A CHIEF concern about the push for global accounting standards is the possibility that the developed economies, particularly the United States and Europe, will dominate the shaping of this common language of financial reporting.
Such a situation, it is feared, will result in the smaller countries being on the losing end because the standards may ignore the practices and conditions in those places.
For Malaysia, the worry is real because our plantation companies and property developers have issues with some aspects of the International Financial Reporting Standards (IFRS).
Under the IAS 41, the international accounting standard for agriculture, all biological assets that are related to agricultural activity must be measured at fair value less costs. However, the plantation industry has argued that oil palms or rubber trees are more like factories, and should be valued differently from consumable biological assets such as wheat and maize.
The international accounting rules for recognising revenue from property development are based on the build-then-sell model of the West. In Asia, purchasers and their end financiers pay progressively for the properties according to the stage of construction. Naturally, the property industry here wants to be allowed to report revenue based on the percentage of completion method.
Malaysia fully converged with the IFRS in 2012 but the Malaysian Accounting Standards Board (MASB) has allowed agriculture and real estate companies to defer their adoption of an IFRS-compliant set of accounting standards until the two so-called transitional issues have been resolved.
It appears that the resolutions will come soon. Last June, the International Accounting Standards Board published an exposure draft proposing that biological assets such as oil palms and rubber trees come under the scope of the IAS 16, which covers property, plant and equipment. Presumably, the next step is to amend the relevant standards.
As for the difference in recognising revenue from property projects, the matter is expected to be addressed with the release of a new standard for revenue.
Via the MASB and industry players, Malaysia has played a significant role in the lobbying and work that have led to these solutions. This shows that being small isn’t necessarily the same as being helpless and voiceless. Strong, well-supported arguments and a solid game plan can often make up for the lack of size and influence.