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

The Malaysian AccountantAUGUST 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)Education & Research ManagerJenny Chua (jenny.edu@micpa.com.my)Public Affairs& Communications ManagerVicky Rajaretnam (vic.pr@micpa.com.my)Marketing ManagerEvelyn Lim (evelyn.mktg@micpa.com.my)Examination OfficerLee How Lai (hl.exam@micpa.com.my)Assistant Manager, MembershipSalyasusanti Achom(membership@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 3PERSPECTIVE 2FEATURESMalaysian Tax Updates 3Corporate Governance Analysis in Malaysia 7Overview of Takaful in Malaysia 10Corporate Governance for Takaful 12INSTITUTE NEWSMICPA Turns 50 14Recipient of Anugerah Presiden 2008:YBhg Tan Sri Dato’ Seri Mohd Hassan Marican 17November 2008 Examination 20May 2008 Examination Results 21Continuing Professional Development (CPD) Programmes 22Career Talks at Secondary Schools 22Career Fairs and Exhibitions 23Collaboration and Career Talks at Universities 24MICPA–BURSA MALAYSIA Business Forum 2008 24YOUNG CPAYoung CPA Malaysia Symposium 2008- Charting the Future of Accounting and Finance Professionals 18PROFESSIONAL NEWSMASB Update 26IASB Update 27IFAC Update 30CASE LAW HIGHLIGHTSSee Teow Guan & Ors v Liquidators of Kian Joo Holdings Sdn Bhd(in Liquidation) & Ors 35GLOBAL INSIGHTNews from Down Under 36World News 38LIFESTYLETaiping – A Town of Many Firsts 39

PERSPECTIVEIt was a significant night for the members of the MICPA as they got together to celebratethe Institute’s 50th Golden Anniversary on July 26, 2008. To commemorate the auspiciousoccasion, members of the accounting fraternity attended the Golden Jubilee Gala Dinneraptly themed A Golden Celebration on the Red Carpet.The night of fellowship and camaraderie also saw the launch of the Institute’s 50thAnniversary Logo by the guest of honour YB Dato’ Hj Hasan bin Malek, Deputy Minister in thePrime Minister’s Department. Several individuals who had made contributions in one way oranother were also acknowledged at the gala night.One of the most significant recognition was accorded to YBhg Tan Sri Dato’ Seri MohdHassan Marican, President and Chief Executive Officer of Petronas Berhad. The Deputy Ministerpresented the Anugerah Presiden 2008 to Tan Sri Hassan who was admitted as a member of theMICPA in 1992. Tan Sri Hassan whose eminent career spans over 35 years has made exceptionalcontributions to society, the accountancy profession and the Institute. YBhg Dato’ NordinBaharuddin, the President also honoured the early members of the Institute as well as the firstCPA graduate member.Also discussed at great length is the subject of corporate governance. Corporategovernance can be viewed as the financial health tool for management and directors to monitorthe health status of the organisation.In managing an organisation, there must be systematic and procedural ways to ensurethe sustainability and survival of the business in the fast-moving economy coupled with highlycompetitive market forces.Corporate governance is aimed at enhancing accountability, transparency andtrustworthiness. It recognises the role of market forces in the efficient allocation of resources,socio-economic justice and well-being of all through an integrated role of moral values, marketmechanism and good governance.In the local bond market context, the article inside highlights four broad categories of poorcorporate governance: non-compliance of information covenants; related party transactionsand improper payments; misappropriation of funds; and earnings manipulation.This issue also touches on the Young CPA Malaysia Symposium themed Charting theFuture of Accounting and Finance Professionals. The symposium was held to address relevantissues in today’s business environment which would help them to capitalise on their careerdevelopment opportunities.Participants were advised to continuously upgrade their knowledge, skills and expertisein order to provide relevant and high quality services to employers and clients. It is importantfor the young CPAs uphold their objectivity, integrity and technical excellence to fulfil the needsof both the local communities and global markets.The lifestyle section focuses on a local destination – the unassuming and quiet town ofTaiping, the second largest town in Perak after Ipoh and the wettest town in PeninsularMalaysia. In the 19th century the town had a thriving mining business and was the social focusof the British administration. This former state capital is a pioneer in many fields achievingmany ‘firsts’ in the country. Look inside to find out.2 | The Malaysian Accountant | August 2008 www.micpa.com.my

via a withholding tax charge. To enhance skills in theIslamic Financial sector to promote Malaysia as an Islamicfinancial hub, an exemption from withholding tax is givento non-resident individuals in respect of income arisingfrom the provision of technical advice, assistance orservices rendered in relation to Islamic Finance as proposedin the 2008 Budget and enacted in the Income Tax(Exemption) (No. 3) Order 2008. To qualify for thiswithholding tax exemption, the non-resident individualmust be verified by the Malaysia International IslamicFinancial Centre Secretariat as an expert in the field ofIslamic finance. This exemption is in force from September8, 2007 until December 31, 2016.Islamic Fund Management ServicesThe exemption from tax on income from the provision ofIslamic fund management services to foreign investors hasbeen widened to the provision of such services to localinvestors pursuant to the Income Tax (Exemption) (No. 6)Order 2008. The exemption is available to licensedMalaysian incorporated fund management companies.Accelerated Capital Allowances onSecurity Equipmentthis new provision, the 2007 Order referred to above is nolonger required and has been revoked by the Income Tax(Exemption) (Revocation) Order 2008. It should be notedthat revocation is effective from the year of assessment 2007.Revocation of Income Tax (AcceleratedCapital Allowance) Renewable EnergyRules (2005)The 2008 Budget proposed that companies generatingrenewable energy for their own consumption be granted100% investment tax allowance on their qualifying capitalexpenditure over a period of 5 years. Accordingly, thepreviously available accelerated capital allowances forsuch expenditure will no longer be available. Therefore the2005 Rules mentioned above have been revoked by thenew Income Tax (Accelerated Capital Allowance)(Renewable Energy) (Revocation) Rules 2008. Note that theinvestment tax allowance will only be available forapplications made to the Malaysian Industrial DevelopmentAuthority (MIDA) up to December 31, 2010.Withholding Tax Exemption forNon-Resident Experts in Islamic FinanceNon-resident consultants who provide technical advice,assistance or services in Malaysia are generally subject totax on the income arising therefrom. The tax is imposedThe Income Tax (Accelerated Capital Allowance) (SecurityControl Equipment or Monitor Equipment) Rules 2008have been gazetted and are effective for the years ofassessment 2008 to 2012. Accelerated capital allowanceswill be given in respect of specified equipment installed forsecurity in factories and for monitor equipment installed inspecified lorries. An initial allowance of 20% and anannual allowance of 80% will be given in relation to suchequipment. Effectively therefore, the equipment will befully depreciated for tax purposes in the first year.Non-Profit Oriented SchoolsIncome derived by qualifying persons from themanagement of registered non-profit oriented schools willbe exempt from tax pursuant to the Income Tax(Exemption) (No. 5) Order 2008 with effect from the yearof assessment 2008.Gifts of Personal Computers toEmployees and Payment ofBroadband SubscriptionsPursuant to the Income Tax (Exemption) (No. 4) Order2008, employees will not be taxed on gifts of personalcomputers from employers and on the payment by theiremployers of monthly broadband subscription fees(registered in the name of the employer). The exemptionapplies from the year of assessment 2008 to 2010. It4 | The Malaysian Accountant | August 2008 www.micpa.com.my

should be noted that hand phones with computer facilitiesare excluded from the exemption. From the employer’sperspective, the cost of providing these benefits will be taxdeductible pursuant to the Income Tax (Deduction for Giftsof New Personal Computers and Monthly BroadbandSubscription fees to Employees) Rules 2008.Accelerated Agriculture AllowanceQualifying agricultural expenditure incurred on anagricultural project or on a forest plantation project forrubber wood will be eligible for a 100% allowance (subjectto conditions) pursuant to the Income Tax (AcceleratedAgriculture Allowance) (Plantation of Rubber Wood Tree)Rules 2008.Public Ruling No. 2/2008 –Reinvestment AllowanceA Public Ruling on Reinvestment Allowance (RA) hasfinally been issued. RA claims have often been the focusof tax audits and it is therefore useful to have a PublicRuling to provide clarification on the IRB’s view of thefollowing:- projects that qualify for RA;- expenditure that qualifies for RA;- the period of eligibility for RA; and- the computation of RA.Taxpayers in the manufacturing and agriculturalsectors should familiarise themselves with Public RulingNo. 2/2008.Guidelines on the Income TaxTreatment From Adopting FRS 139 –Financial Instruments: Recognition andMeasurementLabuan Offshore CompaniesElection for Labuan Offshore Companies to beTaxed under the Income Tax Act, 1967 (ITA)The 2008 Budget proposed a change in the law allowingLabuan offshore companies (OCs), which have been taxedunder the Labuan Offshore Business Activity Tax Act, 1990(LOBATA) to elect irrevocably to be taxed under the ITA.The Finance Act 2007 amended the ITA and LOBATA toallow for this. The Labuan Offshore Business Activity Tax(Forms) (Amendment) Regulations 2008 were recentlygazetted, to provide for a prescribed form on which theelection is to be made. In addition, the Inland RevenueBoard has issued guidelines on the tax treatment of OCswhich elect to be taxed under the ITA.Liberalisation of Rules in Relation to LabuanOffshore CompaniesThe Labuan Offshore Financial Services Authority (LOFSA)has recently announced a liberalisation in the rulespertaining to OCs. LOFSA has granted a blanket approvalto allow OCs to:i) carry on business with Malaysian residents,ii) invest into domestic companies (so long as the holdingdoes not amount to a controlling holding); andiii) wholly own a domestic company to carry on an offshorebusinessIt should be noted however that where approvals arerequired from other regulatory authorities, such as BankNegara Malaysia, the Securities Commission and the ForeignInvestment Committee (FIC), such approvals must still beobtained. Further, LOFSA has issued a notification form whichOCs are required to submit when undertaking (i) – (iii) above.The Ministry of Finance (MOF) has issued the aboveguidelines which are applicable to financial institutionsonly and are effective from the year of assessment 2008.FRS 139 relates to the recognition and measurement offinancial instruments for accounting purposes. Althoughthe effective date for the implementation of FRS 139 hasbeen deferred by the Malaysian Accounting StandardsBoard, Bank Negara Malaysia (BNM) has incorporated asignificant portion of the FRS 139 into its reportingrequirements as per the BNM guidelines and directives onfinancial assets and liabilities. The purpose behind theMOF’s guidelines is to address the income tax treatmentarising from the adoption of FRS 139 with a view toconverging the accounting and tax treatment of financialassets and liabilities, in particular, the timing of incomerecognition and the deductibility of expenses. Theguidelines can be obtained from the MOF’s website:www.treasury.gov.my.www.micpa.com.myAugust 2008 | The Malaysian Accountant |5

Windfall Profit LevyElectricity and oil palm fruit have become prescribed goods for the purposes of the Windfall Profit Levy Act, 1998. Theimpact of this is as follows:ImpactComputation of Windfall Profit Levy (WPL)Electricity:Producers of electricity will be subject to a windfall profit levy (WPL) on a return [Profit (before interest, tax and WPL)on assets (ROA) which exceeds 9% per financial year. – (9% of fixed assets)] x 30%WPL is payable pursuant to the Windfall Profit Levy (Electricity) Order 2008.Oil Palm fruit: i) For Peninsular Malaysia:Plantation companies/oil palm fruit producers who own oil palm holdings which WPL = (Monthly average national price ofin aggregate are not less than 100 acres are subject to a WPL in respect ofcrude palm oil – RM2,000) x 0.03 x monthly totaloil palm fruit produced.production of oil palm fruit in metric tonnesWPL is payable pursuant to the Windfall Profit Levy (Oil Palm Fruit) Order 2008. ii) For Sabah and Sarawak:WPL = (Monthly average national price ofcrude palm oil – RM2,000) x 0.015 x monthly totalproduction of oil palm fruit in metric tonnesOther Gazette OrdersSeveral other Gazette Orders have been recently issuedincluding the following:- Income Tax (Deduction of Tax on the Distribution ofIncome of a Family Fund, Family Re-Takaful Fund orGeneral Fund) Rules 2008- Income Tax (Set-Off for Tax Charged on ActuarialSurplus) Rules 2008Indirect TaxService TaxWith effect from July 1, 2008, the annual sales turnoverthreshold for restaurants (excluding those located inhotels) has increased from RM300,000 to RM3 million,pursuant to the Service Tax (Amendment) Regulations2008. This means that service tax cannot be imposed by arestaurant (other than one located in a hotel) unless itsturnover within a twelve-month period exceeds RM3 million.Extension of Time to AppealTaxpayers who seek to appeal against a decision of theDirector General of Customs may do so by filing aprescribed form, Form A within 30 days from the date ofwritten notification of such decision. In the case where itis inevitable that an appeal needs to be filed out of time,the taxpayer may apply for an extension of time underRegulation 3 of the Customs (Appeal Tribunal) Regulations2007. The Customs Appeal Tribunal has issued guidelineson such applications (for an extension of time to fileappeals). Essentially, the application can be made by wayof a letter to the Director General of Customs or hisrepresentative indicating the reasons for the failure to filethe appeal within the stipulated time frame. The saidapplication must be sent by way of Registered Post or bypersonal service. (Applications sent by personal servicewould need to be acknowledged by the Customs officer).Double Tax AgreementsMalaysia and Qatar signed a double tax agreement (DTA)on July 3, 2008. The details of the DTA will be reportedwhen this information is available.ConclusionThe above summarises the tax developments in Malaysiaover the last few months. It is important that reference bemade to the relevant legislation, guidelines and publicrulings to ensure a clear understanding of the changes. Asindicated at the outset, the 2009 Budget Proposals have notbeen announced at the time of writing this article, andclearly, we can expect several tax proposals. It is hopedthat the proposals will take account of the increased costsof doing business and rising costs of living affectingMalaysians as a whole.Renuka Bhupalan is a Director at TAXAND MALAYSIASdn Bhd which is part of the TAXAND network of independenttax consulting firms in 44 jurisdictions. She can be contactedat rb@taxand.com.my. The views expressed are the personalviews of the writer.The Analysis of the 2009 Budget Proposals will bepublished in the October 2008 issue of The Malaysian Accountant.6 | The Malaysian Accountant | August 2008 www.micpa.com.my

FEATURECorporate Governance Analysisin MalaysiaBY RHB RESEARCHGood corporate governance is always ablessing to investors, which heightens inimportance given the difficulty in aligningthe interest of shareholders withbondholders.As an example, company owners may think abusiness venture that could yield an expected return oninvestment (ROI) of 20% is appealing despite a failure rateof 70%. However, from the standpoint of bond investors,incremental benefits from taking excessive risk will mostlyaccrue to equity owners at the expense of lenders.In this case, strict financing covenants are an optionthat bondholders can use to protect themselves incurtailing moral hazard and reducing chances of businessowners from taking advantage of this asymmetric rewardprofile.In other instances, a complicated ownership structureand “poison pill” for corporate takeovers may help equityowners obtain a firm grip of company ownership. However,such practices may impede corporate takeovers, indulgepoor management and prejudice the interest of creditors.In the local bond market context, we highlight four broadcategories of poor corporate governance: non-complianceof information covenants; related party transactions andimproper payments; misappropriation of funds; andearnings manipulation.We offer some suggestions for investors to search fornascent signs of deteriorating corporate governance andearnings quality, including a company’s timelydissemination of information, growing related partytransactions, to be watchful for purposes and use of bondproceeds and potential signs of earnings manipulation.Broad corporate governanceissues in MalaysiaAt the root of finance principles, excess funds provided byinvestors feed through businesses which require financing,in exchange for gaining a certain expected rate of returnin future at the expense of sacrificing existing spendingpatterns.However, how can the suppliers of funds be assuredtheir funds will be put into productive projects, rather thanwww.micpa.com.myAugust 2008 | The Malaysian Accountant |7

just simply help business owners cash out theirshareholdings? This is related to the agency problem,where the overlap of control and ownership causesinappropriate resource allocation.In Malaysia, with the majority of publicly tradedcompanies being either family-owned or controlled bydominant shareholders, the agency problem is not so muchan issue for owner and management, but between thecompany management and the minority shareholders, aswell as other stakeholders. Typically, the interest of ownersand creditors (as well as other stakeholders) may not bealigned due to different incentives and the asymmetricinformation gap regarding company health.The situation may be further complicated by thecross-shareholdings of these family-owned shareholders onother closely related companies, and the business dealingsbased on personal and political connections.In the bond market, conflicts of interest can arisewhere the investment bank and bond trustee are all “underone roof”, causing the likelihood of more lenientcompliance requirements from trustee, to the detriment ofbondholders.Given this, a well-established legal infrastructure andstrict enforcement would play a crucial role to safeguardthe interest of company stakeholders, even though it maybe difficult to prove that the act of directors is ultra vires orfraudulent towards minority shareholders and otherstakeholders.Despite being one of the frontrunners with respect tocorporate governance in the region, there are still someother inherent governance issues with our currentownership structures.With some conglomerates and companies in Malaysiahaving the complex and pyramid model for theirownership structure, this has reduced, if not eliminated, thepossibilities of the company being taken over (this alsopartly explains why leveraged buyouts (LBO) are notprevalent in Malaysia), thereby undermining the corporategovernance system, resulting in poor management notbeing punished.Additionally, the pyramid structure helps controllingshareholders draw capital, selectively passed down to lessdesired assets in subsidiaries and adopting discriminativetransfer pricing. Finally, apparently fragmented shareholdingstend to be disguised via indirect shareholdings andnominees, lending subterfuge to linkages pointing to a single,ultimate majority holder.Meanwhile, appointment and removal of a director isdone according to simple majority vote by shareholders;therefore, major shareholders would have a disproportionateinfluence over the proceedings.The method of appointing an auditor is similar toappointing a director; therefore, auditor independencecould be weakened due to the influence of dominantshareholders. Some auditors may even collude with themanagement in order to continue providing services to thecompany.We understand that some countries have introducedmandatory rotation of audit firms to protect auditorindependence, though the scheme is not without debateand resistance.Larger minority shareholdings are usually associatedwith a higher turnover of directors and replacement ofmanagers in response to poor performance than thosewithout it. Nonetheless, substantial minority shareholdingsby the institutional investors in the local market areuncommon, thus reducing the opportunity for largeinvestors to act as a disciplining mechanism.Also, creditors like banks and bondholders have verylimited access to the company management and thebusiness operations of the company.For the case of bondholders, any enquiry on thecompany operations and financial conditions may only beallowed via the request through the bond trustee, whichwill inevitably impede the process of timely disseminationof crucial information.In a collaborative study on Malaysia’s corporategovernance disclosures conducted by Standard & Poor’s(S&P) and National University of Singapore in June 2004,the study highlighted that 32% of the top 50 largestcapitalised companies listed then in the exchange had onethirdor less independent directors on their boards,suggesting that third party checks/balances on a companymay still have room for improvement.Furthermore, S&P said that only one out of the topfive best scoring companies had a board with majorityindependent directors, and only two companies gave itsdirectors with independent access to management.Additionally, the study also underlined that the selection of8 | The Malaysian Accountant | August 2008 www.micpa.com.my

a company’s audit, remuneration and nominationcommittees were not really transparent for most of thecompanies.From recent corporate governance cases, there are afew major trends to take note from local bond issuers:Non-compliance of information covenants: A mostcommon trait that problematic companies tend to have.We notice that most troubled companies were slow toprovide timely information on their financial health priorto heading into trouble; hence, it is a nascent sign to spotailing companies;Related party transactions and improper payments:Business dealings based on non-competitive tenders aredetrimental to company profits, and enrich related parties,such as company directors, senior management and theirfamily members. However, improper payments could beeven harder to substantiate, given that these payments donot require separate disclosure like related partytransactions;Misappropriation of funds: Proceeds of the bondissuance may go to purposes not stipulated in thefinancing documents. Also, general borrowing terms, suchas funding for general working capital requirements, maynot help the surveillance or indicate specificity of proceedsused. Besides, a company may finance certain non-corebusinesses using their projected cash flows, which shouldhave been used to meet their financial obligations andother operational funding requirements; andEarnings manipulation: Commonly known as“creative accounting”, where the managementintentionally attempts to alter financial statements tomislead stakeholders about the company’s underlyingperformance for their private gains. Detecting potentialsigns of earnings manipulation are: the volatility and sizeof earnings relative to cash flows; the correlation betweencash flows and accruals; the extent of discretion inaccounting methodology in areas such as accruals, markto-marketpolicies, and depreciation; and the extent ofloss avoidance and income trend management.Investment implications in corporate governance: Poorcorporate governance implies information asymmetry,which creates risk. In modern investment theory, capitalwill flow to an investment till the marginal rate of returnis on par with the opportunity cost of funding, so thatinvestors would not earn excess returns, under theconditions of an efficient market.However, in reality, investors would have to deal withinformation asymmetry — particularly in privately-heldcompanies, where the coverage of media and analysts aresparse and inadequate. Hence, a higher risk premium andthus lower valuation would usually be accorded byinvestors to little known and poorly “governed” companies.Impact of corporate governance on ratings and PDSyields volatility: Corporate governance issues will inevitablydrive ratings and yields volatility, increasing the returnuncertainties. Poor corporate governance has adverselyaffected the rating prospects of companies. Furthermore,in most circumstances, rating downgrades have beenquick and deep, underscoring the severity of poorcorporate governance to investors. The major problems ofpoor governance therefore are its lack of calculable risk, itsuncontrollable nature, and disproportionately largenegative impact to a bond’s credit rating. This is unlike,say, the gradual decline in sales due to a slower businesscycle. As such, we opine it is even more important thatindicators of corporate governance quality be givenweighty consideration.Links between business cycle, “name”, sector preferencesand governance: Investors form their decisions based on thecompany track record and sector preference. It should benoted that issues of corporate governance seldom emergeduring a booming economy, given that companies usuallyenjoy thick profit margins and conducive lendingconditions. Consequently, corporate governance recordsduring the Asian Financial Crisis 1997/98 play a central rolefor the “name” (reputational) preference for a company.However, thriving sectors and heavily regulated industriessuch as banks and insurance companies are usually attachedwith lower risk premiums. It is worth mentioning that themerger & acquisitions and tight central bank supervision inthe banking sector has significantly reduced the link betweencomplex conglomerates and banks as well as ownershipconcentration. Hence, some yield premium imputations ofbetter corporate governance have been accorded to bankbonds. In a nutshell, risk aversion comes hand-in-hand withinvestor preference for well-governed companies.Well-governed companies can enhance returns: Corporategovernance is one of the most crucial qualitative factors ininvestment decisions. Numerous international studies havedemonstrated that investment performance is positivelycorrelated with the quality of corporate governance. In aGlobal Investors Opinion survey done in 2002 by Mckinsey,institutional investors mentioned that they would payadditional 22% premium on average to own well-governedcompanies in Asia and Latin America. In the same vein,good corporate governance does not only reward theinvestors, but also benefits the company itself, given itattracts more investors and lenders, thereby reducingborrowing costs (i.e bond yields).This article appeared in The Edge Daily on June 30, 2008and was extracted from the website at www.theedgedaily.comwww.micpa.com.myAugust 2008 | The Malaysian Accountant |9

FEATUREOverview of Takaful inMalaysiaThe concept of takaful (Islamic insurance) wasfirst introduced in Malaysia in 1985 when thefirst takaful operator was established to fulfilthe need of the general public to be protectedbased on the Islamic principles. The legal basis for theestablishment of takaful operators was the Takaful Actwhich came into effect in 1984.Insurance as a concept does not contradict thepractices and requirements of Shariah. In essence,insurance is synonymous to a system of mutual help.However, Muslim jurists are of the opinion that theoperation of conventional insurance does not conform tothe rules and requirements of Shariah as it involves theelements of uncertainty (Gharar) in the contract ofinsurance, gambling (Maisir) as the consequences of thepresence of uncertainty and interest (riba) in its investmentactivities.Takaful is an insurance concept in Shariah wherebya group of participants mutually agree among themselvesto guarantee each other against a defined loss or damagethat may inflict upon any of them by contributing astabarru’ or donation in the takaful funds. It emphasisesunity and co-operation among participants. Takaful is nota new concept as it had been practised by the Muhajirin ofMecca and the Ansar of Medina following the hijra of theProphet over 1400 years ago.Tabarru’ is the agreement by a participant torelinquish as donation, a certain proportion of the takafulcontribution that he agrees or undertakes to pay, thusenabling him to fulfil his obligation of mutual help andjoint guarantee should any of his fellow participants suffera defined loss. The concept of tabarru’ eliminates theelement of uncertainty in the takaful contract. The sharingof profit or surplus that may emerge from the operations oftakaful is made only after the obligation of assisting thefellow participants has been fulfilled. Thus, the operationof takaful may be envisaged as a profit sharing businessventure between the takaful operator and the individualmembers of a group of participants.Takaful operations are regulated and supervised byBNM since 1988 with the appointment of the BNMGovernor as the Director-General of Takaful. In October1995, the ASEAN Takaful Group (ATG), a grouping oftakaful operators in Brunei, Indonesia, Malaysia andSingapore was formed to enhance mutual co-operationand to facilitate the exchange of business among takafuloperators in ASEAN. In 1997, the Malaysian takafulindustry took a leap forward with the formation of ASEANRetakaful International (L) Ltd. (ARIL) as an offshoreretakaful company in Labuan. The establishment of ARILwas to create a vehicle for more dynamic retakafulexchanges among ATG members and provides additionalretakaful capacity to further reduce their dependence onconventional reinsurance.Types of businessThe takaful businesses carried on by the Malaysian takafuloperators are broadly divided into family takaful business(Islamic "life" insurance) and general takaful business(Islamic general insurance).10 | The Malaysian Accountant | August 2008 www.micpa.com.my

Muslim jurists are of the opinionthat the operation ofconventional insurance does notconform to the rules andrequirements of Shariah as itinvolves the elements ofuncertainty (Gharar) in thecontract of insurance, gambling(Maisir) as the consequences ofthe presence of uncertainty andinterest (riba) in its investmentactivities.Family Takaful BusinessIn general, a family takaful plan is a combination of longterminvestment and mutual financial assistance scheme.The objectives of this plan are: -• to save regularly over a fixed period of time;• to earn investment returns in accordance with Islamicprinciples; and• to obtain coverage in the event of death prior tomaturity from a mutual aid scheme.Each contribution paid by the participant is divided andcredited into two separate accounts, namely: -• The Participants' Special Account (PSA)A certain proportion of the contribution is creditedinto the PSA on the basis of tabarru'. The amountdepends on the age of the participant and the coverperiod.• The Participants' Account (PA)The balance goes into the PA which is meant forsavings and investments only.Examples of covers available under family takaful businessare as follows: -• Individual family takaful plans;• Takaful mortgage plans;• Takaful plans for education;• Group takaful plans; and• Health/Medical takaful.General Takaful BusinessThe general takaful scheme is purely for mutual financialhelp on a short-term basis, usually 12 months to compensateits participants for any material loss, damage or destructionthat any of them might suffer arising from a misfortunethat might inflict upon his properties or belongings. Thecontribution that a participant pays into the generaltakaful fund is wholly on the basis of tabarru'. If at the endof the period of takaful, there is a net surplus in the generaltakaful fund, the same shall be shared between theparticipant and the operator in accordance with theprinciple of al-Mudharabah, provided that the participanthas not incurred any claim and/or not received anybenefits under the general takaful certificate.The various types of general takaful scheme providedby the takaful operators include: -• Fire Takaful Scheme;• Motor Takaful Scheme;• Accident/Miscellaneous Takaful Scheme;• Marine Takaful Scheme; and• Engineering Takaful Scheme.Family Takaful:Individual planGroup planAnnuity- Mortgage- Health- Education- Travel- Family plan- Waqaf- Group family- Group medical- Employees Provident Fund- RetirementGeneral Takaful:MotorFireMarine, aviation and transitMiscellaneous Includes:- Personal accident- Workmen corporation- Liability- Engineering- House ownersRegistered Takaful Operators• CIMB Aviva Takaful Berhad• Hong Leong Tokio Marine Takaful Berhad• HSBC Amanah Takaful (Malaysia) Berhad• MAA Takaful Berhad• Prudential BSN Takaful Berhad• Syarikat Takaful Malaysia Berhad• Takaful Ikhlas Sdn Berhad• Takaful Nasional Sdn BerhadThis article is extracted from Bank Negara Malaysia’swebsite at www.bnm.com.mywww.micpa.com.myAugust 2008 | The Malaysian Accountant |11

FEATURECorporate Governancefor TakafulBY SAIFUL BAHRI SARONIIn managing an organisation, there must besystematic and procedural ways to ensure thesustainability and survival of the business in the fastmovingeconomy coupled with highly competitivemarket forces. Corporate governance is aimed atenhancing accountability, transparency and trustworthiness.These values are paramount in Takaful operations as wellas Islamic financial transactions on a bigger scale.Corporate governance is about the way in which theboard of a company oversees the running of the firm by itsmanagers, and how board members are in turnaccountable to shareholders, stakeholders and thecompany.It recognises the role of market forces in the efficientallocation of resource, socio-economic justice and wellbeingof all through an integrated role of moral values,market mechanism and good governance. The salientdifferences between conventional insurance and Takafuloperator are:1. Moral values: Moral uplift aims to change thebehavior, tastes and preferences of individuals, andthereby complements the price mechanism inpromoting general well-being.2. Hereafter effect: The concept of Hereafter iscompletely ignored in the conventional practice, butis greatly emphasised in Takaful.3. Misconception of wealth maximisation: In theconventional sense, this is to serve our self-interestthrough wealth maximisation. In Takaful operations,it is not confined to serving one’s self-interest in thisworld alone, but also extended to the Hereafterthrough faithful compliance with moral values thathelp rein in self-interest so as to promote socialinterest.4. Ethics and valuesThe conventional practice lacks the fact that ethicsand values carry into the day-to-day businessactivities. In Takaful, all resources at the disposal ofthe organisation are a trust from God, and everyindividual in the organisation will be accountablebefore Him. There is no other option but to use themin keeping with the terms of trust. These terms aredefined by beliefs and moral values.The relationship between Islam and economicscannot be underemphasised as there should be a balancebetween materialistic notion and religious, moral andhumanistic frame of action. Takaful operation is a branchof Islamic economics that serves the need of the public.ISLAMShariahPractices &ActivitiesMan to GodRelationshipISLAMAqidahFaith & BeliefIslamic qualitiesMan to ManRelationshipISLAMMoralities & EthicAkhlaqTo do that, Takaful must possess and practice such Islamicqualities in its transaction and dealing with itsstakeholders. These qualities are found in the corporategovernance structure which will guide Takaful companiesto attain the highest level of integrity and trustworthinessin the financial market. In a nutshell, Takaful companiesare a branch of Islamic economics (Muamalat), which is anoffshoot of Islam itself as illustrated on the left.Corporate governance is an important facet ofTakaful business philosophy. To put it simply, corporationsmust exercise greater accountability when undertakingtheir business operations, both to their shareholders andthe public. It is in fact a systematic framework that providesa blueprint for Takaful companies to manage themselvesin the best interests of the shareholders and to manage risksin an increasingly competitive global economy. TheIslamic concept of corporate governance stresses threemain areas: accountability, transparency and trustworthiness.The diagram below illustrates the concept of Islamiccorporate governance.Islamic financial transactions have essentiallyembraced the concept of corporate governance. More oftenthan not, we need a mechanism that would guide Islamiccorporations to fully embrace the importance of corporateISLAMPracticalActivitiesEconomicActivitiesSocialActivities12 | The Malaysian Accountant | August 2008 www.micpa.com.my

governance.The Takaful industry is still fairly new and requirestremendous effort from the regulatory bodies and marketparticipants to cooperate and implement good governancein their day-to-day operations.What corporate governance entailsCorporate governance can be viewed as the financialhealth tool for management and directors to monitor thehealth status of the organisation. In a way, it guides us tostay on course to remain healthy for a long time. This leadsto enhancing corporate governance (appreciation,adoption, implementation and control), which involvescollective responsibility among the regulatory agencies,professional bodies, corporate leaders as well as investorsand shareholders.The board of directors is entrusted with the conductand daily management of business activities andcommercial feasibility of the venture by using the availableassets. Directors are, therefore, subjected to higherstandards not only in the technical efficiency of operations,but also the implementation of an efficient managementsystem through the use of “best practices” developed fromhigh ethical values.A good governance system should consist of a systemof structure, operating, controlling, and monitoring acompany to achieve the following objectives:1. Fulfilling long-term strategic goals, buildingshareholders’ value by establishing a dominantmarket share and being a leader in a chosen sphere.2. Considering and caring for the needs of theenvironment and local community, including theeconomic and cultural interaction.3. Maintaining excellent relationship with customersand suppliers in terms of quality of service provided,considerate ordering and account settlementprocedures.4. Maintaining compliance with all legal and regulatoryrequirements under which the company operates.Islamic Corporate Governance FrameworkTransparencyAccountabilityTakafulOperatorTrustworthyCorporate governance isaimed at enhancingaccountability, transparencyand trustworthiness. Thesevalues are paramount inTakaful operations as well asIslamic financial transactionson a bigger scale.Management should be concerned with managingthe organisation in a highly ethical way and “governance”is about seeing that it runs properly.A careful observation of corporate governance asdescribed would easily reveal that the central element isprimarily and essentially man. In short, corporategovernance is basically about the moral and ethicaldimensions of managing a company’s business.Thus this drives us to believe that man tends to beswayed from the “desired” action. To ensure that this canbe aligned with the objective and purpose of this individualin the organisation, we need to adopt a system whichwould self-correct each “intended” action. Corporategovernance will pull everyone in the organisation to bemore objective and committed in managing theorganisation in a manner that will exhibit effectivenessand efficiency.Takaful companies deal with intangible products andrequire a great deal of transparency to their prospects andclients.Responsibility and amanahAs part of the list of items in corporate governance,trustworthiness creates a long-lasting relationship betweenthe company and clients. Consequently, there should notbe any misappropriation or mismanagement of funds inTakaful operations or other types of operations for thatmatter.Islam also looks into the essence of responsibility, theconcept of work, dedication to work and vicegerency ortrusteeship. This gives Islamic corporate governance verycomprehensive coverage. And Takaful operators are notexempted from such governance.Saiful Bahri Saroni is senior vice-president/chief actuary ofTakaful Ikhlas Sdn Bhd. Email: ikhlascare@takaful-ikhlas.com.myor visit www.takaful-ikhlas.com.myThis article first appeared in March 2008 in the MIFMonthly Takaful Supplement. Produced with kind permission.www.micpa.com.myAugust 2008 | The Malaysian Accountant |13

INSTITUTE NEWSMICPA Turns50The MICPA turned 50 Golden Years onSaturday, July 26, 2008. To commemoratethe momentous occasion, the Institute’sGolden Jubilee Gala Dinner with the theme AGolden Celebration on the Red Carpet washeld at Mandarin Oriental Kuala Lumpur.This event was graced by YB Dato’ Hj Hasan bin Malek,Deputy Minister in the Prime Minister’s Department who alsolaunched the Institute’s 50th Anniversary Logo. Over 600members, invited guests and staff of the Secretariat attendedthe dinner.The Deputy Minister presented Anugerah Presiden 2008to a member who has made exceptional contributions tosociety, the accountancy profession and the Institute whichcan be emulated by others. YBhg Tan Sri Dato’ Seri MohdHassan Marican, President and Chief Executive Officer ofPetronas, was the recipient of Anugerah Presiden 2008. AFellow of the Institute of Chartered Accountants in Englandand Wales (ICAEW), Tan Sri Hassan was admitted as a memberof MICPA in February 1992. He is also a member of theMalaysian Institute of Accountants (MIA). Tan Sri has builta distinguished and eminent career spanning a period ofover 35 years, both in the United Kingdom and in Malaysia.In his acceptance speech, YBhg Tan Sri Dato’ Seri MohdHassan Marican expressed that he was indeed honoured tohave been accorded the MICPA’s Anugerah Presiden on the14 | The Malaysian Accountant | August 2008 www.micpa.com.my

occasion of the Institute’s 50th Golden Jubilee. He said “to berecognised by your own fraternity” makes it very special.The President, YBhg Dato’ Nordin Baharuddinpresented a Memento and a Certificate of HonourableMention to Mr Ong Boon Bah in recognition of hismembership with the Institute for the past 49 years from dateof admission, May 2, 1959. The other recipient was Mr LimSean Teck who was admitted as a member on July 18, 1959.The Institute also recognised the First CPA Graduate Member,Mr Lim Yew Chan who sat for the CPA examination inDecember 1965 and was admitted as a member on June 25,1966.The most important asset of any organisation is its staff.The President also presented “Long Service Award” to twoSecretariat Staff, Ms Irene Ng, PA to the Executive Directorand Encik Ruslan A Hamits, Office Guard in recognition oftheir loyalty, diligence and dedicated service with the Institutefor over 10 years.Entertainer, Amy Mastura, wooed the audience with arendition of popular songs and aptly started off with“Celebration”. She also managed to interact with theaudience and successfully persuaded the Vice President, YBhgDato’ Ahmad Johan Mohammad Raslan and CouncilMember, Mr Sam Soh Siong Hoon for a sing-along.Accountants are not boring after all!All in all, it was a pleasant and enjoyable evening.www.micpa.com.myAugust 2008 | The Malaysian Accountant |15

INSTITUTE NEWSRECIPIENT OF ANUGERAH PRESIDEN 2008YBhg Tan Sri Dato’ SeriMohd Hassan MaricanYBhg Tan Sri Dato’ Seri Mohd Hassan Maricanwas born on October 18, 1952 in Sungai Petani,Kedah. He received his early education fromSekolah Rendah Ibrahim in Sungai Petani andlater continued his secondary education at the MalayCollege Kuala Kangsar, Perak.Tan Sri Hassan left for London in 1972 to join theaccounting firm Touche Ross & Co, as an article clerk beforequalifying as a Chartered Accountant in 1978, and becamethe first Asian to have been appointed as an AuditManager in the firm. He returned to Malaysia in 1980 andjoined Tetuan Hanafiah Raslan & Mohamad / Touche Ross& Co, Public Accountants as Audit Manager and becamea Partner of the firm a year later.A Fellow of the Institute of Chartered Accountants inEngland and Wales (ICAEW), Tan Sri Hassan was admittedas a member of MICPA in February 1992 (MembershipNo.2523). He is also a member of the Malaysian Instituteof Accountants (MIA).In 1989, Tan Sri Hassan was “called” to serve theNational Oil Corporation PETRONAS as Senior Vice-President, Finance. He was appointed President and ChiefExecutive Officer of PETRONAS in February 1995.Tan Sri Hassan is a member of the PETRONAS Boardof Directors, and is Chairman of two public listedcompanies under the Group, namely PETRONAS GasBerhad and MISC Berhad.Beyond PETRONAS, Tan Sri Hassan is a boardmember of the Central Bank of Malaysia and a member ofthe board of Malaysia-Thailand Joint Authority. He is alsoa member of the International Investment Council for theRepublic of South Africa established by President ThaboMbeki. Tan Sri Hassan is also a board member of the WorldEconomic Forum’s Partnering Against Corruption Initiativeas well as a member of the WEF’s Council of 100 Leaders.Tan Sri Hassan has received numerous awards,among them are the Panglima Setia Mahkota (PSM) in1997 carrying the title Tan Sri, the Bintang Darjah SeriPaduka Mahkota Terengganu (SPMT) in 1996 and DarjahSultan Mahmud Terengganu Yang Amat Terpuji (DSMT) in1992, both carrying the title Dato’, the Panglima NegaraBintang Sarawak (PNBS) in 2003 which carries the titleDato Sri, and the Darjah Seri Setia DiRaja Kedah (SSDK)this year which carries the title Dato’ Seri.The French Government has awarded him the“Commandeur De La Legion D’ Honneur” in 2000 and theVietnamese Government has awarded him the “FriendshipMedal” in 2001. University of Malaya awarded him withan Honorary Doctorate in Engineering in 2001 andUniversiti Teknologi Mara awarded him with an HonoraryDoctorate in Corporate Governance in 2006. Theconferment of these fine honours speaks well of hiscontribution to the country as well as internationally.PETRONAS is committed to Corporate SocialResponsibility and has contributed generously to MICPA’sevents as well as having a strong commitment towards the16 | The Malaysian Accountant | August 2008 www.micpa.com.my

accountancy profession. This is clearly demonstrated byPETRONAS’ commitment and support in offeringscholarships to students to undertake the MICPA’s CPAexaminations. Practical training is an integral part of theInstitute’s CPA programme apart from passing the CPAexamination. Recognising the fact that supervised trainingis important, PETRONAS has registered as an ApprovedTraining Organisation (ATO) of the Institute, where underthe Stream II training, employees of PETRONAS mayundertake the CPA examinations prior to the start ofpractical training or during the training period under thesupervision of a member of MICPA or approvedprofessional body.PETRONAS was also a Gold sponsor for the MICPA-Bursa Malaysia Business Forum 2007.Ladies and Gentlemen, sincerely, I can think of noother better person to receive Anugerah Presiden 2008.ACCEPTANCE SPEECH BYYBHG TAN SRI DATO’SERI MOHD HASSANMARICANI am indeed honoured to have been accorded the MICPA’sAnugerah Presiden on the occasion of the Institute’s 50thGolden Jubilee. To be recognised by your own fraternity makesit very special. Awards of this nature go beyond individualrecognition. To me, this award is an acknowledgement ofthe overall success and achievement of PETRONAS in itscontributions to the nation, to society and to thedevelopment of the profession. Working with professionalbodies, including MICPA, PETRONAS has over the years,developed more than 1,600 accountants and we continueto train accountants both in Malaysia and overseas throughvarious programmes. Hence, on behalf of PETRONAS andmyself, I humbly and sincerely accept this award.As a national body of Certified Public Accountants,MICPA has made significant contributions to thedevelopment of the modern profession in this countryover a relatively short span of 50 years. The Institute hascome a long way since its relatively modest beginningsin 1958 with 20 founding members.Members of the Institute play an active role in boththe private and public sectors including the academia.We can take pride that we have a representative in theCabinet. Today, about 37% of our members are femaleand increasing, and about 40% are below the age of 40.I would like to congratulate the Institute for itssuccess. It is my hope that it will continue to maintainits reputation as a premier accounting body, both inMalaysia and overseas. I would also like to call upon theyoung members to actively participate in the affairs ofthe Institute to take it to greater heights.It has been some years since I left the profession. Inthat time, the profession has evolved into globalbusinesses through mergers and consolidations. Today,the Big Four amongst the professional firms are nodifferent to the super-majors in the oil industry, wieldinghuge influence.Indeed, the profession today does much more thanaudit. We challenge people and organisations, clientsand colleagues, to think and act differently, to provideclarity and rigour, to help create and sustain prosperity.As leaders and advisors to major businesses, we have aresponsibility and a role to play in fostering change. Wenow live in an age of increased accountability wherepublic expectations are high and we need to be able todemonstrate that as a profession, we are both relevantand a powerful force for change. This requires us to becompetent, responsible and uphold a strong sense ofethics and integrity. While professional firms today aremulti-million dollar businesses, we must continue to actobjectively especially in the face of intense pressures.Some thoughts especially for the young practitioners.You can shape your own character by how you handleyourself. Are you going to hold to your principles or areyou going to rationalise away little deviations from thoseprinciples? Will you sacrifice your principles for yourown ambition? And will you put the firm and yourcolleagues at risk for personal benefits? These are simplequestions and it is so easy to cross that line. But believeme, you cross it once, you will never come back.Finally, on behalf of PETRONAS and myself, Iwould like to once again express my sincere appreciationto the Malaysian Institute of Certified Public Accountantsfor this great honour.Thank you.www.micpa.com.myAugust 2008 | The Malaysian Accountant |17

YOUNG CPAYoung CPA MalaysiaSymposium 2008Charting the Future of Accounting and Finance ProfessionalsOn August 6, 2008 the Young CPA MalaysiaSymposium 2008 with the theme Charting theFuture of Accounting and Finance Professionalswas held at the Sime Darby ConventionCentre. The Symposium was specially designed to addresspertinent issues in today’s business environment and toprovide young accounting and finance professionals withcritical understanding of the changing financial regulatorylandscape and emerging trends across the profession. Thiswould further help them to capitalise on their careerdevelopment opportunities.The Symposium, attended by over 70 participantscommenced with a welcome address by the Chairman ofthe Young CPA Group, Encik Abdul Halim Md Lassim. Hehighlighted the importance of acquiring soft skills intoday’s challenging environment as young businessprofessionals progressively advance into managementpositions.The President of the Institute, YBhg Dato’ NordinBaharuddin delivered the Keynote Address and officiallydeclared open the Symposium. In his address, Dato’Nordin advised participants to continually upgrade theirknowledge, skills and expertise in order to provide relevantand high quality services to employers and clients. He alsoencouraged participants to facilitate entrepreneurship,create value, manage risk and rationalise complexity tomeet the needs of both the local communities and globalmarkets. He urged young CPAs to uphold their objectivity,integrity and technical excellence in whatever capacitiesthey may be serving.After the formalities were over, a panel of highlyexperienced business professionals led discussions andshared their knowledge, experiences and best practiceswith participants in the following 4 Sessions.The first Session, “Reflection on the Past Years ofFinancial Regulatory Reform and Corporate Failures – Impactson Next Generation Accountants and Finance Managers”, waspresented by Mr Ong Ching Chuan, Senior ExecutiveDirector at PricewaterhouseCoopers. He deliberated on thechanging external business environments and its directimpact on the role and career aspirations of accountingand finance professionals. The session was moderated byEncik Ahmad Shahrul Hj Mohamed, a member of MICPA’sYoung CPA Group and a Partner at Khairuddin Hasyudeen& RaziThe second Session was on “Employment Trends – TheSpecialities and Skills in Demand”, which was delivered by MrKok Ghee, Senior Manager, Group Business System atJobStreet.com. He provided an insight on the specialitiesand skills in demand and the current recruitment andretention strategies of various organisations in response tothe changes in the business environment.18 | The Malaysian Accountant | August 2008 www.micpa.com.my

Session three was on “Working Abroad – The Myths,Traps and Tips”. Two CPA members, Ms Soh Eng Hooi,Executive Director of Moore Stephens AC and En MohdMuazzam Mohamed, Executive Director, IT AdvisoryServices at KPMG shared their experiences withparticipants on working abroad. Sessions two and threewere moderated by Encik Abdul Halim Md Lassim,The last session was a Roundtable Discussion on“Charting the Future of Accounting & Finance Professionals”.This interactive session between the panellists andparticipants facilitated an exchange of ideas. Thepanellists concurred that young accounting and financeprofessionals must embrace the right skills to be successfulin a changing profession.For young accounting and finance professionals, thesymposium was a step forward in their careers. It providedan opportunity for participants to garner first-handknowledge on a wide array of issues in today’s globalisedenvironment.When approached for comments, most participantsagreed that the event was both timely and relevant, inview of the changing business environment and the needto address the challenges with the relevant knowledge,skills and attitudes.INSTITUTE NEWSMAY 2008 EXAMINATIONPerformance in Individual SubjectsPARTAdvanced StageExaminationSUBJECTModule CAdvanced TaxationPASSED%57.5CPA STUDENTSFAILED%42.5Module DAdvanced Financial ReportingModule EAdvanced Auditing & Assurance15.457.684.642.4Advanced Taxation(Shamsir Jasani Grant Thornton Gold Medal)Module FAdvanced Business Management& Integrative Case StudyWinners of Subject Prizes24.4NG YI SHEUE (MISS) (2/760S)75.6Advanced Auditing & Assurance WONG SHENG HUEI (1/7395)(Ernst & Young Gold Medal)Presentation of 2008 MICPA Excellence Awards, ExaminationCertificates, Prizes, Membership and Practising CertificatesWe are pleased to inform that the Presentationof 2008 MICPA Excellence Awards,Examination Certificates, Prizes, Membershipand Practising Certificates will be held onSaturday, October 25, 2008 at 10:00 a.m. to 12:30 p.m. at PacificBallroom, Best Western Premier Seri Pacific Kuala Lumpur.The presentation ceremony will be officiated by YB DatukIr Hj Idris bin Hj Haron, Deputy Minister of Higher Education I.All registered students of the Institute who havecompleted the Advanced Stage Examination in November2007 or May 2008, shall wear graduation gowns at thePresentation Ceremony. Please note that the closing datefor registration and gown rental is Friday, October 17, 2008.Late entries will not be entertained.The administrative details and registration form forthe Presentation Ceremony are available on the studentwebsite www.micpa.com.myFor further information, please contact the PublicAffairs & Communications Manager on Tel: 03-2698 9622or e-mail: vic.pr@micpa.com.mywww.micpa.com.myAugust 2008 | The Malaysian Accountant |19

NOVEMBER 2008 EXAMINATIONTIME TABLEProfessional Stage ExaminationDATE MORNING AFTERNOON(9:00 a.m. – 12:00 noon) (2:00 p.m. – 5:00 p.m.)Monday (November 24) Financial Accounting and Taxation Financial ReportingTuesday (November 25) Business and Company Law Auditing and AssuranceWednesday (November 26) Management Information and Control Business Finance & ManagementAdvanced Stage ExaminationDATE TIME EXAMINATION PAPERMonday (November 24) 9:00 a.m. – 12:00 noon Advanced TaxationTuesday (November 25) 9:00 a.m. – 12:30 p.m. Advanced Financial ReportingWednesday (November 26) 9:00 a.m. – 12:30 p.m. Advanced Auditing & AssuranceThursday (November 27)Advanced Business Management& Integrative Case Study9:30 a.m. – 11:30 a.m. Part A - Integrative Case Study[8:45 a.m. – 9:30 a.m. (Reading Time)]12:30 p.m. – 2:30 p.m. Part B - Advanced BusinessManagementAdmitting ExaminationBye-Law 34(1)(f) [formerly bye-law 33(d)] Examination CandidatesDATE TIME EXAMINATION PAPERMonday (November 24) 9:00 a.m. – 12:00 noon Malaysian TaxationTuesday (November 25) 9:00 a.m. – 12:00 noon Regulatory & Financial ReportingFramework of Malaysia20 | The Malaysian Accountant | August 2008 www.micpa.com.my

MAY 2008 EXAMINATION RESULTSCPA STUDENTSList of Successful CandidatesThe President and Council of The Malaysian Institute of Certified Public Accountantscongratulate successful candidates in the May 2008 Examination.The following candidates passed Module C to thesatisfaction of the Examination Committee:CANDIDATEDZULFIQAR AZLI B AYUB @ ABDUL RAHIMDZULFIQRI AZLI B AYUB @ ABDUL RAHIMEE MENG WANGEMY IRLIANA BT KAMARUZZAMAN (CIK)FOONG YIN TENG (MISS)IZNI FAUZAN BT ZULKIFLY (CIK)LEONG SIN NEE (MISS)MEGAT MOHAMED NAQUIYUDDIN B SONARIMOHD AIZUDDIN BIN OMARMOHD FAIZAL B MOHD FARIDMOHD FUAD RUSHDY BIN MOHAMED RASHIDMOHD NIZAM B ABDULLAHMOHD SHAIPUL BARKHIYAH B MASORMOHD ZULFAHMI BIN HUSSAINMUHAMMAD ADHWA B ISMAILNG YI SHEUE (MISS)NOOR FARALINA BT MOHD FAIRUZ (CIK)SHAH NIZAM B MAHD RASIDSHARIFAH MARINI SYED AHMAD LABIB (CIK)TAN CHEE HEANTANG SOO LEE (MISS)TEH SUET GHOON (MISS)WAN NURAINA ZAHRA BT HJ WAN NAFI (CIK)CANDIDATEAHLAM NABIHAH BINTI MOHD SAFIE (CIK)ANIS NADIA BINTI CHE MUSTAFAR (CIK)MD HENDREE BIN JOHARING PEI LING (MISS)NUR AMIZA BINTI AMAN (CIK)ROSEDALIANA BINTI ABDUL RAHIM (CIK)PRINCIPAL/STREAMStream II (S)Stream II (S)Stream II (S)Stream II (S)Stream II (S)Stream II (S)Stream II (S)Stream II (S)Stream II (S)Stream II (S)Ho Yuet Mee/Stream IStream II (S)Stream II (S)Stream II (S)Stream II (S)Stream II (S)Stream II (S)Stream II (S)Stream IIStream II (S)Stream II (S)Habibah Abdul/Stream IStream II (S)The following candidates passed Module D to thesatisfaction of the Examination Committee:PRINCIPAL/STREAMShirley Goh/Stream ITeoh Soo Hock/Stream ILee Yoke Khai, Gary/Stream ITan Soo Yan/Stream IStream IIStream II (S)The following candidates passed Module E to thesatisfaction of the Examination Committee:CANDIDATEPRINCIPAL/STREAMALIYAH HANIM BINTI ABD HALIM (CIK)Lee Tuck Heng/Stream IENG YUH YUN (MISS)Datuk Tan Kim Leong/Stream IGAN SEK LING (MISS)Habibah Abdul/Stream IGOH CHEE YONGSiew Chin Kiang/Stream IKHOR SEW LIN, SERENE (MISS)George Koshy/Stream ILEW CHUI HOONG (MISS)Loh Kok Leong//Stream ING LING ZTE (MISS)Ooi Lip Aun, Eric/Stream INISHA NOR BINTI NOOR HASAN (CIK)Ooi Lip Aun, Eric/Stream IONG YUN LING (MISS)George Koshy/Stream ISU SIEW LING (MISS)Eric Ooi Lip Aun/Stream ISUHAIRI BIN JAWATeoh Soo Hock/Stream ISUM MEE JIUN (MISS)Dato' Gregory Wong Guang Seng/Stream ISUZIELA BINTI ABU YAMIN (CIK)Ooi Lip Aun, Eric/Stream ITAN BEE HWA (MISS)TEOH KHENG KOKTEOH WEE TONGWONG SHENG HUEIYAN WAI MEI (MISS)ZEID BIN ABDUL RAZAKChan Kam Chiew/Stream INg Swee Weng/Stream INg Swee Weng/Stream IChoong Mei Ling/Stream ISeow Yoo Lin/Stream IYap Seng Chong/Stream IThe following candidates passed Module F to thesatisfaction of the Examination Committee:CANDIDATEPRINCIPAL/STREAMCHOO MING YEE (MISS)Pushpanathan a/l SA Kanagarayar//Stream IFADZILAH BINTI MOHAMED (CIK)Abdullah Abu Samah/Stream ILEE YIH HONGLee Yoke Khai, Gary//Stream ING AI LIN (MISS)Tan Hock Hin/Stream INORHAIDA BINTI YAHAYA (CIK)Ooi Lip Aun, Eric//Stream IONG SIOU HWEE (MISS)See Huey Beng/Stream IPHANG SOON YEOWShirley Goh/Stream ISYAHRUL NAZRI BIN MOHD SAI'ON Sivadasan s/o Narayana Nair/Stream ITAN SZE MEI (MISS)Ooi Lip Aun, Eric//Stream ITONG SHEAU WEI (MISS)Shirley Goh/Stream IYEAP KOH SIN (MISS)Lee Tuck Heng/Stream IThe following candidate passed Business &Company Law as a single subject:CANDIDATEAHMAD FAZRIL B MOHD FAUZIPRINCIPAL/STREAMStream IIThe following candidates completed the AdvancedStage Examination to the satisfaction of theExamination Committee:CANDIDATEPRINCIPAL/STREAMCHOO MING YEE (MISS)Pushpanathan a/l SA Kanagarayar//Stream IFADZILAH BINTI MOHAMED (CIK)Abdullah Abu Samah/Stream ILEE YIH HONGLee Yoke Khai, Gary//Stream ING AI LIN (MISS)Tan Hock Hin/Stream INORHAIDA BINTI YAHAYA (CIK)Ooi Lip Aun, Eric//Stream IONG SIOU HWEE (MISS)See Huey Beng/Stream IPHANG SOON YEOWShirley Goh/Stream ISYAHRUL NAZRI BIN MOHD SAI'ON Sivadasan s/o Narayana Nair/Stream ITAN SZE MEI (MISS)Ooi Lip Aun, Eric//Stream ITONG SHEAU WEI (MISS)Shirley Goh/Stream IYEAP KOH SIN (MISS)Lee Tuck Heng/Stream IThe following candidates passed Regulatory &Financial Reporting Framework of Malaysia to thesatisfaction of the Examination Committee:CANDIDATEAFFENDI BIN RASHDISIA YEAK HONGwww.micpa.com.myAugust 2008 | The Malaysian Accountant |21

INSTITUTE NEWSContinuing Professional Development(CPD) ProgrammesThe Institute organised the following CPDprogrammes in the months of July - August 2008:A one-day Workshop on Recent Case Laws and TaxDevelopments on July 2, 2008. The objective of theworkshop was to provide participants with an in-depthunderstanding of the tax changes and developmentsbrought about by the decisions made to the recent caselaws. Mr Harvinder Singh, Managing Partner of Harvey &Associates led discussions.A one-day Workshop on Accounting for Constructionand Property Development Activities (FRS 111, FRS 1232004 andFRS 2012004) on July 14, 2008 at the Legend Hotel KualaLumpur. The workshop aimed to discuss the importantaspects of these FRSs and to highlight the major areas ofdifficulty in measuring and recognising revenue and costsassociated with construction contracts and propertydevelopment activities. Ms Lim Geok Heng, a freelancetechnical and training consultant led the discussions.A two-day Workshop on A Practical Guide to Auditingon July 28 & 29, 2008 at the Legend Hotel, Kuala Lumpur.The objective of the workshop is to equip participants withthe technical knowledge and skills in conducting an auditof financial statements in accordance with internationalstandards on auditing, which have been adopted forapplication in Malaysia.A one-day Workshop on Understanding FinancialStatements for Directors and Senior Management on July 17,2008 at the Legend Hotel, Kuala Lumpur. Ms Ng Mi Li, MrOng Ching Chuan and Ms Yee Chai Yun led participants toconsider how to manage shareholders’ expectations,knowing how the financials will be reported, and thecommunication of the financial information thereof.Participants also received a checklist of questions theyshould consider asking executive management indischarging their duties, particularly, pertaining to thefinancial information.Career Talks at Secondary SchoolsThe Institute continued in its efforts to presentscheduled career talks at secondary schools toForms 4, 5 and 6 students undertaking theprinciples of accounting subject. For the month of July, theInstitute presented a talk on Career in Accountancy to:70 students at SMK TTDI Jaya, Shah Alam onTuesday, July 1, 2008;120 students at SMK Alam Megah 2, Shah Alam onWednesday, July 2, 2008;120 students at SMK Sultan Abdul Samad onThursday, July 3, 2008;160 students at SMK Seafield, Subang Jaya onTuesday, July 8, 2008; and70 students at SMK Bandar Utama on Wednesday,July 16, 2008.22 | The Malaysian Accountant | August 2008 www.micpa.com.my

Career Fairs and ExhibitionsThe Institute continued with its on-going efforts toembark on a more aggressive marketing strategyto position the CPA and CFiA as the designatedchoice. In this respect, the Institute participates regularlyin career fairs and exhibitions across the country to promoteaccountancy as a career choice and in particular to creategreater awareness of the CPA Malaysia and CFiA qualification.For the months of July – August 2008, the Instituteparticipated in the following career fairs and exhibitions:Universiti Malaya Interaction WeekThe Accounting Club of Universiti Malaya organisedInteraction Week 2008 with the theme “Dream IgnitesPassion, Passion Creates Reality” from July 18–19, 2008.The MICPA was a sponsor for the event and presented aCareer Talk to UM accounting students on Saturday, July19, 2008. The talk was presented by Dr Veerinderjeet Singh,Council Member of MICPA. CPA Ambassadors, Mr TiowWei Sheng and Mr Lim Chu Guan also shared with thestudents their experiences as a CPA.Accountancy & Career Education Fair (ACEF) 2008The Malaysian Institute of Accountants (MIA) organisedthe Accountancy & Career Education Fair (ACEF) 2008 on July26 & 27, 2008 at the Sunway Pyramid Convention Centre.The MICPA participated in the fair as part of the accountancypavilion.IIUMInternational Islamic Universiti Malaysia - Exhibitionon Job Market and Career Week 2008The MICPA participated as an Exhibitor in the Exhibition onJob Market and Career Week 2008 held in conjunction withIIUM E-Fest 2008 from July 14-18, 2008 at the CulturalActivity Centre at IIUM. The objective was to increaseawareness and profile the CPA Malaysia qualification toIIUM students. Other exhibitors included professionalbodies, banking institutions and Government agencies.CPA firm HLB Ler Lum also shared the booth space withMICPA to undertake recruitment of students.ACEF 2008Universiti Kebangsaan Malaysia – Accountancy Week 2008The MICPA participated as an Exhibitor in UKM’s AccountancyWeek 2008 with the theme “Profesion Perakaunan MenjulangKemerdekaan, Mengharungi Cabaran”, which was heldfrom August 13 – 20, 2008. The MICPA was also a sponsorfor the event.UMUKMwww.micpa.com.myAugust 2008 | The Malaysian Accountant |23

INSTITUTE NEWSCollaboration and Career Talks at UniversitiesAs part of the Institute’s efforts to foster closercollaboration with the universities in a positive andmutually beneficial manner, the Institute hasscheduled meetings with the Deans of the Faculty ofAccountancy of the various public universities. The aim isto promote the CPA Malaysia and CFiA qualification toaccountancy students as well as lecturers.The Institute’s Executive Director, Mr Foo Yoke Pinwas kept busy presenting Career Talks at the followinguniversities in the months of July - August 2008. The visitswere also a platform for the Institute to have discussionswith the academic staff.Universiti Kebangsaan MalaysiaJuly 28, 2008: Career Talk to 200 accountancy students;Universiti Putra MalaysiaJuly 31, 2008: Career Talk to 200 accountancy students.CPA ambassador, Mr Tiow Wei Sheng was also present toshare his experiences as a CPA with the accountingstudents;Universiti Utara MalaysiaAugust 7, 2008: Career Talk to 300 accountancy students.At the same talk, YBhg Datin Fadzillah Saad, Councilmember of MICPA also presented a talk on the CFiAqualification to UUM lecturers; andUniversiti Sains MalaysiaAugust 8, 2008: Talk on the CFiA qualification to USM lecturers.MICPA–BURSA MALAYSIABusiness Forum 2008The 5th MICPA-Bursa Malaysia Business Forum2008 will be held on October 20 & 21, 2008 at theShangri-La Hotel Kuala Lumpur. Featuring thetheme, Reinventing for Success, the Business Forumwill provide an invaluable platform for the exchange of ideasand experiences on the strategies and measures undertakento promote reinvention and to strengthen the growth ofbusinesses in light of the changing landscape and trends ofglobal business.The Organising Committee has invited YB Senator TanSri Datuk Amirsham A. Aziz, Minister in the Prime Minister’sDepartment, to deliver the Opening Keynote Address, as wellas, speakers and panelists comprising prominent corporateleaders, senior Government officers, business professionalsand capital market regulators, including to lead discussions inthe plenary sessions over the two-days.Target participants for the MICPA-Bursa MalaysiaBusiness Forum 2008 are company directors, CEOs, CFOs,senior Government officers, fund managers, investmentadvisers and business professionals.For further information on the MICPA-Bursa MalaysiaBusiness Forum 2008, please contact Ms Evelyn Lim,Marketing Manager at Tel: 03-2698 9622 or e-mail:bizforum08@micpa.com.myThe plenary sessions will include the following topics:Day 1Session 1: Global Business Trends: ThreatsAnd OpportunitiesSession 2: Corporate Governance:Where Are We Going?Session 3: Creating Value After ListingDay 2Session 4: Managing Risk in a ChallengingEnvironmentSession 5: The Environment: Truth Be ToldSession 6: Investment Opportunities in theMiddle East and Africa24 | The Malaysian Accountant | August 2008 www.micpa.com.my

PROFESSIONAL NEWSMASB UpdateMalaysia’s Convergencewith IFRS in 2012In a press release dated August 1, 2008, the FinancialReporting Foundation (FRF) and the Malaysian AccountingStandards Board (MASB) issued a statement about theirplans to bring Malaysia to full convergence withInternational Financial Reporting Standards (IFRS) by 1January 2012.MASB’s chairman, YBhg Dato’ Zainal Abidin Putihsaid, “Since 1978, we have been incorporating the provisionsof the international standards into our local accountingstandards; and today we are convinced that by becomingfully IFRS compliant, Malaysia’s capital and financialmarket will be further enhanced.”Compliance with IFRS, which are used by more than ahundred countries around the world, will facilitatecomparability and increase transparency. He added,“However, we’re not jumping on the bandwagon for the sakeof joining the crowd. IFRS is really a robust set of standards.Because of the international consultative approach tostandard-setting, a lot of thought has gone into IFRS. It getsinput from literally hundreds of people with diverseexpertise, from diverse jurisdictions.”To facilitate a phased changeover to IFRS, the effectivedate for applying FRS 139 Financial Instruments: Recognitionand Measurement will be January 1, 2010. By 2012, allapproved accounting standards applicable to entities otherthan private entities will converge fully with IFRS. Thisconvergence plan will not affect private entities that arecurrently applying the Private Entity Reporting Standards(PERS). Private entities will continue to apply PERS until suchtime the Board decides otherwise.Dato’ Johan Raslan, chairman of the FinancialReporting Foundation (FRF), the oversight body of the MASB,explains the changeover milestones. He said, “Othereconomies, such as Korea, India and Canada haveannounced IFRS convergence by 2011,” he said. "With theadoption of FRS 139 in 2010, and a further 2 years to adoptthe remaining standards, 2012 is considered the right datefor convergence.”Dato’ Zainal advises, “We hope that with thisadvanced notice, companies will have sufficient time toprepare themselves for the changeover.” He understandsthat many of them have been preparing for the changeover.“All of our current standards have already incorporated IFRSprovisions anyway. Only a few more substantive standardsneed to be formally adopted between now and 2012, and wehave already discussed those with the affected parties.”Welcoming the decision, Securities CommissionChairman Dato’ Zarinah Anwar said, “Businesses operate inan increasingly global environment. Therefore, this movewill help to give Malaysian companies and our capitalmarket the recognition they deserve.”(Source: www.masb.org.my)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.my26 | The Malaysian Accountant | August 2008 www.micpa.com.my

IASB UpdateIFRIC UPDATEIFRIC issues guidance on hedges of anet investment in a foreign operationThe International Financial Reporting InterpretationsCommittee (IFRIC) on July 3, 2008 issued an Interpretation,IFRIC 16 Hedges of a Net Investment in a Foreign Operation.The IFRIC was asked for guidance on accounting forthe hedge of a net investment in a foreign operation in anentity’s consolidated financial statements. Practice hasdiverged as a result of differing views on which risks areeligible for hedge accounting according to InternationalFinancial Reporting Standards (IFRSs).Constituents asked for clarification of three main issuesas follows:First, whether risk arises from the foreign currencyexposure to the functional currencies of the foreignoperation and the parent entity, or from the foreign currencyexposure to the functional currency of the foreign operationand the presentation currency of the parent entity’sconsolidated financial statements.Secondly, which entity within a group can hold ahedging instrument in a hedge of a net investment in aforeign operation and in particular whether the parententity holding the net investment in a foreign operationmust also hold the hedging instrument.Thirdly, how an entity should determine the amountsto be reclassified from equity to profit or loss for both thehedging instrument and the hedged item when the entitydisposes of the investment.IFRIC 16 clarifies these issues, stating that:• the presentation currency does not create an exposureto which an entity may apply hedge accounting.Consequently, a parent entity may designate as ahedged risk only the foreign exchange differencesarising from a difference between its own functionalcurrency and that of its foreign operation.• the hedging instrument(s) may be held by any entityor entities within the group.• while IAS 39 Financial Instruments: Recognition andMeasurement must be applied to determine theamount that needs to be reclassified to profit or lossfrom the foreign currency translation reserve in respectof the hedging instrument, IAS 21 The Effects of Changesin Foreign Exchange Rates must be applied in respect ofthe hedged item.IFRIC 16 applies to an entity that hedges the foreigncurrency risk arising from its net investments in foreignoperations and wishes to qualify for hedge accounting inaccordance with IAS 39. It does not apply to other types ofhedge accounting.The main expected change in practice is to eliminatethe possibility of an entity applying hedge accounting for ahedge of the foreign exchange differences between thefunctional currency of a foreign operation and thepresentation currency of the parent’s consolidated financialstatements.The IFRIC recognises the difficulty that entities wouldface in preparing adequate documentation from theinception of the hedge relationship and therefore requiresprospective application of the guidance. The Interpretationis effective for annual periods beginning on or after October1, 2008.Introducing IFRIC 16, Robert Garnett, IFRIC Chairmanand IASB member, said: IAS 39 and IAS 21 provide limitedguidance on the application of their requirements for hedgesof net investments in foreign operations. With thisInterpretation the IFRIC has provided practical guidance tohelp entities apply those standards consistently.(Source: www.iasb.org)IFRIC issues clarification onagreements for the construction ofreal estateThe IFRIC on July 3, 2008 issued an Interpretation, IFRIC 15Agreements for the Construction of Real Estate.The Interpretation will standardise accounting practiceacross jurisdictions for the recognition of revenue among realestate developers for sales of units, such as apartments orhouses, ‘off plan’, i.e. before construction is complete.The Interpretation provides guidance on how todetermine whether an agreement for the construction of realestate is within the scope of IAS 11 Construction Contracts orIAS 18 Revenue and when revenue from the constructionshould be recognised.The main expected change in practice is a shift forsome entities from recognising revenue using the percentageof completion method (i.e. as construction progresses, byreference to the stage of completion of the development) torecognising revenue at a single time (i.e. at completion uponor after delivery).Agreements that will be affected will be mainly thosewww.micpa.com.myAugust 2008 | The Malaysian Accountant |27

currently accounted for in accordance with IAS 11 that donot meet the definition of a construction contract asinterpreted by the IFRIC and do not transfer to the buyercontrol and the significant risks and rewards of ownership ofthe work in progress in its current state as constructionprogresses.The IFRIC released draft Interpretation D21 Real EstateSales for public comment in July 2007 and received 51comment letters in response. In its redeliberations, the IFRICresponded to the concerns expressed by respondents byimproving the articulation between IAS 11 and IAS 18 andby providing additional guidance on how to account forrevenue in IAS 18. In addition, in its ratification process, theIASB specifically considered whether the IFRIC’sinterpretation was in line with the principles underpinningIAS 18 and agreed with the IFRIC’s consensus.IFRIC 15 applies to the accounting for revenue andassociated expenses by entities that undertake theconstruction of real estate directly or through subcontractors.The interpretation is effective for annual periods beginningon or after January 1, 2009 and is to be applied retrospectively.Introducing IFRIC 15, Robert Garnett, IFRIC Chairmanand IASB member, said:The real estate industry is an important sector acrosscountries and, especially in times of volatile markets,transparency and comparability of the accounting areimportant.However, at present there is widespread divergence inpractice when accounting for the recognition of revenue for‘off plan’ contracts. IFRIC 15 clarifies how the existingprinciples in IAS 11 and IAS 18 apply for the revenuerecognition in the real estate sector and by doing so willensure consistent accounting. In some cases this means thatcompanies will have to change their accounting.(Source: www.iasb.org)Trustees publish proposals onenhancements to public accountabilityand to IASB compositionThe Trustees of the International Accounting StandardsCommittee (IASC) Foundation on July 21, 2008 published adiscussion document, Review of the Constitution: PublicAccountability and the Composition of the IASB - Proposalsfor Change.The document contains proposals that are dealt within the first phase of the organisation’s five-yearlyConstitution Review. The deadline for public comment onthe document is September 20, 2008.The proposals would:• establish a formal link between the organisation anda Monitoring Group comprising representatives ofpublic authorities and international organisations thathave requirements for accountability to publicauthorities• expand the membership of the InternationalAccounting Standards Board (IASB) to 16 membersand add new guidelines regarding the geographicaldiversity of the members of the IASBThe establishment of the link to a Monitoring Group,a group established by public authorities outside the IASCFoundation’s organisational framework, is aimed atenhancing the transparency and public accountability ofthe IASC Foundation, while not impairing the independenceof the standard-setting process.As contemplated by the proposal, the initialmembership of the Monitoring Group would comprise theresponsible member of the European Commission, themanaging director of the International Monetary Fund, thechair of the IOSCO Emerging Markets Committee, the chairof the IOSCO Technical Committee, the commissioner of theJapan Financial Services Agency, the chairman of the USSecurities and Exchange Commission, and the president ofthe World Bank.The Monitoring Group would have the responsibility ofapproving the selection of Trustees. The Trustees would alsoreport to the Monitoring Group regularly to enable it toaddress whether and how the Trustees are fulfilling their roleset out in the Constitution.Regarding the IASB’s composition, the Trusteesreiterate in their proposals that the Constitution’s emphasison ‘professional competence and practical experience’should remain paramount. At the same time, the expansionof the IASB would enable it to engage more efficiently andeffectively with interested parties throughout the world andbring new perspectives to its deliberations. Furthermore, theaddition of a geographical component would strengthen thelegitimacy of the IASB in the view of the countries choosingto adopt IFRSs.The Trustees’ proposals reflect consultations that theyhave had with many parties with an interest in thedevelopment of accounting standards. The Trustees havediscussed their proposals with members of the proposedMonitoring Group, the Standards Advisory Council (theorganisation’s primary advisory group) on two occasions,and stakeholders in their respective countries.Most recently, and in advance of the formalconsultation period, the Trustees held a series of round-tablemeetings in London on June 19, 2008 with thirtyparticipating organisations. As a result of those discussionsthe Trustees revised and clarified their proposals.The Trustees expect to complete the first part of theConstitution Review at their meeting in Beijing in October,with the changes taking effect from January 1, 2009.A review of other elements of the IASC Foundation’s28 | The Malaysian Accountant | August 2008 www.micpa.com.my

Constitution will begin after the meeting in Beijing. TheTrustees will publish a further discussion document invitingrespondents to suggest topics for consideration by theTrustees. It is expected that consultations will be held duringthe course of 2009, with changes taking effect from January1, 2010.(Source: www.iasb.org)IASB amends standard to giveadditional guidance on thedesignation of a hedged itemThe IASB on July 31, 2008 issued Eligible Hedged Items (anamendment to IAS 39 Financial Instruments: Recognition andMeasurement).The amendment clarifies how the existing principlesunderlying hedge accounting should be applied in twoparticular situations.The International Financial Reporting InterpretationsCommittee (IFRIC) asked the IASB to provide additionalguidance on what can be designated as a hedged item.The responses to an exposure draft of proposedguidance (published in September 2007) indicated thatdiversity in practice existed, or was likely to exist, in thedesignation of:• a one-sided risk in a hedged item, and• inflation in a financial hedged item.The IASB has therefore focused on developingapplication guidance to illustrate how the principlesunderlying hedge accounting should be applied in thosesituations.Entities are required to apply the amendmentretrospectively for annual periods beginning on or after July1, 2009, with earlier application permitted.(Source: www.iasb.org)IASB publishes proposals foramendments under its annualimprovements projectThe IASB on August 7, 2008 published for public commentan exposure draft of proposed amendments to eightInternational Financial Reporting Standards (IFRSs) underits annual improvements project.The proposed amendments reflect issues discussed bythe IASB in the project cycle that began last year. Theproposals range from guidance added to the Appendix ofIAS 18 Revenue, on how to determine whether an entity isacting as a principal or as an agent, to changes of wordingto clarify the meaning and remove unintendedinconsistencies between IFRSsThe IASB adopted an annual process in 2006 to makenecessary, but non-urgent, amendments to IFRSs that willnot be included in another project. By presenting theproposed amendments in a single document rather than asa series of piecemeal changes the IASB aims to ease theburden for all concerned.Unless otherwise specified, the proposed effective datefor the amendments is for annual periods beginning on orafter January 1, 2010, although entities are permitted toadopt them earlier. The proposed effective date for thoseamendments arising from the revised IFRS 3 BusinessCombinations is July 1, 2009 (in line with the effective datefor the revised standards on business combinations - IFRS 3and IAS 27 Consolidated and Separate FinancialStatements).The exposure draft can be accessed via the ProjectWebsite or on the ‘Open to Comment’ section onwww.iasb.org. The IASB requests comments on the exposuredraft by November 7, 2008.(Source: www.iasb.org)IASB proposes amendments tosimplify and achieve convergence inthe calculation of EPSThe IASB on August 7, 2008 published for public commentproposals to simplify the calculation of earnings per share(EPS) and to eliminate differences between the methodsrequired by International Financial Reporting Standards(IFRSs) and US accounting standards to calculate EPS. Theproposals are part of the short-term convergence project thatthe IASB is conducting jointly with the US FinancialAccounting Standards Board (FASB). Consequently the FASBhas also published an exposure draft to amend SFAS 128Earnings per Share on August 7, 2008.In particular, the proposals aim to achieveconvergence by:• providing a clear principle to determine whichinstruments should be included in the EPS calculation;• clarifying the EPS calculation for particularinstruments, such as contracts to sell or repurchase anentity’s own shares and participating instruments; and• simplifying the EPS calculation for instruments thatare accounted for at fair value through profit or loss.The IASB believes that the proposals would, if implemented,simplify the calculation of EPS and increasetransparency for users of financial statements.The IASB invites comments on the exposure draftSimplifying Earnings per Share (proposed amendments toIAS 33) by December 5, 2008. The exposure draft is availableon the ‘Open for Comment ’ section on www.iasb.org.(Source: www.iasb.org)www.micpa.com.myAugust 2008 | The Malaysian Accountant |29

PROFESSIONAL NEWSIFAC UpdateNew IFAC Guidance SupportsProfessional Accountants in Businessin Promoting Better InvestmentDecisionsRecognising that professional accountants in business playan important role in helping their organisations deliverlong-term value, the International Federation ofAccountants (IFAC) Professional Accountants in Business(PAIB) Committee has released new guidance on the use ofdiscounted cash flow analysis and net present value inevaluating investments. Entitled Project Appraisal UsingDiscounted Cash Flow, this guidance was released as partof the PAIB Committee's new program to developInternational Good Practice Guidance on financial andmanagement accounting topics.Discounted cash flow analysis and estimating the netpresent value of cash flows involve fundamental principlesof finance that support disciplined financial managementin organisations. Professional accountants in businesshave a role in promoting and explaining the importanceof these principles in their organisations, particularlywhere the connections between the application of financialprinciples and related financial theory are not easilyunderstood or accepted."This new guidance will help professionalaccountants in business to promote the importance ofgenerating long-term value in their organisations," statesEdward Chow, Chair of the PAIB Committee. "Professionalaccountants have a significant role in ensuring that theirorganisations focus on decisions that maximize expectedvalue, rather than on their short-term impact on reportedearnings. Companies with good records of value creationgenerally have better shareholder and investoracceptance."Final Preface to International Good Practice GuidanceTogether with the guidance, the PAIB Committee hasreleased the final Preface to IFAC's International GoodPractice Guidance. The Preface sets out the scope, purpose,and due process of the committee's new International GoodPractice Guidance, which cover management accounting,financial management, and broader topics in whichprofessional accountants in business are engaged.Project Appraisal Using Discounted Cash Flow andthe Preface can be downloaded free-of-charge from theIFAC online bookstore at http://www.ifac.org/store. ThePAIB Committee welcomes feedback on both documents,which can be emailed to stathisgould@ifac.org.(Source: www.ifac.org)IFAC Appoints Alta Prinsloo Directorof OperationsAlta Prinsloo, CA (SA) has been named Director ofOperations of the IFAC, with effect from, January 1, 2009.Ms. Prinsloo is currently Deputy Director of the InternationalAuditing and Assurance Standards Board (IAASB), anindependent standard-setting board under the auspices ofIFAC. She joined the organisation as an IAASB SeniorTechnical Manager in September 2002.As Director of Operations, Ms. Prinsloo will overseeIFAC's planning, budgeting, and financial managementand accounting processes, including supporting theactivities of IFAC's Planning and Finance Committee andAudit Committee. She will direct the organisation's day-todayoperations, play a key role in the strategic planningprocess, oversee its human resources and informationtechnology activities, and manage preparations for IFACBoard and Council meetings."Alta's strong international experience, together withthe leadership and management skills she has demonstratedwith the IAASB, will be of great value to IFAC as she assumesthe role of Director of Operations," states Ian Ball, IFAC ChiefExecutive Officer. "In that capacity, Alta will play a centralrole in the effective management and operations of a globalorganisation with more than 150 member organisationsworldwide."Prior to joining IFAC, Ms. Prinsloo was TechnicalDirector of the South African Institute of CharteredAccountants, an IFAC member body, where she managedthe Technical Department and oversaw the convergence ofSouth African accounting and auditing standards withinternational standards. She also served as a technicaladvisor to the South African member of the IAASB fromJanuary 2001 to March 2002.Alta Prinsloo will assume the position later this year,after she has completed her obligations with respect to workon the IAASB Clarity project. She will take over from StephenWalker, who has served as IFAC Director of Operations sinceSeptember 2002 and will be returning to his home countryof New Zealand."Stephen has played a very significant role instrengthening IFAC's strategic planning and financefunctions and improving our organisation's efficiency. Weare grateful for his many contributions to IFAC, and we wishhim all the best for the future," states Mr. Ball.(Source: www.ifac.org)30 | The Malaysian Accountant | August 2008 www.micpa.com.my

IFAC Proposes Principles-BasedGuidance on Governance and Costingto Drive Organisational PerformanceAs part of its ongoing commitment to support professionalaccountants in business and their organisations inenhancing governance and in assessing and deliveringorganisational performance, the IFAC’s ProfessionalAccountants in Business (PAIB) Committee has released twonew proposed International Good Practice Guidancedocuments for public comment. The proposed guidanceaddresses evaluating and improving governance structuresand use of costing to support effective decision making.GovernanceThe newly released exposure draft, Evaluating and ImprovingGovernance in Organisations, sets out a framework, a series offundamental principles, practical guidance, and referenceson how to evaluate and improve governance inorganisations. The purpose of this guidance is to assistprofessional accountants and their organisations in creatinga balance between conformance with rules and regulationsand organisational performance.CostingThe second proposed International Good Practice Guidance,Costing to Drive Organisational Performance, is designed toassist professional accountants in business in deliveringuseful cost information to support effective decision makingand organisational performance. The proposed guidancesets out eight fundamental principles of costing thatencourage a performance-based view of costing to helpprofessional accountants in business to ensure that costinginformation supports forward-looking strategic andoperational decisions."This principles-based good practice guidance addresses keystrategic and financial management issues that manyprofessional accountants in business address in their dailywork," states Edward Chow, Chair of the PAIB Committee."Our goal is to develop principles-based guidance that offersa global perspective and places professional accountants inbusiness at the heart of driving organisational performance."How to CommentComments on the two proposed guidance documents arerequested by September 23, 2008. They may be viewed bygoing to http://www.ifac.org/EDs. Comments may besubmitted by email to EDComments@ifac.org.As part of a pilot project to further encourage userinvolvement in the development of good practice guidance,the PAIB Committee is inviting all those who are interestedto provide comments on the proposed document, Evaluatingand Improving Governance in Organisations, via an onlinefeedback form, which can be accessed at http://www.ifac.org/governanceED.All comments will be considered a matter of publicrecord and will ultimately be posted on the IFAC website. Asummary of online feedback on the proposed governanceguidance will also be posted on the IFAC website.(Source: www.ifac.org)IFAC’s International AccountingEducation Standards Board AddressesMeasurement of ContinuingProfessional DevelopmentThe International Accounting Education Standards Board(IAESB), an independent standard-setting board within theIFAC, has released a new information paper to assist IFACmember bodies and other stakeholders in developingeffective continuing professional development (CPD)programs for professional accountants. EntitledApproaches to Continuing Professional Development(CPD) Measurement, the paper explains the elements of aneffective CPD program, examines current practices byaccountancy and other professional associations, anddiscusses approaches to measure a program's effectiveness."The paper is the result of a wide-ranging internationalresearch project into continuing professional developmentacross a number of professions, and it is intended tostimulate discussion and debate on the subject ofmeasuring CPD," states IAESB Chairman Henry Saville. " Inaddition to IFAC member bodies, the findings in the paperwill be of interest to current and future professionalaccountants, regulators, educators, CPD providers, andemployers seeking to implement CPD programs forprofessional accountants."The IAESB commissioned the Professional AssociationsResearch Network to conduct research on measuring CPDand to prepare this information paper. The paperintroduces a four-phase CPD model - covering planning,action, results, and reflection - that IFAC member bodiesand other professional associations may use to improve theeffectiveness of their CPD programs. Case studies andprofiles are included to provide practical examples, andrecommendations are provided that may assist IFACmember bodies and others in evaluating variousapproaches to measuring CPD.The information paper can be downloaded freeof-chargefrom the IFAC online bookstore athttp://www.ifac.org/store. For more information on thework of the IAESB, visit its home page at http://www.ifac.org/education.(Source: www.ifac.org)www.micpa.com.myAugust 2008 | The Malaysian Accountant |31

Arnold Schilder Named to Lead IFAC'sInternational Auditing and AssuranceStandards BoardThe Board of the IFAC has appointed Prof. Dr. ArnoldSchilder, RA, to lead the International Auditing andAssurance Standards Board (IAASB), an independentstandard-setting board under the auspices of IFAC,beginning January 1, 2009. Prof. Schilder's appointment toa three-year term as IAASB Chair was approved by thePublic Interest Oversight Board (PIOB)*, which oversees theIAASB's activitiesAs chair, Prof. Schilder will lead the IAASB in itsinitiatives in setting high quality auditing and assurancestandards and facilitating the convergence of internationaland national standards. He will play a key role in guidingthe IAASB as it strives to enhance the quality anduniformity of audit practice throughout the world and tobuild public confidence in financial reporting."I am delighted to chair the IAASB during the nextthree years as it continues to fulfill its public interestmission," states Prof. Schilder. "I will welcome the input ofall our stakeholders, including users of IAASB standards,national standard setters, regulators, governments, andthe public, as the IAASB addresses new assurance topics aswell as promotes further the benefits of its standards to keyconstituencies that have not yet adopted them.""Arnold Schilder brings both a breadth and depth ofexperience and strong integrity to the position of IAASBChair," states Fermín del Valle, IFAC President. "As its nextchair, he will lead the IAASB in continuing to develop highquality international audit standards to be used around theworld." Prof. Schilder is currently Executive Director of DeNederlandsche Bank NV, the prudential supervisor offinancial institutions in the Netherlands.For more information about the work of the IAASB,visit its home page at http://www.iaasb.org.(Source: www.ifac.org)IFAC Program Sparks Initiatives toStrengthen the AccountancyProfession and Achieve Convergenceto International StandardsThe IFAC Member Body Compliance Program, launched fouryears ago, has reached a major milestone in its mission toencourage accountancy organisations worldwide to worktogether with their members, regulators, standard setters,and other key stakeholders to strengthen the profession.The Compliance Program is comprised of a three-part process:• A member organisation's assessment of its country'sregulatory and standard-setting framework;• A self-assessment of the extent to which a memberbody has committed to international convergence ofstandards and promoted the implementation ofstrong quality assurance and enforcement regimes asspecified in IFAC membership requirements; and• The development of action plans to further theconvergence process and meet other IFACmembership requirements.The Compliance Program is now in this third phaseand, the actions plans of IFAC members from six countries werepublicly released on the IFAC website. The six members are:• Federación Argentina de Consejos Profesionales deCiencias Económicas;• Botswana Institute of Accountants;• Chinese Institute of Certified Public Accountants;• Chamber of Auditors of the Czech Republic;• Institute of Certified Public Accountants of Kenya; and• Corpul Expertilor Contabili si Contabililor Autorizatidin Romania.Representing four different continents, these actionsplans are reflective of the kinds of programs and activitiesthat all IFAC member organisations are developing in theirown jurisdictions."These action plans demonstrate the leadership of theprofession in engaging country stakeholders, such asregulators, government officials, academics, and others infurther enhancing the quality of the profession andensuring greater consistency worldwide," states RobertMednick, Chair of the Compliance Advisory Panel thatoversees the Member Body Compliance Program."Our expectation is that all of IFAC's 157 memberbodies in both developed and emerging countries willdevelop actions plans that address the key elements ofconvergence, the subsequent implementation of standardsand new regulatory initiatives," added Mednick.To view the actions plans of IFAC member bodies aswell as the responses to Parts 1 and 2 of the ComplianceProgram, go to http://www.ifac.org/ComplianceAssessment/published.php.(Source: www.ifac.org)IAASB Issues Auditing Standard onRelated Parties; Makes FurtherProgress on Clarity StandardsFollowing the consideration and approval of due process bythe Public Interest Oversight Board (PIOB), the InternationalAuditing and Assurance Standards Board (IAASB), anindependent standard-setting board under the auspices ofthe IFAC, on July 14, 2008 released International Standardon Auditing (ISAs) 550 (Revised and Redrafted), RelatedParties and three clarity redrafted ISAs.32 | The Malaysian Accountant | August 2008 www.micpa.com.my

Related PartiesThe involvement of related parties in major corporatescandals encouraged the IAASB to revise its current auditingstandard on the subject. The revised Related Partiesstandard clarifies the meaning of "related party" for purposesof an audit. It also makes clear the auditor's responsibilityto obtain sufficient evidence about the required accountingand disclosure of related party relationships andtransactions and to understand how such relationships andtransactions affect the view given by the financial statements."The standard will strengthen current auditing practicein this area by emphasising the need for the auditor tounderstand related party relationships and transactions inorder to identify the risks of material misstatement to whichthese may give rise, and directing the auditor to focus work efforton the assessed risks of material misstatement, includingthose due to fraud," explains John Kellas, IAASB Chairman."The revised standard clarifies the auditor's responsibilitiesin those cases where the financial reporting frameworkestablishes minimal or no related party requirements. Inaddition, it provides enhanced guidance to assist the auditorin understanding and responding to the risks of materialmisstatement that may arise in relation to related partieswith dominant influence," emphasises Kellas.Clarity Redrafted ISAsIn addition to ISA 550 (Revised and Redrafted), the IAASBhas also released the following clarity redrafted ISAs:• ISA 250 (Redrafted) - Consideration of Laws andRegulations in an Audit of Financial Statements;• ISA 510 (Redrafted) - Initial Audit Engagements-Opening Balances; and• ISA 570 (Redrafted) - Going Concern.They form part of the IAASB's ambitious 18-monthprogram to redraft existing standards following the claritydrafting conventions. To date, the IAASB has released 15final clarity redrafted ISAs. The IAASB is on track to finalizeits complete set of clarified ISAs by the end of this year.The complete set of clarified ISAs, including newlyrevised standards such as ISA 550 (Revised and Redrafted),will be effective for audits of financial statements forperiods beginning on or after December 15, 2009.The ISAs can be downloaded free-of-charge from theIFAC online bookstore at http://www.ifac.org/store.(Source: www.ifac.org)IFAC’s International Auditing andAssurance Standards Board IssuesStrategy and Work Program for 2009-2011The International Auditing and Assurance StandardsBoard (IAASB), an independent standard-setting boardunder the auspices of the IFAC, on July 14, 2008 releasedits Strategy and Work Program, 2009-2011. The three-yearstrategy includes an emphasis on the development ofstandards that contribute to the effective operation of theworld's capital markets and that address the needs of smallandmedium-sized entities and small and mediumpractices.The Strategy and Work Program, issued followingconsideration and approval of its completeness from apublic interest perspective by the Public Interest OversightBoard (PIOB)*, is consistent with the IAASB's overallobjectives. ** It builds on the strong base of standardsdeveloped by the IAASB to date and focuses on three areas:• The development of standards;• The facilitation and monitoring of adoption of thosestandards; and• Responding to concerns about the implementation ofthe standards by activities designed to improve theconsistency with which they are applied in practice."The IAASB's vision is that the high quality standardson assurance, related services and, in particular,International Standards on Auditing that we develop in thepublic interest are adopted and applied internationally.The strategy and work program are consistent with thislonger term vision," explains John Kellas, IAASB Chairman.The Strategy and Work Program responds to significantdevelopments in the environment in which audit and otherassurance services are performed, and in which standardsfor such services are set. It also highlights the IAASB role inworking toward global acceptance of and convergence withits standards and in establishing and maintaining relevantpartnerships. It is underpinned by the IAASB's communicationsinitiatives to keep stakeholders informed of its activitiesand to promote adoption and implementation of itsstandards.The Strategy and Work Program reflects the outcome ofan extensive consultation program to obtain the widestpossible input into determining the IAASB's priorities overthe next three years. A summary of the IAASB's conclusionswith regard to significant matters raised during theseconsultations is presented in the Basis for Conclusions:IAASB Strategy and Work Program, 2009-2011."I am grateful to the many people and organizationsthat contributed to our strategy review consultations. Ihope that the direction of our work will be seen asresponding to the representations made to us, and to thepublic interest, which must be our overriding concern. Ofcourse, events and circumstances may require us to amendour program, and for this reason it will be kept underconstant review," notes Kellas.The Strategy and Work Program, 2009-2011 can bedownloaded free-of-charge from the IFAC online bookstore(http://www.ifac.org/store). To access the related Basis forConclusions and other information on the IAASB's work,www.micpa.com.myAugust 2008 | The Malaysian Accountant |33

visit its home page at http://www.iaasb.org/.(Source: www.ifac.org)IFAC's International Ethics StandardsBoard Issues Proposals to ClarifyCode of Ethics for AccountantsTo further promote and facilitate accountants' adherence tohigh ethical and independence standards, theInternational Ethics Standards Board for Accountants(IESBA), an independent standard-setting board within theIFAC, has proposed changes to the IFAC Code of Ethics forProfessional Accountants. The changes, outlined in anexposure draft with the same title focus on enhancing theclarity of the Code. The proposed changes make clear thespecific requirements that are contained in the Code andrefine the application of the Code's conceptual framework."The proposals significantly enhance the clarity andunderstandability of the provisions in the Code," statesRichard George, IESBA Chair. "We believe that the revisedCode will provide a strong foundation to further the IESBA'sobjective of facilitating convergence of international andnational ethical standards."Comments on the exposure draft are requested byOctober 15, 2008. The exposure draft may be viewed bygoing to http://www.ifac.org/eds. Comments may besubmitted by email to edcomments@ifac.org.(Source: www.ifac.org)SMS Latinoamerica Becomes FullMember of Forum of FirmsSMS Latinoamerica has been named a full member of theForum of Firms after reporting it has implemented aglobally coordinated quality assurance program,committed to the use of International Standards onAuditing (ISAs), and met other specific ethics requirements,the Forum announced today. Seventeen other internationalnetworks of accounting firms achieved full member statusearlier this year.The Forum of Firms is an association of internationalnetworks of accounting firms. These firms perform auditsof financial statements that are or may be used acrossnational borders. The Forum's goal is to promote consistentand high quality standards of financial reporting andauditing practices worldwide.In order to achieve full membership status, SMSLatinamerica had to commit to meet the Forum'smembership obligations which require members to:• Maintain appropriate quality control standards inaccordance with International Standards on QualityControl issued by the International Auditing andAssurance Standards Board (IAASB) in addition torelevant national quality control standards andconduct, to the extent not prohibited by nationalregulation, regular globally coordinated internalquality assurance reviews;• Have policies and methodologies for the conduct oftransnational audits that are based, to the extentpracticable, on ISAs issued by the IAASB; and• Have policies and methodologies which conform tothe IFAC Code of Ethics for Professional Accountantsand national codes of ethics.As of July 2008, of the 22 Forum members, 18 are fullmembers and four are provisional members. The Forum'sremaining provisional members are working towardbecoming full members in 2008. For additional details onthe Forum of Firms, please visit: http://www.ifac.org/Forum_of_Firms/.(Source: www.ifac.org)IFAC’S International AccountingEducation Standards Board ReleasesUpdated Education PronouncementsTo ensure that its pronouncements remain clear andrelevant, the International Accounting EducationStandards Board (IAESB), an independent standard-settingboard within the IFAC, has released amended versions ofits International Education Standards (IESs) and relatededucation pronouncements. The amendments result inmore consistent use of terminology throughout thestandards and more clearly describe the role of the IAESBand its standard-setting process, including oversight of itswork by the Public Interest Oversight Board.The amended documents comprise the Framework forInternational Education Pronouncements, the Introduction toInternational Education Standards, and InternationalEducation Standards 1-8, all of which were publishedbetween 2003 and 2006. Given the editorial nature of thechanges, the IAESB felt that public consultation was notnecessary and the amended documents were approved bythe IAESB in its May 2008 meeting.In addition to these editorial amendments, the IAESBhas commenced a project to substantively revise theFramework and the Introduction. As part of that project,the IAESB will seek public comments on changes to thesedocuments.The amended versions of IESs 1-8, the Framework andthe Introduction can be downloaded free-of-charge fromthe IFAC online bookstore at http://www.ifac.org/store. Formore information on the IAESB’s work program, visithttp://www.ifac.org/education.(Source: www.ifac.org)34 | The Malaysian Accountant | August 2008 www.micpa.com.my

CASE LAW HIGHLIGHTSSee Teow Guan & Ors v Liquidatorsof Kian Joo Holdings Sdn Bhd (inLiquidation) & OrsCOURT OF APPEAL (PUTRAJAYA)– CIVIL APPEAL NO W-02-563 OF 2003TENGKU BAHARUDDIN,SURIYADI AND HASAN LAH JJCANOVEMBER 9, 2007Civil Procedure – Injunction – Injunction for preservation ofproperty – Delay of four years for injunction – Whether inordinateand inexcusableCivil Procedure – Injunction – Pending appeal– Principles applicableCompanies and Corporations – Winding up – Liquidators –Officers of the court – Unless restrained, liquidators wouldproceed to sell shares forming subject matter of appeal – Whethercourt should interfere with liquidators’ decisionThe applicants had filed a motion pursuant to s 44 of theCourts of Judicature Act 1964 (‘CJA’) on the ground that unlessan injunction was granted pending the hearing and disposalof the appeal, the liquidators of the Kian Joo Holdings Sdn Bhd(in liquidation) would proceed to sell all the 69,240,877 sharesforming the subject matter of the appeal making the appealif successful, nugatory and therefore academic as causingirreparable harm to the appellants. Kian Joo Holdings SdnBhd (‘the company’) was incorporated on March 27, 1982having 27 shareholders who were all members of the SeeFamily. On September 10, 1994 a petition was filed to windup the company. Subsequently by consent of the parties, thehigh court on January 30, 1996 had ordered that the companybe wound up, and liquidators appointed. On July 12, 1996 theliquidators convened a meeting of the contributories of thecompany pursuant to s 237(2) of the Companies Act 1965, toascertain their wishes regarding the disposal of the shares andwarrants in its possession. In that meeting two groupsemerged viz the See Teow Chuan Contributories (‘STC group’)and the See Teow Guan contributories (‘STG group or theapplicants’). At that meeting and confirmed in another, it wasresolved that 55% in value and 52% in number of thecontributories (that was the STC group) preferred a sale of theshares and warrants, whilst the remaining holders of 54% invalue and 48% in number of the shares (‘STG group’) preferreddistribution of the shares and warrants in specie. Thereafterthe liquidators, after coming into possession of the propertiesand after the said meetings, had wanted to implement themajority decision. Being aggrieved the STG group filed anapplication (‘encl 191’) to modify the said decision. At the endof the hearing of encl 191, the high court found that the STGgroup had failed to show how the liquidators had actedfraudulently or were mala fide in the exercise of theirdiscretion, to warrant intervention by the court and dismissedencl 191. Being dissatisfied the applicants filed an appealwhich was now pending before the court of appeal.Held, dismissing the motion:(1) It was quite established that an injunction for thepreservation of property and other mandatory ordersmight only be granted in accordance with the principlesapplicable to the granting of interlocutory injunctions.It might be granted where the court was satisfied thatthere was substantial question to be tried, and a case hadbeen made out for the preservation of that property.(2) The first reason was that unless restrained the liquidatorswould proceed to sell the 69,240,877 shares forming thesubject matter of the appeal. That they were appointedby the court, and hence officers of the court, who merelywanted to perform their duties. Their decision to sell theshares at the best possible price would have benefitedevery shareholder including the applicants. The courthere was not about to interfere with the liquidators’decision simply because its opinion might differ fromthat of the liquidator.(3) Not only was there not shown bad faith or perverseerrors had been committed by the liquidators, but as perthe supporting affidavit, the applicants had also notadduced evidence that such sale would have causedirreparable damage to them.(4) The intention of their late father to have the sharesretained by the family coupled with the fear of losingthem, were inextricably intertwined to the fear ofsuffering a loss in value of the investment. These werenot special circumstances. Mere fear and sentimentalitycertainly did not qualify as persuasive groundsconstruable as special circumstances.(5) Unexplained here too was the delay of four years by theapplicants since June 13, 2003 to apply for thisinjunction order. Despite the conspicuous clarity of s 73of the CJA, that an appeal should not operate as a stay,the applicants took no steps for four years to apply forthis order. This delay was inordinate and inexcusableand in the circumstances of the case quite fatal to theapplicants’ motion.(Source: Malayan Law Journal January 25, 2008, [2008] 1 MLJ 305-440)Produced with kind permissionwww.micpa.com.myAugust 2008 | The Malaysian Accountant |35

GLOBAL INSIGHTNEWSfrom Down UnderA O FERRERS, AUSTRALIAN CORRESPONDENTFacilitating the Return of Women tothe Accounting ProfessionThe following headline recently caught my attention – NIAproposes Govt tackles skills shortage by attracting womenback to accounting.This prefaced a media release by the NationalInstitute of Accountants. What has happened is that theInstitute has called on the Commonwealth government toconsider a $2,500 training voucher scheme to help womenaccounting professionals to update their skills and re-enterthe workforce.CEO Roger Cotton has pointed out that there aremany women who have left the profession, often forpersonal reasons regarding families, who may want tocome back, either full time or part time, but feel they havebeen out of the profession too long. He noted that a lot haschanged in accounting in recent years and someone whohas been out for more than even three years may find ithard to get a job at an appropriate level because they maybe seen not to have all the skills necessary.This is where a training voucher would be helpful. Itis proposed it would be available to women who have beenout of accounting for more than 5 years. It would then beeasier for a woman to access training that would assist herto re-enter the workforce.Mr Cotton said, “Addressing the skills shortage inaccounting in Australia is an economic issue offundamental importance to this country and this initiativewould be a beneficial step in the right direction.”Wages are good and prospects excellent. Thestanding of an accountant in the community is high.Nevertheless it is difficult to attract the numbers requiredto replace those accountants leaving the profession. Manyleave because of their advancing age and there has notbeen a necessary inflow to maintain requisite numbers.More are leaving than joining.Generally speaking, women are an untapped pool oftalent. They need, in most cases, only some minor help topolish up their accounting expertise which would betterprepare them to return to the profession. The voucherscheme would facilitate this and the Institute is urging thegovernment to take it on board.A survey by the Institute of Chartered Accountants inAustralia has discovered that in fact women are breakingdown accounting industry stereotypes and embracing theprofession. In the last 10 years the number of women whohave successfully become chartered accountants has morethan doubled. Today the proportion of women charteredaccountants is 30 per cent, whereas ten years ago it stoodat 19.7 per cent. They outnumber their male counterpartsin taking up accounting.Speaking for the Institute, Michael Nazzari said, “Amore balanced gender membership base is good news forthe accounting industry as we move into the future. Thisis of particular importance and significance in the currentskills shortage environment in which we operate.”Tax ReviewIn the budget this year Wayne Swan, the Federal Treasurer,announced that there would be a major overhaul of the taxsystem under the chair of Dr Ken Henry, the head ofTreasury. A discussion paper was released on August 6, 2008with a press release containing the following words:The Rudd Government welcomes the launch today of theAustralia’s Future Tax System (AFTS) Discussion Paper byTreasury Secretary Dr Ken Henry.Long-term reform of our tax and welfare systems is akey way to secure our economic foundations for the future,create wealth, spread opportunity and reward workingAustralians.The AFTS Review will play a vital role in modernisingAustralia’s economy to meet the great economic, socialand environmental challenges of the 21st century.Meeting these future challenges - like climate change, theageing population, new technologies and rapidglobalisation – will require a tax system that is as fair andefficient as possible and the AFTS Review will help achievethat goal.The Review will be the most comprehensiveexamination of the tax system in over 50 years.In a media release CEO Roger Cotton of the NationalInstitute of Accountants welcomed this initiative and theopportunity for discussion with all interested parties,particularly the accounting professions. For many yearsthe professions have wrestled with the complications of taxlaw and any simplification is good news.He made these comments, “The complexity in the taxsystem is an enormous disadvantage and cost to smallbusiness. We realise that often simplicity is traded offagainst certainty in the tax system and the review willprovide an opportunity to reconsider the fundamentalprinciples of tax design and to achieve serious tax reform.“Another key issue is our ageing population. The NIArecommends removing incentives for early retirement andencouraging delayed retirement through reduced rates ofincome tax. Tax is a key factor in driving workforce36 | The Malaysian Accountant | August 2008 www.micpa.com.my

participation and here we have a chance to make significantchanges to help ensure sustained economic growth.”Garry Addison as senior tax counsel spoke on behalfof CPA Australia,“ Greater incentives to join the workforceand measures to ensure enhanced international businesscompetitiveness should also be accorded priority. It isimportant that there be no financial disincentives to peopleentering the workforce, including situations wherehouseholds earn a second income.“At present the effective marginal tax rate for asecond income earner may be so high as to discourage aperson entering or rejoining the workforce. This can onlyimpact negatively on the skills shortages and productivityissues being experienced in the economy at present.”These aspects should be included in the review ofpersonal income tax. He welcomed too the review ofbusiness taxation, since an effective business tax regime iscrucial to national wealth generation.The review will look at inefficient State taxes whichcould be removed and harmonise the rest wherever possibleto reduce business compliance costs. In this context theimposition of stamp duty, a State tax, should be the focusof attention.CANADA- International FinancialReporting Standards (IFRS)These new standards come into force in Canada in 2011and it is now timely for boards and audit committees tobegin preparing for the changeover from the present GAAP(Generally Accepted Accounting Principles). This is amajor undertaking. In order to facilitate this work, theCanadian Institute of Chartered Accountants has produceda booklet entitled “20 questions directors and auditcommittees should ask about IFRS conversions”. A copymay be found at www.cica.ca/IFRS.President Kevin Dancey has said in a media release,“It is crucial for all directors to have a generalunderstanding of what the changeover will mean for theirorganisation. The document provides suggested questionsto ask of themselves, senior management and others…“Responsibility for executing the conversion to IFRSrests with management and it will be the board’sresponsibility to play an oversight role. Our document isdesigned to help directors, especially audit committeemembers, to understand the potential scope of thetransition. This involves consideration not only of theconversion process itself but of issues relating to risk,stakeholder relations, financial reporting and internalcontrols which will be triggered by the transition.”After conversion to IFRS, Canada will be on the samefooting as more than 100 other countries so far as financialreporting is concerned. As a result, Canadian companiesshould see a reduction in the cost of capital and greateraccess to international capital markets. No longer willthere have to be a reconciliation of figures between onecountry and another.MICPA Practising CertificateThe Membership Affairs Committee of the Institute in considering applications forpractising certificates, has frequently come across cases where a member hascommenced public practice before he is issued with a practising certificate by theInstitute.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 inpublic practice in Malaysia only if he holds a practising certificate issued by theInstitute.If members need clarification on the above, kindly contact the Institute’s MembershipServices Department.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.mywww.micpa.com.myAugust 2008 | The Malaysian Accountant |37

GLOBAL INSIGHTWORLDNEWSEUROPEAN COMMISSIONINDIAHONG KONGEuropean CommissionThird Anti-Money LaunderingDirective: EC Takes Action Against 15Member StatesThe paper explores the possible development of a newfinancial reporting framework for large private companies,given the burden imposed on them by the application ofHong Kong Financial Reporting Standards.(Source: www.hkicpa.org.hk)The European Commission has decided to pursueinfringement procedures against 15 Member States forfailure to implement the Third Anti-Money LaunderingDirective into national law, which should have occurred byDecember 15, 2007. The Commission will send formalrequests to those Member States and, if there is no replywithin two months, the Commission may refer the matterto the European Court of Justice.(Source: www.europa.eu)Hong KongNew Paper Addresses Need forSimplified Financial Reporting forPrivate CompaniesThe Hong Kong Institute of Certified Public Accountants(HKICPA) is seeking comments on a recently releasedconsultation paper, Financial Reporting by Private Companies.IndiaIndian Institute Launches CertificateProgram in AccountingThe Institute of Cost and Works Accountants of India haslaunched a certificate program in accounting designed tohelp students living in rural areas who cannot afford theprofessional qualification develop accounting skills.Following the recommendation of the Union Ministry ofCorporate Affairs in India, the program is geared towardssmall and medium enterprises, the retail sector, knowledgeprocess outsourcing (KPO) and business processoutsourcing (BPO) sectors and Panchayats. Referred to asthe Certificate of Accounting Technician (CAT), theprogram will aid in addressing the expected shortage ofaccountants in India over the next ten years.(Source: www.myicwai.com)38 | The Malaysian Accountant | August 2008 www.micpa.com.my

LIFESTYLETaiping– A Town of Many FirstsBY KAVALYN KREERTaiping, the former state capital of Perak,has the distinction of achieving many‘firsts’ in the country. The TaipingMunicipal Council records a total of 40firsts, either in monuments or events,dating as early as 1844.These include the first open-tin mining activity in thepeninsula and the first hill resort in Maxwell Hill in 1844.The first mosque, the Masjid Tengku Menteri, was foundedin 1870 while the first Magistrate court was set upin 1874. The Taiping Lake Gardens are the oldestin the country while the Perak Museum is the firstto open its doors in 1883. The famous railwaytrack from Taiping to Port Weld commenced in1885 and the game of golf first began in Taipingat the Taiping New Club in 1885.Aside from these, there are many others andthey include newspapers, government offices,hospitals, a post office, a railway station, anairfield, the library, a college, the police forceteam, the fire brigade, a recreation park,schools, churches, associations and otherstructures that were established ‘first’ inTaiping.Taiping, the second largest town in Perakafter Ipoh, gets its name from the Chinese word‘Tai-Peng’ which means eternal peace. Thehistory of thistown began in the 19th century when tin was discovered in1848. The mines attracted large numbers of settlers,particularly Chinese who subsequently fought over the tinfields.The battle for power was so ferocious that the Britishhad to intervene and thus eventually took control of thetown.Being the British Administrative centre, the townthrived economically and its population rosetremendously. Interestingly, it also gained a reputation asa clean and cool city.Taiping, known for having the highest rainfall in thecountry, was attractive to the British as it reminded themof the English April weather, often dispelling homesickness.Until today, usually after a heavy downpour, the lushtropical jungle and lofty hills would be covered by the whitecushy blanket of heavy mist.This prompted William Edward Maxwell, theAssistant Resident of Perak then and a noted Malayscholar, to a look for a suitable spot for a hill station thatwould appeal to his countrymen. Thus the Maxwell Hillwas founded and it quickly became the favourite retreatof high-ranking British officers, their families and guests.www.micpa.com.myAugust 2008 | The Malaysian Accountant |39

The unusual rainfall in Taiping has alsoblessed the Lake Gardens with a fertile and splendidcollection of flora and century-old rain-trees whosebranches stretch across the driveway and dip intothe lake’s waters. The Taiping Lake Garden whichdates back to 1880 is one of the oldest in thecountry and offers a beautiful panoramiclandscape.Within its locality and close to the MaxwellHill or Bukit Larut, lies the famous Taiping Zoowhich houses more than 180 species. Aninteresting feature of the Zoo is thenight safari. Also within the area is the disused golf course,the first in the country and third in Asia, which was closedin the 1980s because the flying golf balls posed a publichazard to patrons of the Lake Gardens.The Perak Museum in Taiping which dates back to1883 is another interesting visit. During Sir High Low’sadministration, he appointed Leonard Wary Jr, a botanistand geologist as the first curator of the Perak Museum.Leonard exhibited zoological, archaeological, ethnologicaland herbarium materials in the four galleries. Currently,only the herbarium section has changed while the rest isstill intact and extended with more items over the years.Indeed, the museum has the best and oldest specimens andartefacts dating over a century old.A visit to the museum library, the first in the country,is also worth the time as it is truly a walk through history.The museum library stores reference books, periodicals,government gazettes and other materials on history,anthropology, archaeology, culture, science, nature andothers to researchers. Presently, there are over 6,000collections available in the library and some of them arerare local and foreign collections.Through the years, the Perak Museum has alsoretained a close relationship with the British Museum inLondon, Raffles Museum in Singapore, CambridgeMuseum and Oxford Museum in England.The town centre of Taiping isquite small and can be covered in one day. Some part ofthe original General Hospital founded in 1880 still existsand so does the Old Kota Mosque on Jalan Masjid (MosqueRoad) which was built in 1897. The Old Clock Tower ofTaiping, the first in the country and within the city hasbeen converted into a tourist information office. Visitorscan pick up informative trail maps to guide them on walksaround the town. The Taiping Government offices locatedat Jalan Kota in a large Victorian style building wasconstructed at the end of the 19th Century looksresplendent when lit-up in the night. Of the BritishResident’s large and lofty home, the only thing left, are thecolumns that held the timber house.Aside from historical attractions, there are plenty ofgastronomy choices for everyone ranging from upmarketrestaurants to simple hawker fare.Though Taiping does not offer big city excitement itdoes have a special charm of its own.This article was written by Kavalyn Kreer, who writes lifestylearticles for publication on the web and print.40 | The Malaysian Accountant | August 2008 www.micpa.com.my