md Johari 2/420Nurul Aisyah Bt Dahari 2/571SNurul Firdaus Binti Baharum 2/637SNurul Kamimah Bt.Kamaruddin 1/6857Ong Mooi Lam 1/6739Ong Swee Lean 1/6391Rj Nur Faizatul Asyikin R Omar 2/573SSanthi a/p Saminathan 2/613SSanthiran Segaran a/l Raman 1/6530Seow Li Yoong 1/6841Shahrul Niza Bt.Muhd.Hassan 1/6644Shazliyana Binti Salleh 2/548SSiti Dalina Tumiran @ K.Nasser 2/584SSiti Habsah Bt Rahmat Rambali 2/574SSiti Murni Bt Abdol Jahim 2/560SSiti Nor Baizura Bt.Abd.Aziz 2/572SSiti Norzafirah Bt Mohd Zaini 2/549SSiti Sabariah Bt Zakaria 2/550SSiti Shalihah Muhamad Syuhadi 2/575SSiti Zuraihan Binti Mohd Yatim 1/7082Sue-Anne Ng 1/6554Suzana Bt.Ahmad Fauzi 1/6850T.Nahdatul Shima T.Bahanuddin 1/6687Tg Nor Fadhlina Bt Tg Ab.Aziz 2/552STg Zamir Hisham B.Abd.Rahman 1/6812Ummu Athiyah Bt Ismail 2/624SWee Yu Kar 2/616SWong Chau Shang, Andrew 2/554SWong Tze Ping 1/6708Wong Yoon Jye 2/555SZainab Binti Ithnin 2/663SZaireen Aizura Bt.Abdul Latif 1/5752Zamanhuri Bin Ahmad Norilah 1/6436Zubaidah Bt Reping @ Ariffin 2/557Swww.micpa.com.myApril 2008 | The Malaysian Accountant |19

INSTITUTE NEWSEvening TalkThe Public Practice Committee of the Instituteorganised an Evening Talk cum Hi-Tea on the KeyAmendments to the Malaysian Code on CorporateGovernance on March 28, 2008 at the Legend Hotel, KualaLumpur.The Malaysian Code on Corporate Governance(Code), first issued in March 2000, marked a significantmilestone in corporate governance reform in Malaysia. Itcodified the principles and best practices of goodgovernance and described optimal corporate governancestructures and internal processes. The mandatoryreporting of compliance with the Code has enabledshareholders and the public to assess and determine thestandards of corporate governance by listed companies.The talk was led by Ms Wong Sau Ngan, GeneralCounsel of the Securities Commission Malaysia and MsYew Yee Tee, Head of Issuers in Rule Development andAdvisory Department of Bursa Malaysia Berhad. Theyshared with participants insights on the key amendmentsto the Code which are aimed at strengthening the board ofdirectors and audit committees and ensuring that theboard of directors and audit committees discharge theirroles and responsibilities effectively.Mr Sam Soh Siong Hoon, Chairman of the Institute’sPublic Practice Committee chaired the evening talk thatwas attended by over 50 participants.Participants at the Evening TalkPublic Practice ForumThe Institute is always looking for opportunities andwelcomes the exchange of information betweenfellow accountancy bodies to strengthenprofessional relationship and understanding of the currentdevelopments in the accountancy profession and thebusiness environment. The Public Practice Committees ofACCA and MICPA jointly organised a Public PracticeForum with the theme Growing Profits through ServiceDiversification on March 19, 2008.In today’s highly competitive market, it is crucial forpublic practitioners to generate additional sources ofincome in order to survive and grow. One of the effectiveways of generating wealth of new income sources isthrough service diversification, which is a growth strategy,whereby a public practitioner builds revenue byestablishing other businesses that are not directly related tothe firm’s present service or market. The Forum aimed ateducating participants to diversify into other relatedprofessional services and to expand their revenues. Thespeakers, Mr Wee Hock Kee, Executive Chairman of CGBoard Asia Pacific, Mr Patrick McPhee, Partner of FerrierHodgson Monteiro Heng, Mr Lim Tian Huat, Partner ofErnst & Young and Mr Eugene Wong, Director / Head ofCorporate Finance, Deloitte led discussions for Session 1:Concentric Diversification and Session 2: HorizontalDiversification at the Forum.Continuing Professional Development Programme (CPD) 2008Courses Type of Programme Date VenueBusiness Combinations and Issues in One-Day Workshop May 29, 2008 The Legend Hotel, Kuala LumpurConsolidated Financial Statements(FRS 3 and FRS 127)Tax Planning and Strategies for Cross One-Day Workshop June 6, 1008 The Legend Hotel Kuala LumpurBorder TransactionsRisk Management One-Day Workshop June 12, 2008 The Legend Hotel, Kuala LumpurUnderstanding Financial Statements for One-Day Workshop July 17, 2008 The Legend Hotel, Kuala LumpurDirectors and Senior ManagementA Practical Guide to Auditing Two-Day Workshop July 28-29, 2008 The Legend Hotel, Kuala LumpurDecember 1-2, 2008For further information, please contact:Mr Joseph Leong/Cik Salmiah AliyasTel: 03-2698 9622 Fax: 03-2698 9403E-mail: joseph.edu@micpa.com.my or salmiah.edu@micpa.com.my20 | The Malaysian Accountant | April 2008 www.micpa.com.my

MICPA Participates in Career Fairs and ExhibitionsExhibition booth at MITC, Melaka held in conjunction withMMU Inter-Varsity QuizThe Institute continues to embark on a moreaggressive marketing strategy to position the CPAand CFiA as the designated choice. In this regard,the Institute participates actively in career fairs andexhibitions across the country to promote accountancy asa career, and in particular to create greater awareness of theCPA Malaysia qualification. The Institute welcomesparticipation from students who would like to support andparticipate in these activities. For further information, pleasecontact Ms Jenny Chua, Education and Research Manageron Tel: 03-2698 9622 or e-mail: jenny.edu@micpa.com.myCareer Talks at Secondary SchoolsAccountancy has become one of the more popularcourses being pursued by young Malaysians. TheInstitute is always seeking opportunities to fostercloser relationship with the secondary schools, to promoteaccountancy as a career and in particular to createawareness of the CPA Malaysia qualification. In thisregard, a series of scheduled career talks at secondaryschools to Forms 4, 5 and 6 students undertaking theaccounting subjects has been planned for February – July2008 in the Klang Valley. The Institute presented a talk onCareer in Accountancy to:• 120 students of SMK Bandar Sunway on Tuesday,February 26, 2008;• 60 students of SMK Bandar Sri Damansara I onTuesday, March 18, 2008;• 100 students of SMK Seksyen I Bandar Kinrara onTuesday, April 1, 2008The Institute also participated in an exhibition atSMK (P) Sri Aman on Tuesday, April 15, 2008 which washeld in conjunction with the school’s Pameran Pendidikandan Kerjaya 2008.Career Talk at SMK Sri Damansara ICollaborationwith UniversitiesAs part of the Institute’s efforts to fostercloser collaboration with theuniversities in a positive andmutually beneficial manner, the Institutehas scheduled meetings with the Deans ofthe Faculty of Accountancy of the variouspublic universities. The aim is to promoteand strengthen the CPA Malaysia brandname, the CPA and CFiA qualifications touniversity students.To date the Institute has made visits toUPM, UKM, USM, UiTM (Shah Alam, SriIskandar & Arau), UNITEN and PoliteknikUngku Omar.Universiti Tenaga Nasional:Financial Reporting SymposiumThe final year Bachelor of Accounting students of UniversitiTenaga Nasional had recently organised the Financial ReportingSymposium 2008 with the theme Financial Reporting in Malaysia:Issues and Challenges. The event was held on March 12, 2008 atUNITEN, Campus Sultan Hj Ahmad Shah in Pahang.The objective of the symposium was to give an overview of theadoption of new standards, highlight the issues and challenges ofadopting the new standards and to discuss contemporary issues andcomplexities in financial reporting for specialised industries inMalaysia.Mr Foo Yoke Pin, Executive Director of the Institute presented asession titled Issues and Challenges in Adopting New Standards at thesymposium. The MICPA was also a sponsor for the symposium.www.micpa.com.myApril 2008 | The Malaysian Accountant |21

PROFESSIONAL NEWSIASB UpdateIASB publishes a discussion paper asfirst step towards reducingcomplexity in reporting financialinstrumentsThe International Accounting Standards Board (IASB) onMarch 19, 2008 published for public comment a discussionpaper Reducing Complexity in Reporting Financial Instruments.The existing requirements for the reporting of financialinstruments are widely regarded as difficult to understand,interpret and apply and constituents have urged the IASB todevelop standards that are principle-based and less complex.The document is the first stage in a project which aims toreplace IAS 39 Financial Instruments: Recognition andMeasurement.The discussion paper analyses the main causes ofcomplexity in reporting financial instruments and proposespossible intermediate approaches to address some of them.Those approaches seek to improve and simplifymeasurement and hedge accounting by amending orreplacing the existing requirements.Furthermore the discussion paper sets out thearguments for and against a possible long-term approachthat would use one measurement method for all types offinancial instruments in the scope of a financial instrumentsstandard.The IASB seeks views on both the possible long-termand intermediate approaches and is interested to hear aboutpossible alternatives on how it should proceed in developingnew standards for reporting financial instruments that areprinciple-based and less complex.The publication of the discussion paper also fulfils thecommitment set out in the Memorandum of Understandingbetween the IASB and the US Financial AccountingStandards Board (FASB) - A Roadmap for Convergence betweenIFRSs and US GAAP – 2006–2008. The discussion paper will beconsidered for publication by the FASB for comment by itsconstituents.Introducing the discussion paper, Sir David Tweedie,IASB Chairman, said, “IAS 39, which the IASB inheritedfrom its predecessor body, is far too complex. We aredetermined to simplify and improve IAS 39 by creating aprinciple-based standard. Those who believe in reducingcomplexity in accounting standards have now theopportunity to shape the way ahead.”The IASB invites comments on the discussion paper bySeptember 19, 2008. For more details on the project, see theFinancial Instruments Web pages.The discussion paper Reducing Complexity in ReportingFinancial Instruments is freely available on the Website.(Source: www.iasb.org)IASB opens discussion on proposals toincrease transparency in the accountingfor post-employment benefitsThe International Accounting Standards Board (IASB) onMarch 27, 2008 published for public comment a discussionpaper on IAS 19 Employee Benefits. The paper sets out theIASB’s preliminary views on how the accounting for somepost-employment benefits, including pensions, could beimproved.The discussion paper, developed in consultation withthe IASB’s Employee Benefits Working Group, addresses themain concerns expressed by a wide range of interestedparties that the accounting model set out in IAS 19 isinadequate and should be reviewed. Constituents havepointed out that:• the deferral of the recognition of gains and losses leadsto misleading figures in the statement of financialposition;• the multiple options for deferring recognition lead topoor comparability across companies;• the lack of clarity in the definitions of benefit promiseslead to inconsistencies and poor comparability forthose benefit promises that include a promised returnon contributions linked to an asset or an index;• the required measurement method is inadequate forthose benefit promises that include a promised returnon contributions linked to an asset or an index.The IASB’s preliminary views on how to address thosemain issues are:• to remove the options for deferred recognition of gainsand losses in defined benefit plans;• to introduce a new classification of benefit promisesinto contribution-based promises and defined benefitpromises, with a new measurement attribute for22 | The Malaysian Accountant | April 2008 www.micpa.com.my

contribution-based promises.Introducing the discussion paper, Sir David Tweedie,IASB Chairman, said, “Accounting for pensions is a complexarea of huge importance. The total liability for 80 of the topcompanies around the world alone is estimated to be around£700 billion. In some cases, the pension liability evenexceeds the market capitalisation of the company. Thefinancial statement of a company must provide investors,analysts and companies with clear, reliable and comparableinformation on a company’s pension obligations. It is in theinterest of all of us to find ways to improve this area offinancial reporting, and the discussion paper on postemploymentbenefits is the starting point.”The IASB invites comments on the discussion paper bySeptember 26, 2008. For more details on the project, see theproject Web pages.The IASB plans to re-deliberate the issues and publishan exposure draft of proposed amendments to IAS 19, witha view to issuing a revised standard by 2011.The discussion paper Preliminary Views onAmendments to IAS 19 Employee Benefits is available foreIFRS subscribers and will be freely available on the Websitefrom April 7, 2008.(Source: www.iasb.org)Interested parties are invited to access the near finalversion of the IFRS Taxonomy 2008 and send comments byMay 30, 2008. In accordance with the XBRL Internationalpolicy the near final version of the IFRS Taxonomy 2008 isfreely available on the IFRS XBRL Website.The final version is expected to be released at the endof June 2008 and will also be freely available.Commenting on the announcement, Gerrit Zalm,Chairman of the Trustees, said, “XBRL is rapidly becomingthe format of choice for the electronic filing of financialinformation, particularly within jurisdictions reportingunder IFRSs. However, this will require IFRS Taxonomyupdates to be synchronised with publication of the IFRSbound volume and I congratulate the team on theirachievements.”Olivier Servais, the IASC Foundation’s XBRL TeamLeader, added, “The publication of the near final draft of the2008 IFRS Taxonomy marks an important step in bringingXBRL into the mainstream of financial reporting.”(Source: www.iasb.org)Trustees announce new appointmentsto enlarged IFRICThe IASC Foundation publishes IFRSTaxonomy 2008The International Accounting Standards Committee (IASC)Foundation’s XBRL Team on March 31, 2008 announced therelease of the near final version of the IFRS Taxonomy 2008.The IFRS Taxonomy 2008 is a complete translation ofInternational Financial Reporting Standards (IFRSs) aspublished in the IFRS Bound Volume 2008 into XBRL, aneXtensible Markup Language (XML) language that is usedto communicate information between businesses. The IFRSTaxonomy 2008 is published in the same languages as theIFRS Bound Volume 2008.The specific characteristics of XBRL will provide usersof the IFRS Taxonomy 2008 with easier filing, access to andcomparison of financial data.The IFRS Taxonomy 2008 represents a complete reviewof past taxonomies and is also the first taxonomy to undergoan extensive external review by the XBRL Quality ReviewTeam (XQRT) that was set up by the IASC Foundation at theend of 2007. The XQRT comprises 20 experts from thepreparer community, securities regulators, central banks,financial institutions and software companies.In a press release dated April 3, 2008, the Trustees of theInternational Accounting Standards Committee (IASC)Foundation on announced the appointment of twoadditional members of the International FinancialReporting Interpretations Committee (IFRIC).In November 2007 the Trustees decided to increase thenumber of IFRIC members from 12 to 14 in order to broadenIFRS expertise on the committee. The appointments follow apublic search to fill the vacancies created. The appointmentsare for three years, as mandated in the IASC Foundation’sConstitution, and will end on June 30, 2011. The twomembers will be eligible for reappointment.Further vacancies will be created in July 2008 by theretirement of four IFRIC members. An advertisement for newmembers will be posted shortly on the IASC Foundation’sWebsite.Commenting on the appointments, Gerrit Zalm,Chairman of the Trustees, said:“The IFRIC has a vital role in promoting the uniforminterpretation and application of accounting standards, andits expansion to fourteen members will enable the IFRIC todraw upon a wider range of practical experience with IFRSs.Peggy Smyth, in her role at a multinational companyimplementing IFRSs for many of its subsidiaries andwww.micpa.com.myApril 2008 | The Malaysian Accountant |23

addressing convergence issues for the corporation as awhole, and Scott Taub, from his experience both at the SECand in his current role advising companies using IFRSs, arewell-positioned to assist the IFRIC in its work.”(Source: www.iasb.org)Trustees launch Constitution Reviewand announce conclusions of meetingThe Trustees of the International Accounting StandardsCommittee (IASC) Foundation, the oversight body of theInternational Accounting Standards Board (IASB), on April8, 2008 announced the conclusions reached at their meetingheld in London in March, 2008.At the meeting, the Trustees agreed on the process forthe second five-yearly Constitution Review and completedproposals for immediate consultation on the creation of aMonitoring Group and the size and composition of the IASB.They also approved the text of a report on their 2007oversight activities, created a special committee of Trusteesto consider the future of the Standards Advisory Council, andapproved the 2007 financial statements of the IASCFoundation.The launch of the Constitution ReviewThe Trustees agreed on a process aimed at a thorough andtransparent Constitution Review that will enable interestedparties to raise any issues they wish the Trustees to considerand will provide opportunities to comment on proposals.Following the normal timeline, the Review should becomplete by the end of 2009.However, there are two issues that are to be dealt withearlier - one related to the Foundation in terms of itsgovernance and public accountability (the creation of aMonitoring Group, previously discussed by the Trustees attheir meetings in October-November 2007 and January2008) and another concerning the composition of the IASB.These two topics are ones on which the Trustees havealready received views from interested parties urging themto expedite the process in these areas, and on which theTrustees believe that delaying implementation until 2010 isnot appropriate. Thus the Trustees propose, as theConstitution permits, to deal with these separately and in anaccelerated time frame, with a view to implementation onJanuary 1, 2009.The remaining issues will be dealt comprehensivelybeginning with a consultation document in the second halfof 2008 inviting respondents to raise constitutional issues.The Trustees intend to publish later this month for publiccomment their proposals regarding the Monitoring Groupand the composition of the IASB.Continued emphasis on effectiveness of oversightAt the meeting, the Trustees reviewed their effectiveness inachieving their oversight objectives, as set out in theframework agreed in October 2006. The Trustees approved areport of their activities for 2007, which will be posted on thisWebsite. The Trustees also agreed to publish a separatesummary of their activities as part of the 2007 AnnualReview.Review of the IASB’s work programmeThe Trustees received a report from Sir David Tweedie,Chairman of the IASB, on the IASB’s activities. The Trusteescontinued to emphasise the relevance of the projects set outin the IASB’s Memorandum of Understanding with the USFinancial Accounting Standards Board in February 2006 forthe establishment of a single set of accounting standardsused worldwide.Progress on long-term financing arrangementsThe Trustees noted that the IASC Foundation has raised £13million towards its funding requirement for 2008 of £16million. The Trustees noted that some countries haveestablished a levy system through regulatory bodies andaccounting firms, that funding from around the worldcontinues to be diversified and that good progress is beingmade to ensure sustainable resources for the organisation.The Trustees remain committed to funding thestandard-setting operations through these new fundingarrangements and will continue to pursue the £16 milliontarget. While the Trustees are establishing the new regimes,the remaining shortfall will be covered by publications salesand interest on investments.Review of the Standards Advisory CouncilNoting that the terms of the members of the StandardsAdvisory Council (SAC) come to an end in December 2008,the Trustees established an internal committee chaired byPhilip Laskawy, Vice Chairman of the Trustees, to examinethe Trustees’ approach for a reconstituted SAC in 2009. Thisexamination will be of high priority, and the committee willseek to make recommendations at the July 2008 meeting.The Trustees emphasised their common belief that theSAC, as a globally representative body, should play animportant role in reflecting the views of the many partiesinterested in the IASB’s standard-setting activities. As part oftheir review, the Trustee committee will examine thecomposition of the SAC and its terms of reference.24 | The Malaysian Accountant | April 2008 www.micpa.com.my

Approval of the 2007 financial statementsThe Trustees approved the financial statements that will nowbe published as part of the IASC Foundation’s 2007 AnnualReview. The Trustees expect to publish the Review in early May.(Source: www.iasb.org)ASBJ and IASB hold seventh meetingaiming towards goal of convergencein accounting standardsThe Accounting Standards Board of Japan (ASBJ) and theInternational Accounting Standards Board (IASB) held theirsecond meeting in Tokyo since the announcement of theinitiative to accelerate convergence between JapaneseGenerally Accepted Accounting Principles (GAAP) andInternational Financial Reporting Standards (IFRSs), knownas the ‘Tokyo Agreement' in August 2007. This was theseventh meeting between the two boards. The two daymeeting was held on April 8 – 9, 2008.At the beginning of this meeting, representatives of theASBJ explained the progress of the items listed in its projectplan issued in December 2007 based on the TokyoAgreement. The boards confirmed that the convergenceproject to eliminate major differences between JapaneseGAAP and current IFRSs (as defined by the July 2005 CESRassessment of equivalence) by the end of 2008 is progressingin line with the project plan.In addition, representatives of the IASB explained theprogress of the projects including medium and long-termitems. The representatives of the boards exchanged views onthe following items, which are included in the significantitems to be improved in the medium and long term. Theydeepened mutual understanding of the technical issues onthose items.• Consolidation• Revenue recognition• Insurance contracts - Interaction with other projects• Liability and equity• Financial statement presentationIn this meeting, representatives of the boards alsoexchanged views on the recent international credit crisis.Commenting on the meeting, Ikuo Nishikawa,Chairman of the ASBJ, said:“We are pleased that we and the IASB share theunderstanding of steady progress of the project in line withour project plans. Continuing the good progress to be jointlymade through future meetings and with close co-operationof staff from both boards, we will continue to make progresson the convergence further in the future. In addition, we willaddress the issues to ensure credibility and transparency ofinternational financial and capital markets in co-operationwith the interested parties, including the IASB.”Sir David Tweedie, Chairman of the IASB, said:“The globalisation of the world’s capital markets isaccelerating year by year. As a consequence, IFRSs areincreasingly being accepted worldwide—109 countries nowuse international standards. Following the signing of theTokyo Agreement, we are delighted to return to Tokyo tohave further in-depth discussions with our colleagues at theASBJ. These discussions covered the key projects we hope tocomplete before mid-2011 and the manner in which Japanwill converge its standards with IFRSs.”The next joint meeting is scheduled for September 2008in London, United Kingdom.(Source: www.iasb.org)Dear Readers,If you have any article, which inyour view, is suitable for inclusion inour columns, please send the article tothe Editorial Board at the address belowor via e-mail.We will be happy to review thearticle for publication in this journal.Kindly contact:Public Affairs &Communications ManagerThe Malaysian Institute ofCertified Public Accountants15 Jalan Medan Tuanku50300 Kuala LumpurE-mail: vic.pr@micpa.com.mywww.micpa.com.myApril 2008 | The Malaysian Accountant |25

IFAC UpdateNew Report Examines Improvementsto the Financial Reporting SupplyChain and Areas for Future ActionA new report, Financial Reporting Supply Chain: CurrentPerspectives and Directions, emphasises that significantefforts to strengthen financial reporting in recent yearshave resulted in improvements in three key areas:corporate governance, the process of preparing financialreports, and the audit of financial reports. However, despiteimprovements to the financial reporting process, the reportpoints out that the understandability of financial reportshas not improved.Commissioned by the International Federation ofAccountants (IFAC), the report's findings are based on anindependent global survey of participants in the financialreporting supply chain. The survey, conducted in 2007,sought to determine the extent to which the financialreporting process, and financial reports themselves, haveimproved and where there is need for further action tomake them more relevant. More than 340 participantsfrom all sectors of the financial reporting supply chainworldwide - including investors, preparers, companymanagement and directors, auditors, standard setters, andregulators - took part in the survey. In addition, interviewswere conducted with 25 high-level participants in thesupply chain, including investors, company directors,CFOs, and regulators. The project was led by Norman Lyle,who recently retired as group finance director of JardineMatheson Limited in Hong Kong.Among the key findings, the survey found thatcorporate governance has improved, fuelled by anincreased focus on corporate governance and changes tocompany codes and standards. In commenting onimprovements to the financial reporting process, surveyparticipants indicated that convergence to internationalstandards, enhanced regulations governing financialreporting, and improved internal control over financialreporting systems all contributed to enhancing thereliability and relevance of the reports. Improvements toaudit standards and practices and strengthenedindependence rules were seen as having contributed toenhanced audit quality."Despite the strengthening of the financial reportingprocess and the many improvements made, there is stillmuch to be done to meet the needs of investors and otherstakeholders," points out Norman Lyle, Chair of theFinancial Reporting Supply Chain Project. "Surveyrespondents raised concern about the reduced usefulness offinancial reports due to complexity and the increased focusby companies on compliance instead of reporting on theessence of the business."Recommendations for ActionTo address the usefulness of financial reporting, surveyparticipants recommended:• Improving communications among participants inthe financial reporting supply chain;• Producing financial and business information that isrelevant, reliable and understandable;• Including more business-driven information infinancial reports; and• Promoting the use of technology to enable users tocompile their own information."IFAC is already working to address these challenges,"emphasises Ian Ball, IFAC Chief Executive Officer. "At itsmeeting in New York City last month, the IFAC Boardapproved a new project that will analyse actions currentlybeing taken to address the suitability of business reportingand identify areas for future development. This project willtake the findings of the financial reporting supply chainreport to the next stage and deliver specific recommendationsfor further action."The full report, Financial Reporting Supply Chain:Current Perspectives and Directions, can be downloaded fromthe IFAC website at http://www.ifac.org/frsc. IFACwelcomes comments and feedback on the report, whichcan be submitted at the above web address or by emailingFRSC@ifac.org.(Source: www.ifac.org)IAASB Reports on Progress inAchieving Clarity and ConvergenceThe International Auditing and Assurance Standards Board(IAASB), an independent standard-setting board under theauspices of the IFAC has released its 2007 annual reportwhich highlights its work in enhancing the clarity ofinternational standards and notes progress in achievingglobal convergence to international auditing standards. Thereport also details the IAASB's consultation and outreachprogram and offers a preview of its proposed future strategy.A central part of the IAASB's work program over thepast year has been the redrafting of its internationalstandards to make them clearer and to promote theiradoption and translation. During 2007, the IAASB approvedseven final International Standards on Auditing (ISAs) and26 | The Malaysian Accountant | April 2008 www.micpa.com.my

21 exposure drafts as part of its Clarity project. It alsoannounced that the effective date for all final redrafted ISAswill be for periods beginning on or after December 15, 2009.The IAASB plans to complete the redrafting of all ISAs by theend of 2008.To further promote international convergence ofstandards, the IAASB engaged in extensive consultation andcoordination activities in 2007 with international regulatorsand organisations, national auditing standard setters, andother stakeholders. The IAASB also continued to receiveoversight from the Public Interest Oversight Board andobtained input to its work program and technical projectsfrom the IAASB Consultative Advisory Group (CAG). Areport from David Damant, Chairman of the IAASB CAG, isincluded in the annual report.Throughout 2007, the IAASB actively consulted withstakeholders and users of its standards regarding thedevelopment of its proposed future technical strategy andwork program. The annual report presented highlights of theproposed future strategy, which the IAASB reviewed at itsmeeting in New York City.The 2007 IAASB annual report can be downloadedfrom its home page at http://www.iaasb.org. Print copies arealso available and can be obtained by sending an email withyour mailing address and the quantity desired to pr@ifac.org.(Source: www.ifac.org)IFAC Releases 2008 Handbook ofAuditing, Assurance and EthicsPronouncementsThe IFAC has released its 2008 Handbook of InternationalAuditing, Assurance, and Ethics Pronouncements. The handbookcan be downloaded free-of-charge in PDF format from theIFAC online bookstore (http://www.ifac.org/store), andprint copies can also be ordered and shipped. In addition,the 2008 Handbook of International Public Sector AccountingPronouncements has been finalised and is available fordownload from the IFAC bookstore.Auditing and Assurance HandbookThe 2008 auditing and assurance handbook is presented intwo parts. The first part contains pronouncements onauditing, review, other assurance, and related servicesissued by the International Auditing and AssuranceStandards Board (IAASB) as of January 1, 2008. It alsoincludes the IFAC Code of Ethics for Professional Accountants,issued by the International Ethics Standards Board forAccountants, along with new definitions for "firm,""network," and "network firm." The second part of thehandbook features nine International Standards onAuditing redrafted by the IAASB to improve their clarity, aswell as background information on the IAASB's Clarityproject.Print copies of the handbook can be ordered forUS$150.00 plus shipping. Discounts are available forstudents, academics, and individuals living in developingcountries, as well as for orders of 10 or more copies.Public Sector Accounting HandbookThe 2008 Handbook of International Public Sector AccountingPronouncements will contain all pronouncements of theInternational Public Sector Accounting Standards Board(IPSASB) as of December 31, 2007. It will also feature twonew standards - International Public Sector AccountingStandard (IPSAS) 25, Employee Benefits, and IPSAS 26,Impairment of Cash-Generating Assets - as well as an updatedCash-Basis IPSAS, Financial Reporting under the Cash Basis ofAccounting. Print copies of the public sector handbook canbe ordered for no charge, except for a US$25.00 shippingcost, for shipment.How to OrderThe 2008 Handbook of International Auditing, Assurance, andEthics Pronouncements can be downloaded or ordered fromthe IFAC online bookstore at http://www.ifac.org/store.Orders can also be placed by calling IFAC at +1 (212) 471-8722.(Source: www.ifac.org)IFAC’s IPSASB Launches Project onLong-Term Fiscal Sustainability;Proposes New Requirements forGovernments to Report on SocialBenefit ProgramsFor many governments and public sector entities, socialbenefit programs - such as social security, the provision ofhealthcare and unemployment benefits - comprise a highlysignificant part of their operations. The InternationalPublic Sector Accounting Standards Board (IPSASB), anindependent standard-setting board within the IFAC, haslaunched a project on the long-term fiscal sustainability ofthese programs. The IPSASB is also seeking comments onproposed new requirements designed to improveconsistency and transparency in the reporting of certaingovernment social benefits and has issued a consultationpaper on related issues, particularly liability recognition.Long-Term Fiscal Sustainability ProjectThe IPSASB has undertaken a project on long-term fiscalsustainability and has released a project brief on which itwelcomes comments. In developing its project on socialbenefits, the IPSASB has concluded that financialstatements alone may not provide users with enoughinformation to assess the long-term viability of socialbenefit programs. It has, therefore, undertaken this newwww.micpa.com.myApril 2008 | The Malaysian Accountant |27

project to develop a framework for reporting on the long-termfiscal sustainability of governmental programs and finances."While the IPSASB accepts that there is a level ofuncertainty about fiscal sustainability information, webelieve that additional information may be necessary forusers of financial statements to have a more completepicture about the future viability of government socialbenefit programs. We have, therefore, decided to initiate animportant project on a topic which has assumed increasingglobal significance in recent years," states Mike Hathorn,Chair of the IPSASB.Disclosures for Social BenefitsTo improve the consistency and transparency of reportingon social benefits by public sector entities, the IPSASB hasreleased exposure draft (ED) 34, Social Benefits: Disclosure ofCash Transfers to Individuals or Households. ED 34 proposesdisclosure requirements for amounts to be paid tobeneficiaries as part of social programs, as well asinformation about those programs. ED 34 also includesrequirements for determining the amounts to be disclosed.While this is an initial step in developing accounting forsocial benefits, the IPSASB believes the requirements in ED34 will provide useful information on social benefitprograms for users of public sector financial reports. ED 34is also intended to bridge the gap between accrual basedfinancial statements and the possibility of long-term fiscalsustainability reporting."Accounting for social benefits goes to the heart ofgovernment operations, and there is currently no privatesector standard addressing it," notes Mr. Hathorn. "ED 34provides a very small first step on the challenging road todeveloping a globally accepted approach."Key Issues in Recognition andMeasurement of Social BenefitsThe IPSASB is also seeking comments on a consultationpaper, entitled Social Benefits: Issues in Recognition andMeasurement. The consultation paper sets out the IPSASB'sstrategy for developing approaches to address the issuesinvolved in accounting for social benefits, includingrecognition and measurement. These issues include whenliabilities for cash transfers and goods and services ariseand, if so, whether these liabilities arise at an earlier pointfor contributory programs than for programs financedprimarily through general taxation.How to CommentComments on both ED 34 and the consultation paper arerequested by July 15, 2008. Both documents may be viewedby going to http://www.ifac.org/EDs. Comments may besubmitted by email to EDComments@ifac.org. They canalso be faxed to the attention of the IPSASB TechnicalDirector at +1 (416) 977-8585, or mailed to the IPSASBTechnical Director at 277 Wellington Street West, 6th Floor,and Toronto, Ontario M5V 3H2, Canada. All commentswill be considered a matter of public record and willultimately be posted on the IFAC website.(Source: www.ifac.org)IFAC Seeks Comments on ProposedTranslation StrategyTo increase the accessibility of its standards and guidanceto accountants worldwide, the International Federation ofAccountants (IFAC) Board has approved a proposal tomove to one quality translation of IFAC standards perlanguage and to consult with IFAC members, associatesand other interested parties on the process to achieve this.As a result, IFAC has released a consultation paper entitledTranslation of IFAC Standards that outlines a proposedtranslation process. The new process is designed to facilitatethe ability of member bodies and other qualifiedorganisations to translate IFAC standards and to ensure thetimeliness and quality of such translations."Our ultimate goal is to achieve one quality translationper language of all IFAC standards," emphasises IFACPresident Fermín del Valle. "If IFAC is to accomplish its missionof encouraging high quality practices by the world'saccountants, we must make our standards available to thewidest possible audience."While the official working language of IFAC and itsboards and committees is English, IFAC recognises that itis crucial for practitioners, legislators, regulators,educators, students, and others who work in languagesother than English to have access to current IFAC standardsin their native language.IFAC has already initiated the process of strengtheningits translation processes. It has created a dedicatedtranslations web page that, among other things, features atranslation database based on information submitted bythird parties. The database features a listing of IFACpublications that have been translated, along with thename of the translating body and links to a list of key terms,where it exists.How to CommentThe consultation paper can be viewed at http://www.ifac.org/eds.Comments are requested by June 30, 2008 and may besubmitted by email to translations@ifac.org. They can alsobe faxed to the attention of the Director, Quality Assuranceand Member Body Relations at +1 (212) 286-9570, ormailed to IFAC, 545 Fifth Avenue, 14th Floor, New York, NYUSA 10017. All comments will be considered a matter ofpublic record and will ultimately be posted on the IFACwebsite.(Source: www.ifac.org)28 | The Malaysian Accountant | April 2008 www.micpa.com.my

IFAC’s International Public SectorAccounting Standards BoardConsults on Accounting for ServiceConcession ArrangementsThe International Public Sector Accounting StandardsBoard (IPSASB), an independent standard-setting board ofthe IFAC, is seeking comments on a consultation paperentitled Accounting and Financial Reporting for ServiceConcession Arrangements.The consultation paper identifies issues and providesproposals to be considered in the development of IPSASBrequirements for accounting and financial reporting ofservice concession arrangements. Obtaining feedback fromconstituents is a key desired outcome of the paper. Theconsultation paper provides an overview of the varioustypes of arrangements that are considered public-privatepartnerships, of which service concession arrangements area subset. Also included is an analysis of existingauthoritative guidance to assess whether it is sufficient toaddress the accounting and reporting implications forthese arrangements. The paper concludes that additionalguidance is needed for service concession arrangements inthe public sector.Service concession arrangements are distinct fromother public-private partnership arrangements in that therisks and benefits associated with constructing, owning andoperating the underlying property, along with the controlover the property, are shared to a greater degree by thepublic sector entity and private sector entity involved in thearrangement. The sharing of these aspects of the property,as well as the general complexity of these transactions, hasoften made the financial reporting of the property for theparties unclear.This lack of specific guidance for service concessionarrangements has caused divergence in how the propertyis reported, even occasionally resulting in the property notbeing reported as an asset by either the public sector orprivate sector entity. This has also provided public sectorentities the opportunity to use these arrangements as ameans to fulfil their infrastructure needs withoutrecognising the property and related financing in theirfinancial statements, while potentially still meeting fiscaltargets.In November 2006, the International AccountingStandards Board's International Financial ReportingInterpretations Committee (IFRIC) issued IFRIC 12, ServiceConcession Arrangements, which is applicable only to theoperators of these arrangements and not to the publicsector grantor. This left many public sector grantorswithout international guidance on reporting on serviceconcession arrangements. This consultation paper is theIPSASB's first step in considering options for developingguidance for them."The use of public-private partnership arrangements,which include service concession arrangements, by thepublic sector, as vehicles to build and improveinfrastructure and other public facilities and provide theservices associated with these structures, has continued togrow worldwide over recent years," states IPSASB ChairMike Hathorn. "The lack of international guidance forgrantors of service concession arrangements, combinedwith the growing public sector interest in thesearrangements, made the need for IPSASB action on thisissue critical."How to CommentComments on the consultation paper are requested byAugust 1, 2008, and it may be viewed by going tohttp://www.ifac.org/EDs. Comments may be submitted byemail to EDComments@ifac.org. They can also be faxed tothe attention of the IPSASB Technical Director at +1 (416)977-8585, or mailed to the IPSASB Technical Director at 277Wellington Street West, 6th Floor, Toronto, Ontario M5V3H2, Canada. All comments will be considered a matter ofpublic record and will ultimately be posted on the IFACwebsite.(Source: www.ifac.org)IFAC’S International Public SectorAccounting Standards BoardAdvances Global ConvergenceThe International Public Sector Accounting StandardsBoard (IPSASB), an independent standard-setting board ofthe IFAC, has released a technical update to InternationalPublic Sector Accounting Standard (IPSAS) 4, The Effects ofChanges in Foreign Exchange Rates. The update to IPSAS 4,which was issued as part of the IPSASB's globalconvergence program, reflects the latest amendments tothe corresponding International Financial ReportingStandard (IFRS) issued by the International AccountingStandards Board."Converging IPSASs with IFRSs, where appropriate forthe public sector, is one of the key strategic objectives of ourstandards development program," states Mike Hathorn,Chair of the IPSASB. "The revised IPSAS clarifies therequirements for public sector entities to convert foreigncurrency transactions and balances into their reportingcurrency."The revised IPSAS 4 can be downloaded free-of-chargefrom the IFAC online bookstore at http://www.ifac.org/store.It will also be included in the 2008 edition of the Handbookof International Public Sector Accounting Pronouncements.(Source: www.ifac.org)www.micpa.com.myApril 2008 | The Malaysian Accountant |29

CASE LAW HIGHLIGHTSAbric ProjectManagement Sdn BhdvPalmshire Palza Sdn Bhd& AnorHIGH COURT (KUALA LUMPUR) – COMPANIES(WINDING UP) NO D5-28-311 OF 1999RAMLY ALI JNOVEMBER 30, 2006Companies and Corporations – Charges – Land – Whetherliquidator had capacity to enter into sale of land – Whethersale amounted to compromised or arrangement – CompaniesAct 1965 ss 228(a), 236(1)(c)Companies and Corporations – Winding up – Liquidator –Sale of land allegedly undervalued – Act or decision of theliquidator in discharging their roles – Whether court shouldinterfere – Whether conduct of liquidator reasonableThe applicant, a contributory and former director of thefirst respondent (the company under liquidation) hadsought for an order that the sale of a land by the liquidatorto Idaman Harmoni Sdn Bhd (the second respondent) be setaside and alternatively that the applicant be given leaveto commence proceedings to set aside the sale of the saidland. There was a valuation for RM 30,000,000. Theliquidator himself supplied a valuation providing theamount of RM 28,000,000. There were three serious offersreceived by the liquidator and the second respondent’s offerwas the highest, at RM17,900,000. The applicantattempted to challenge the sale by the liquidator of the saidland on six alleged grounds, namely: (i) the said land wassubject to a charge, therefore the liquidator had in law nopower to sell; (ii) the authority of the court had to beobtained under s 236((1) (c) of the Companies Act 1965(‘the Act’) to effect the sale of the said land; (iii) the sale ofthe said land was grossly undervalued; (iv) pursuant to s228(a) of the Act, the liquidator had no capacity to enterinto a sale of the said land; (v) the transfer of the said landwas defective and/or void as the legal title was not vestedin the liquidator prior to the sale; and (vi) the secondrespondent was not a bona fide purchaser for valuableconsideration.Held, dismissing encl 37 with costs:(1) The action proposed by the applicant against theliquidator was in respect of the performance of hisofficial duties. However, the liquidator was an officer ofthe court and Rule 63 of the Companies (Winding Up)Rules 1972 is clear on this point. The court will notpermit its officer to be sued without investigation of themerits of the case. Thus leave of court was necessarybefore an action could be commenced.(2) The liquidator was empowered under s 236(2)(c) of theAct to use his discretion when selling movable orimmovable property of the company. At all materialtimes, this discretion was subject to the control of thecourt as provided in s 236(3). The court should be slowto interfere with any act or decision of the liquidator indischarging their roles particularly in sale of assetswhich involve commercial considerations.(3) The sale transaction in the present case cannot amountto a compromise or arrangement as envisaged under s236(1)(c) of the Act as HSBC is a secured creditor. Theliquidator had a job to do, i.e. to wind up the firstrespondent. Before this could be completed, theliquidator would have to realise the said land. Theliquidator opted to perform the sale and wasempowered to do so under s 236(2)(c) of the Act as longas he had HSBC’s consent.(4) The liquidator cannot please everyone. The applicantcannot expect the world without having pitched in tofund the disposal. A tender was performed byadvertisement but proved worthless as no oneresponded. The conduct of the liquidator was notunreasonable or absurd. Instead, it was in line with thecircumstances faced at that material time.(Source: Malayan Law Journal May 25, 2007, [2007] 3 MLJ 497-596)Produced with kind permission30 | The Malaysian Accountant | April 2008 www.micpa.com.my

GLOBAL INSIGHTNEWSfrom Down UnderA O FERRERS, AUSTRALIAN CORRESPONDENTThe Federal Commissioner of Taxation, Mr MichaelD’Ascenzo, declared in his compliance programme for thecurrent tax year to 30 June 2008 that one of his principalobjects is combating tax evasion, especially thosearrangements which involve an offshore content. DuringMarch he has released two Alerts, which are documentsdesigned to put taxpayers on their guard. First, on 13March he warned against hiding income or assets offshore.Secondly on March 26, 2008 he warned that his officerswere reviewing uncommercial trust arrangements.The 31 March saw a media release entitled ‘New taxtool for wealthy Australians’. This release is to remindwealthy Australians that, irrespective of the business andtax advice they receive, they are responsible for their owntax affairs. This is a warning to all taxpayers that theycannot hide behind professional advice to save themselvesfrom investigations and back taxes, penalties and interest.The Commissioner has released a booklet entitled‘Wealthy and Wise’ of more than 50 pages. It is addressedto those who effectively control $30 million or more in netwealth. His people have identified some 1200 of suchtaxpayers who are associated with about 25,000 entities.The booklet is designed to give these taxpayers the tools toensure they get their tax right. It poses a series of questionsthat taxpayers should ask themselves and their advisers toensure they are in the low tax category. He gives anexample:“… if the Tax Office was to review you and your group, are youconfident you have the necessary records to support andexplain your tax position? Do all of your entities serve acommercial purpose?”He sees such questions as these will keep advisers ontheir toes and help prevent wealthy Australians fromgetting into a non-compliant tax situation which can becostly and can cause serious damage to a taxpayer’sreputation.An earlier Commissioner had set up a taskforce in1996 to look at the affairs of the wealthy and the presentCommissioner has augmented the numbers of officersinvolved in this undertaking. There are now 181 personsinvolved. It is expected they will carry out 200 risk reviewsand commence 40 audit investigations. Since itsestablishment, the taskforce has seen the collection of anextra $1.7 billion in taxes, so it is justifying its existence.The taskforce is to be enlarged and in the Commissioner’sview the chance of getting caught is already high andgoing to get higher, especially with the aid of moresophisticated technology coming into use.Taskforce attention is triggered by:• Discrepancies between lifestyle and reported income• Significant variations in tax payments• Unexplained losses• Offshore dealings that lack transparency, especiallyinvolving tax havens, banking secrecy and low taxjurisdictions• Tax performance varying substantially from businessperformance• A history of aggressive tax planningThe media release has appended to it a short guide tothe wealthy on managing their taxation obligations. Itmakes the following suggestions that taxpayers should:• Make an effort to understand the tax consequences ofmaterial issues• Ensure valuations are undertaken in good faith andstand up to scrutiny• Become aware of potential problem areas in relationto their tax affairs• Ensure advisers act within the law• Seek clarification when there is doubt about theapplication of the law.Of course, most wealthy Australians leave their taxaffairs to their accountants and advisers and merely signthe tax returns put in front of them. However, theCommissioner’s message now is clear. He expects suchpeople to take a much closer interest in their tax affairs andreturns. It is their responsibility to do so.The short guide lists how the wealthy can get TaxOffice help, should they want it. For instance, they canspeak to a member of taskforce, visit the Tax Office businessportal and study this new booklet among other things. Theprocess of obtaining a private binding ruling may be ofassistance in some circumstances.CPA AustraliaThis professional body has signed up with the HarvardBusiness School, quite a coup. This is a unique partnershipallowing members of CPA Australia to complete world classleadership programmes online as part of their professionaldevelopment. These programmes High PerformanceLeadership and Case in Point are innovative e-learningprogrammes for middle and senior level managers.The Harvard Business School is acknowledged as aleader in the development of effective leadership coursesand this partnership puts CPA Australia in a position tooffer its expertise to members. The programmes use awww.micpa.com.myApril 2008 | The Malaysian Accountant |31

ange of real life case studies from around the globe andare designed to deliver fast-paced, complex andsophisticated scenarios. Each topic presents a variety ofdifficult situations that managers frequently encounter.Tony Gleeson of CPA Australia says in a mediarelease:“By completing the programmes, our members will be able torelate key leadership concepts to their own businesses.”Perry Bedinger of Harvard commented:“Our goal is to provide exceptional access to the best ideas,research, strategies and tactics to support leaders facingcomplex business challenges.”On March 31, 2008 CPA Australia published a mediarelease giving some details about their 2007 small businesssurvey. Those surveyed were from a range of sectors andincluded a mix of metropolitan and regional basedconcerns. There were 500 small businesses and 200members of CPA Australia, who in their practices deal withsmall business clients, who were canvassed.The survey showed that difficulty in finding skilledworkers remained the major impediment to smallbusinesses hiring new staff. Nevertheless small business isconfident about future growth, while showing littleinclination to invest more in environment friendlypractices. Gavan Ord of CPA Australia remarked:“[The survey] showed a continuing trend … of confidence overfuture growth … while a shortage of skilled employees is stillviewed as a serious business impediment. The responsesreflect an awareness of the importance and difficulty infinding the right staff, with a number of respondents alsociting a lack of applicants for available positions as animpediment to hiring new staff. This could be seen as afurther effect of the skills shortage.”The survey indicated a perception among small businessthat its members do not have a major role to play inaddressing climate change. They regarded this as mattersfor the large corporations, even though they will beinevitably affected. Almost all respondents to the surveysaid that they had not taken any steps to decrease theircarbon emissions and had no intention of doing so. Somedeclared they were carrying out recycling as far as possible,however, or reducing their energy use.Despite the attitude of small business on climatechange, Alex Malley, CPA Australia President, believes thataccountants have an important role to fill in this area ofreducing carbon emissions. In his address to the nationalforum of the Committee for Economic Development ofAustralia he said:“There will be a far greater demand for accountantsto provide timely and rigorously prepared information,which can be applied not only to compliance with emissionregulations, but to critical areas such as sustainable capitalinvestment. Accountants will need to be at the forefront ofdecision making in these areas. Strong and innovativeleadership is required from business as well as governmentand highly skilled accountants will need to be a big part ofthe solution.”CPA Australia has released a discussion paper entitled‘Emissions trading and related policy initiatives’. Its intentis to bring members up to speed on the challenges climatechange presents in an economic, financial reporting andcorporate social responsibility sense.MICPA Practising CertificateThe Membership Affairs Committee of the Institute in considering applications for practisingcertificates, has frequently come across cases where a member has commenced public practicebefore he is issued with a practising certificate by the Institute.The Committee would like to remind members that in accordance withbye-law 56 of the Institute’s bye-laws, a member shall be entitled to engage in publicpractice in Malaysia only if he holds a practising certificate issued by the Institute.If members need clarification on the above, kindly contact the Institute’s Membership ServicesDepartment.The Malaysian Institute of Certified Public AccountantsNo.15 Jalan Medan Tuanku, 50300 Kuala Lumpur.Tel: 03-2698 9622 Fax: 03-2698 9403 E-mail: membership@micpa.com.my32 | The Malaysian Accountant | April 2008 www.micpa.com.my

GLOBAL INSIGHTWORLDNEWSCANADAUNITED KINGDOMHONG KONGAUSTRALIAAustraliaAccounting Services and SMEs – NewAustralian Study Released by ACCAAccountants are key advisers to all businesses on all aspectsof doing business, including regulation. A new ACCAresearch study just released, explores the regulatory issuesfacing SMEs and the critical role that accountants andother organisations play in helping SMEs be aware of,comply with and generally manage effectively theregulations that apply to their business.The observance of regulation has become afundamental part of life for the conduct of business aroundthe world. Governments and their duly appointeddesignates, acting in the interest of the collective public,have relied on regulation to moderate economic and socialbehaviour through the imposition and enforcement ofrules. While it can be commonly accepted that such aprescriptive framework may be necessary for theachievement of desired economic and social outcomes,regulation does impose costs on society and on individualfirms. These costs, which can include the costs forgovernment departments to administer, the cost for firmsto comply, and the multitude of indirect costs such as lostinnovation and productivity or their interrelatedopportunity costs, have received ample attention.ACCA has consistently argued for a balanced view tobe taken on regulation, recognising that certain rules arenecessary for the fair development of business and foremployees’ rights. Yet at the same time, ACCA recognisesthat SMEs are likely to be disproportionately burdened byregulatory requirements and, as a consequence, it activelycampaigns for fairness in regulation, recognising the issueas a significant factor in the success, productivity andgrowth of small businesses.This study complements similar researchcommissioned by ACCA in the United Kingdom andCanada (Blackburn et al. 2006), with the aim of helping toprovide a more international picture of the effects ofregulation on advice-seeking by SMEs and howaccountants can help SMEs meet their regulatoryobligations.The research commenced in November 2006 and wasconducted over the Australian summer period 2006/7,among SMEs and accounting practices, as follows:- telephone survey among 250 SMEs;- postal survey among 130 accounting practitionerfirms.The full report is available, free of charge, from theACCA website. (www.accaglobal.com/research)(Source: www.accountingeducation.com)www.micpa.com.myApril 2008 | The Malaysian Accountant |33

United KingdomMandatory Transparency Reports forAuditorsAuditors of public interest entities will have to publishannual transparency reports in line with new regulationsby the Professional Oversight Board (POB).The regulations will set legal requirements onauditors of public interest entities, where they will have toprovide specific information about themselves, such astheir systems of quality control and independenceprocedures and practices.The requirements come into effect on April 6, 2008and the reports must be published on the company’swebsite.Several of the UK’s largest audit firms havevoluntarily published annual transparency reports afterrecommendations in 2003 from a government-led groupthat was set up to consider the implications of Enron for UKaudit regulations.This, however, is the first time that it has beenmandatory.POB director Paul George said, “We want audit firmsto meet the spirit as well as the letter of the requirementsfor transparency reporting, and in particular to take theopportunity to differentiate themselves, for example, bysetting out the ways in which they achieve high qualityaudits.”(Source: www.accountancymagazine.com)APB Revises Ethical StandardsThe Auditing Practices Board has published Revised EthicalStandards for Auditors, which become effective for auditsof financial statements beginning on or after April 6, 2008.This follows a review of the standards by the APBwhich concluded there is currently no need to make majorchanges except for amendments which are needed tocomply with UK and Irish legislation that implements theEU Statutory Audit Directive.It also covers amendments that are required so thestandards continue to adhere to the principles ofinternational ethical standards and add clarity to theexisting standards and help their implementation inpractice.The APB said one of the particular issues on which itrequested views in its consultation paper related to theperiod for rotation of the engagement partner on listedcompany audits.It said responses demonstrate there is not yet aconsensus between auditors, corporates and investors onwhether this should be extended from five to seven years.The board said it believes a further period of dialoguewith interested parties is needed and has decided toundertake further work on rotation periods together withaddressing a small number of additional issues as aseparate exercise later in 2008 and will consult on anyresulting changes to the standards.(Source: www.accountancymagazine.com)Entrepreneur’s Tax Relief CouldHarm Thousands of Business OwnersThe UK Finance Bill provisions which give effect toChancellor Alistair Darling's proposed new capital gainstax relief for entrepreneurs reflect Government paranoiaabout tax avoidance and could adversely affect thousandsof business owners, according to The Institute of CharteredAccountants of Scotland (ICAS).Donald Drysdale, Assistant Director of Taxation, said,“Entrepreneurs’ relief has been described as a partialreplacement for business asset taper relief or a resurrectedform of the old capital gains tax retirement relief - both ofwhich were intended to help taxpayers disposing offavoured business assets.”“In practice, the proposed new relief is much lessreadily available than either of those previous reliefs.Because of the narrow definition of qualifying disposal, thestringent test applied in determining trading status and thereintroduction of the rental test when consideringassociated disposals - for example, where a business andthe premises from which it operates are in differentownership - there is much greater likelihood that theseentrepreneurs will be denied relief because obscuretechnical tests are not satisfied.”Stephen Taylor of Carters Accountants LLP and also amember of the ICAS Tax Committee said, “We areconcerned that the proposals adversely affect taxpayers ona retrospective basis, since existing commercialarrangements that have been regarded as perfectlyacceptable under the current taper relief rules will bepenalised. We also believe it is unfair that employeeshareholders and certain trustees will be denied relief.”Calling for further reconsideration of the proposals,ICAS believes that the impact of capital gains tax wouldfall much more fairly on taxpayers if the legislationprovided for a transitional period after April 5, 2008 duringwhich a measure of taper relief would continue to beavailable, and if for all purposes of capital gains tax therewas a rebasing of assets to a relatively recent date such asMarch 2002 so that inflationary gains accrued up to thatdate would not be taxed unfairly.(Source: www.accountingeducation.com)34 | The Malaysian Accountant | April 2008 www.micpa.com.my

United StatesGASB Acts to Improve the Reportingof Fund Balance Information for theBenefit of Financial Statement UsersThe Governmental Accounting Standards Board (GASB)recently issued an Exposure Draft of a proposed GASBStatement, Fund Balance Reporting and Governmental FundType Definitions. The proposed Statement is intended toimprove the usefulness of information provided about fundbalance by providing clearer, more structured fund balanceclassifications, and by clarifying the definitions of existinggovernmental fund types.Diversity of practice in how fund balance is currentlyreported by state and local governments has causedconfusion among preparers and users of financialstatements. The proposed Statement seeks to address thesedifferences by establishing a hierarchy of fund balanceclassifications primarily based on the extent to which agovernment is bound to observe spending constraintsimposed upon the use of resources reported ingovernmental fund balances.The GASB proposes to distinguish fund balancebetween amounts that are considered "non-spendable,"such as fund balance associated with inventories, and"spendable," such as fund balance associated with cash.The spendable category would be further broken downbased on the relative strength of the constraints thatcontrol how specific amounts can be spent. From greatestto least constraint, the classifications of spendable fundbalance would be restricted, limited, assigned, andunassigned.The proposed Statement also would clarify thedefinitions of individual governmental fund types. Itincludes interpretations of certain terms within thedefinition of special revenue fund types, while modifyingthe debt service and capital projects fund types for clarityand consistency. The proposal also specifies how economicstabilization or "rainy-day" amounts would be reported."Our research indicates that fund balance is one ofthe most widely-used pieces of information in state andlocal government financial statements. It is important tothe analysis of those statements in the financialcommunity, the legislative community, and by otherfinancial statement users," states Robert H. Attmore,chairman of the GASB. "Our proposal sets forth clearcriteria for the reporting of fund balance so that users ofgovernmental financial statements will receive consistentand easier to understand information that is useful fordecision making."The proposed GASB Statement would be effective forfinancial statements for periods beginning after June 15,2010. Governments that wish to implement earlier thanthat date are encouraged to do so. Copies of the ExposureDraft may be downloaded free of charge from the GASBwebsite www.gasb.org(Source: www.accountingeducation.com)FASB Issues Statement No.161 –Disclosures about DerivativeInstruments and Hedging ActivitiesThe Financial Accounting Standards Board (FASB) inMarch issued FASB Statement No. 161, Disclosures aboutDerivative Instruments and Hedging Activities. The newstandard is intended to improve financial reporting aboutderivative instruments and hedging activities by requiringenhanced disclosures to enable investors to betterunderstand their effects on an entity’s financial position,financial performance, and cash flows. It is effective forfinancial statements issued for fiscal years and interimperiods beginning after November 15, 2008, with earlyapplication encouraged."Use and complexity of derivative instruments andhedging activities have increased significantly over thepast several years. This has led to concerns among investorsthat the existing disclosure requirements in FASB StatementNo. 133, Accounting for Derivative Instruments and HedgingActivities, do not provide enough information about howthese instruments and activities affect the entity’s financialposition and performance," explained Kevin Stoklosa,project manager. "By requiring additional informationabout how and why derivative instruments are being used,the new standard gives investors better information uponwhich to base their decisions."The new standard also improves transparency aboutthe location and amounts of derivative instruments in anentity’s financial statements; how derivative instrumentsand related hedged items are accounted for underStatement 133; and how derivative instruments and relatedhedged items affect its financial position, financialperformance, and cash flows.FASB Statement No. 161 achieves these improvementsby requiring disclosure of the fair values of derivativeinstruments and their gains and losses in a tabular format.It also provides more information about an entity’sliquidity by requiring disclosure of derivative features thatare credit risk–related. Finally, it requires cross-referencingwithin footnotes to enable financial statement users tolocate important information about derivativeinstruments.(Source: www.accountingeducation.com)www.micpa.com.myApril 2008 | The Malaysian Accountant |35

LIFESTYLEPreparing For ExamsBY KAVALYN KREERThe most important thing any student can do toprepare for an exam is to start early. If you havebeen keeping up on everything on a daily andweekly basis, then you are in good shape when it comestime to get serious about preparing for an exam. Inaddition, time-management and effective study habitshelp a great deal.Essentially, preparing for an exam starts from the firstday you attend classes. Indeed, one way to ensure that youare well-prepared for an examination is to attend classesand to take notes. The physical act of writing will help youremember information. Familiarise yourself with the topicthat is going to be taught in class for the day so that youcan take intelligent and accurate notes. Learn to take notesin shorthand if you cannot write complete sentences; aslong as you know what they mean.Nonetheless, the anxiety level in a student alwaysincreases when an examination draws closer. To avoidthat, the first thing you need is a plan. The plan can bemade by answering these questions.• What is your schedule like during the exam week?• How many papers do you have to sit for?• How much time do you have to prepare i.e. all weekto prepare or just the weekend?• How much do you need to cover i.e. notes andchapters to study?Prior to an exam, try to attend every class. Themistake most students make is skipping classes before animportant examination. Taking good notes would alsohelp and spending 20-30 minutes going through thesenotes each day would help in clearing any confusingpoints. Daily preparation is crucial as it would later makeexam preparation much easier. Review the day’s noteswhen classes are over. You will be able to deal withquestions about class material when it’s fresh. In this wayyou will also avoid the need to cram for exam.One of the things, students preparing for anexamination often forget to take into account is theamount of time needed to prepare for an exam. Theamount of time needed will depend on how much work you36 | The Malaysian Accountant | April 2008 www.micpa.com.my

have done so far.Say your examination is a week away; one weekbefore the exam, you must start studying in earnest. Makesure you find a quiet, well lit place to study. Tell everyone,whether family or friends, that you are studying and askthem to leave you alone for awhile.Work at a desk or table. Do not lie down on a bed tostudy. Take a break if you need it. Find the best time of theday to study. Some students are most awake in themorning, others think best late at night. Learn the mostoptimal time of day for you to concentrate and study.However, studying at night when close to examination isnot really advisable.Break up the material into parts and cover as muchas you can each day. You will need to plan the number ofhours you will spend studying until the exam. Devise aschedule and follow it stringently. Make sure you also havesome time for group study with friends.Once you have a game plan, follow it. But importantthe plan is one that works for you and not against you.Be sure that you understand the format of the test andhow to properly prepare for the material that will be on it.Every test is different and you need to attack each formatin a different way.Get a piece of paper and outline the material youneed to study. This will help you get an overview of thematerial so to develop a sense of the big picture. Start withthe big topics and later the smaller ones. Once you haveput down all the information it would be easier to organiseyour studying material.Break the material into smaller portions and studyeach one carefully. Once you understand each one, moveto the next. Make sure that you are studying in a quietplace that best suits you. You will need the quiet toconcentrate better and memorise the information. If youhave any questions, jot them down and move on to thenext material.Work with a friend who can help you clarifyquestions. You could also work with a study group, orattend review sessions. Your aim at this point of time is tomake sure that you understand everything clearly as timeis of great essence.If you had been diligently studying and working allalong, then when the time for exams comes closer, youwould have an easier time revising. The last thing youwant to do is cramming before an examination.If you have trouble studying alone, work withsomeone else who will ask you questions about thematerial. If you can answer them without much effort thenyou are in good shape. This type of studying usually helpsstudents realise which areas require more attention. Onceyou have identified your weak areas, go back and reviewyour materials again.If you have planned well and kept to your schedule,there should be little anxiety the night before an exam. Ifyou started studying too late, then chances are you will becramming the night before your exam. This will add extrastress and you are likely to make errors on your exam. It’sokay to feel a little afraid or anxious but if you are panickythen you are in trouble.The only thing that should be going through yourmind the night before the exam is a sense a confidence andthis sense of well-being only comes if you are well-preparedfor the exam.While it is important to revise before exams, don’tpush yourselves to the point of exhaustion. Promiseyourself that you will do something fun if you study for aperiod of time. When you reach your goal, take a breakand do something fun. Studies show people canconcentrate for about 30 minutes before they lose focus.When you get to the point where your mind starts towander, get up and take a walk. Get a drink and comeback.Aside from sleeping well, it is also important to eatwell before an examination. The brain needs all the fuel itcan get during this time. On the day of the exam, arriveearly so you are in the perfect frame of mind and calm. Awell-rested, calm and composed person will do a better jobon the exam. If you have studied well, the answer is in yourhead somewhere. You will need a calm mind to retrieve theinformation.This article was written by Kavalyn Kreer, who writes lifestylearticles for publication on the web and print.www.micpa.com.myApril 2008 | The Malaysian Accountant |37