ASEAN Linkage - accounting and reporting seminar 18 May 2012 To insert a picture

Transcription

1 ASEAN Linkage - accounting and reporting seminar 18 May 2012 To insert a picture

2 Agenda 1. Introduction 2. Business reporting environment 3. Comparison of significant GAAP differences 4. Getting ready for the roadshow 2

3 Introduction 3

4 Introduction Adopted most of IFRS 2009 IFRS in 2012 except certain standards IFRS with some local modifications IFRS Thailand Malaysia Singapore 4

5 Business reporting environment 5

6 Business and reporting environment Insert Picture for Malaysia Malaysia 6

7 Business and reporting environment - Malaysia Overview of capital market Stock Exchange - Bursa Malaysia (MYX) Main market ACE market Financial reporting of listed companies is regulated by Securities Commission (SC). 7

8 Business and reporting environment - Malaysia Overview of capital market Listing process - Similar to Thailand - Submit prospectus - Obtain approval from the Securities Commission Malaysia - Obtain listing eligibility approval from the MYX Listing criteria - Main market - Profit test/market capitalisation test - ACE market must have a sponsor 8

9 Business and reporting environment - Malaysia Overview of independent oversight body Applies ISQC 1 from 1 January 2010 Audit Oversight Board (AOB) - established by Securities Commission Malaysia 9

10 Business and reporting environment - Malaysia Auditors Overview Any professional qualification but : must be registered as a Malaysian Institute of Accountants (MIA) member, and Obtain a licence from the MoF. Auditors of listed companies: Must register with the AOB Annual registration & file review Auditors of banks Big 4 only 10

11 Business and reporting environment - Malaysia Auditors Quality of auditors Big-4 generally perform well under AOB review for ISQC 1 compliance Minimum 120 hours of training for every 3 years English competency Auditor rotation 5 years partner rotation 2 years cooling period 11

12 Business and reporting environment - Malaysia Accountants No specific qualification required for accountants generally have CPAs Quality - Board spectrum between top tier and lower tier companies 12

13 Business and reporting environment - Malaysia Accounting standards development All financial statements must be prepared under Malaysian GAAP MFRS for PAEs from 2012 Malaysian Accounting Standards Board Separate set of standards for NPAEs For listed companies must also disclosed break down of realised and unrealised profit. 13

14 Business and reporting environment - Malaysia Financial reporting requirements Listed companies Q1 Q2 Q3 Q4 Due within Quarterly report (un audited & unreviewed) Quarterly review (unaudited & unreviewed) Quarterly review (unaudited & unreviewed) Quarterly review (unaudited & unreviewed) 60 days Audited financial statements 120 days Annual report 6 months 14

15 Business and reporting environment - Malaysia Auditing standards development Issued by the Malaysian Institute of Accountant (MIA) Adopted ISA Clarity in 2010 Full ISA compliance 15

16 Business and reporting environment Insert Picture for Malaysia Singapore 16

17 Business and reporting environment - Singapore Overview of capital market Stock Exchange Singapore Stock Exchange (SGX) Main Board Catalyst Financial reporting of listed companies is regulated by Accounting Corporate Reporting Authority (ACRA). 17

18 Business and reporting environment - Singapore Overview of capital market Listing process - Similar to Thailand and Malaysia Listing criteria - 3 years track record/continuous management - Minimum pre-tax profit or minimum market capitalisation 18

19 Business and reporting environment - Singapore Overview of independent oversight body Applies ISQC 1 from 1 January 2010 Oversight by ACRA 19

20 Business and reporting environment - Singapore Auditors Overview Must be a Singapore CPA Must register with SICPA Sign as audit firm 20

21 Business and reporting environment - Singapore Auditors Quality of auditors Big-4 generally perform well Minimum 120 hours of training for every 3 years English competency Auditor rotation 5 years partner rotation 2 years cooling period 21

22 Business and reporting environment - Singapore Accountants No specific qualification required for accountants generally have CPAs Quality - Board spectrum between top tier and lower tier companies 22

23 Business and reporting environment - Singapore Accounting standards development Accounting Standards Council (ASC) Singapore Financial Reporting Standards (SFRS) All companies subject to financial reporting apply the same set of accounting standards. IFRS, US GAAP, UK GAAP are also allowed 23

24 Business and reporting environment - Singapore Financial reporting requirements Listed companies Q1 Q2 Q3 Q4 Due within Quarterly report (un audited & unreviewed) Quarterly review (unaudited & unreviewed) Quarterly review (unaudited & unreviewed) 45 days if market cap > S$75m Half year (unaudited & unreviewed) 45 days if market cap < S$75m 24

25 Business and reporting environment - Singapore Financial reporting requirements Listed companies Q1 Q2 Q3 Q4 Due within Unaudited annual announce ment 60 days Annual report 120 days 25

26 Business and reporting environment - Singapore Auditing standards development Adopted ISA Clarity in 2010 Singapore Standards on Auditing (SSA) Full ISA compliance 26

27 Comparison of significant GAAP differences 27

28 Comparison Business and of reporting significant environment GAAP Differences - Malaysia Insert Picture for Malaysia Malaysia 28

29 Comparison of significant GAAP Differences MFRS vs IFRS IFRS MFRS Key differences IAS 41 Agriculture No existing MFRS Agricultural assets are carried at cost under MFRS. IFRIC 15 Agreements for the Construction of Real Estate No existing MFRS Revenue from property development is always accounted for using percentage of completion method. 29

30 Comparison Business and of reporting significant environment GAAP Differences - Malaysia Insert Picture for Singapore Singapore 30

31 Comparison of significant GAAP Differences Singapore FRS vs IFRS IFRS Singapore FRS Key differences IAS 12 Income Taxes FRS 12 No deferred tax is accounted for temporary difference arising from foreign income not yet remitted to Singapore if: a) the entity is able to control the timing of the reversal of the temporary difference; and b) it is probable that the temporary difference will not reverse in the foreseeable future. Under IAS 12, deferred tax for temporary difference arising from such unremitted foreign income is required. 31

32 Comparison of significant GAAP Differences Singapore FRS vs IFRS IFRS Singapore FRS Key differences IAS 16 Property, Plant and Equipment (PPE) FRS 16 For an enterprise which had revalued its PPE before 1 January 1984 (in accordance with the prevailing accounting standard at the time); or performed any one-off revaluation on its PPE between 1 January 1984 and 31 December 1996 (both dates inclusive), there will be no need to revalue those assets in accordance with paragraph 29 of FRS

33 Comparison of significant GAAP Differences Singapore FRS vs IFRS IFRS Singapore FRS Key differences IAS 27 Consolidated and Separate Financial Statements FRS 27 The ultimate holding company or any intermediate parent of a company that seeks exemption from consolidation to produce consolidated financial statements that are available for public use. These consolidated financial statements need not comply with any specific accounting framework. IAS 27 requires that those consolidated financial statements comply with IFRS. 33

34 Comparison of significant GAAP Differences Singapore FRS vs IFRS IFRS Singapore FRS Key differences IFRIC 15 Agreements for the Construction of Real Estate INT FRS 115 The standard residential property sales in Singapore that meet certain criteria would require such sales to be accounted for on a percentageof-completion method. 34

35 Comparison Business and of reporting significant environment GAAP Differences - Malaysia Insert Picture for Thailand Thailand 35

36 Comparison of significant GAAP Differences TFRS vs IFRS IFRS TFRS Key differences IFRS 1 First-time Adoption of International Financial Reporting Standards No existing TFRS IFRS 1 applies to an entity that moving from national GAAP to IFRS on its first IFRS financial statements and interim reports. It contains a number of optional exemptions and mandatory exceptions to the requirement for retrospective application. 36

37 Comparison of significant GAAP Differences TFRS vs IFRS IFRS TFRS Key differences IFRS 3 Business Combinations TFRS 3 IFRS 3 limits the choice to noncontrolling interests that are present ownership instruments and entitle their holders to a proportionate share of the entity s net assets in the event of liquidation and requires the acquirer to measure all other components of non-controlling interest at the acquisition-date fair value, unless IFRSs require another measurement basis. 37

38 Comparison of significant GAAP Differences TFRS vs IFRS IFRS TFRS Key differences IFRS 4 Insurance Contracts IFRS 7 Financial Instruments: Disclosures No existing TFRS No existing TFRS IFRS 4 applies to all issuers of insurance contracts whether or not the entity is legally an insurance company. It does not apply to accounting for insurance contracts by policyholders. IFRS 7 applies to all risks arising from all financial instruments, except certain instruments listed in the standard. 38

39 Comparison of significant GAAP Differences TFRS vs IFRS IFRS TFRS Key differences IFRS 8 Operating Segments TAS 14 Segment Reporting Under TAS 14, segments are either business or geographical. IFRS 8 replaces IAS 14 Segment Reporting. It uses a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. 39

40 Comparison of significant GAAP Differences TFRS vs IFRS IFRS TFRS Key differences IAS 12 Income Taxes TAS 12 IAS 12 gives an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. IAS 17 Leases TAS 17 IAS 17 has removed the requirement for land title to pass before land leases can qualify as finance leases. IAS 19 Employee Benefits TAS 19 TAS 19 has provided 4 optional transitional provisions. 40

41 Comparison of significant GAAP Differences TFRS vs IFRS IFRS TFRS Key differences IAS 24 Related Party Disclosures TAS 24 IAS 24 gives an exemption from all of the disclosure requirements for transactions between governmentrelated entities and the government, and all other government-related entities. IAS 24 revises and simplifies the definition of a related party. 41

42 Comparison of significant GAAP Differences TFRS vs IFRS IFRS TFRS Key differences IAS 41 Agriculture No existing TFRS All biological assets are measured at fair value less costs to sell, with the change in the carrying amount reported as part of profit or loss from operating activities. Agricultural produce harvested from an entity s biological assets is measured at fair value less costs to sell at the point of harvest. 42

43 Comparison Business and of reporting significant environment GAAP Differences - Malaysia Typical GAAP differences for Thai companies in selected industries 43

44 Comparison of significant GAAP Differences Typical GAAP differences for Thai companies in selected industries Oil & Gas Functional currency Accounting for derivatives Deferred taxes 44

45 Comparison of significant GAAP Differences Typical GAAP differences for Thai companies in selected industries Utilities Functional currency Accounting for derivatives Deferred taxes Arrangement which may contains a lease (IFRIC 4) 45

46 Comparison of significant GAAP Differences Typical GAAP differences for Thai companies in selected industries Telecommunication Accounting for derivatives Deferred taxes Arrangement which may contains a lease (IFRIC 4) Service concession Customer Loyalty Programmes 46

47 Comparison of significant GAAP Differences Typical GAAP differences for Thai companies in selected industries Food and agricultural Accounting for derivatives Deferred taxes Revenue recognition Accounting for biological assets 47

48 Comparison of significant GAAP Differences Typical GAAP differences for Thai companies in selected industries Consumer products Revenue recognition & Customer loyalty programmes Accounting for derivatives Deferred taxes 48

49 Comparison of significant GAAP Differences Typical GAAP differences for Thai companies in selected industries Real estates Revenue recognition percentage of completion vs completion method Deferred taxes 49

50 Comparison Business and of reporting significant environment GAAP Differences - Malaysia Financial reporting requirements for Banks 50

51 Comparison Business and of reporting significant environment GAAP Differences - Malaysia Financial reporting requirements for Banks Submission requirements - Annual submit audited financial statements to Bank Negara Malaysia (BNM) within 3 months after the close of each financial year. - Interim submit quarterly and half-yearly financial reports to BNM no later than 4 weeks after the end of each interim period. 51

52 Comparison Business and of reporting significant environment GAAP Differences - Malaysia Financial reporting requirements for Banks Publication requirements - Annual publish a complete set of the financial statements within 14 days after the general meeting, in at least two local daily newspapers. - Interim disclose in the websites on a quarterly and half-yearly basis, not later than 8 weeks after the close of the interim period. 52

53 Comparison of significant GAAP Differences Financial reporting requirements for Banks Submission requirements - Annual Immediately after the figures are available, but in any event not later than 60 days after the relevant financial period. - Interim Immediately after the figures are available, but in any event not later than 45 days after the quarter end 53

54 Comparison of significant GAAP Differences TFRS vs IFRS Financial instruments IFRS TFRS Key differences IAS 39 Financial Instruments: Recognition and Measurement No existing TFRS All financial assets and financial liabilities are measured initially at fair value under IAS 39. The measurement of financial instruments after initial recognition depends on their initial classification. All financial assets are measured at fair value except for loans and receivables, held-tomaturity assets. Loans and receivables and held-tomaturity investments are measured at amortised cost. 54

55 Comparison of significant GAAP Differences TFRS vs IFRS Financial instruments IFRS TFRS Key differences IAS 39 Financial Instruments: Recognition and Measurement No existing TFRS Financial liabilities are measured at amortised cost using the effective interest method unless they are classified at fair value through profit or loss. 55

56 Comparison of significant GAAP Differences TFRS vs IFRS Financial instruments IFRS TFRS Key differences IAS 39 Financial Instruments: Recognition and Measurement No existing TFRS Hedging is the process of using a financial instrument (usually a derivative) to mitigate all or some of the risk of a hedged item. Hedge accounting changes the timing of recognition of gains and losses. There are three types of hedge relationship: Fair value hedge Cash flow hedge Net investment hedge 56

57 Comparison of significant GAAP Differences TFRS vs IFRS Financial instruments IFRS TFRS Key differences IAS 32 Financial Instruments: Presentation TAS 107 Financial Instruments: Disclosure and Presentation IAS 32 revises the scope and definitions of financial assets, financial liabilities, and equity instruments, in order to comply with IFRS 9 and IAS 39. It also provides additional guidance, illustration examples on classification of contracts settled in an entity s own equity instruments, puttable instruments, and treasury shares. 57

58 Comparison of significant GAAP Differences TFRS vs IFRS Financial instruments IFRS TFRS Key differences IFRS 7 Financial Instruments: Disclosures No existing TFRS IFRS 7 applies to all risks arising from all financial instruments, except certain instruments listed in the standard. 58

59 Getting ready for the roadshow 59

60 Getting ready for the roadshow Who are our target audience? What do they want to know? How best to market the Company what makes your company an attractive investment? 60

61 Getting ready for the roadshow Consider what the investors want to know e.g. Management discussion & analysis Future business plan & forecast Growth Story Dividend payment ability and WHT Narrative GAAP differences and/or GAAP Reconciliation 61

62 Getting ready for the roadshow GAAP Reconciliation Reconciliation of statement of financial positions Reconciliation of income statement Reconciliation of statement of comprehensive income Reconciliation of earnings per share and diluted earnings per share Notes to reconciliations TFRS Reconciliation adjustments IFRS 62

63 Getting ready for the roadshow GAAP Reconciliation Assume Company A has the following differences between TFRS and IFRS: Company A has a forward contract at fair value gain of Baht 120,000,000. Under TFRS, Company A does not record any gain or loss on forward contract. Company A does not record any deferred tax assets and liabilities. If IAS 12 is applied, Company A will have net deferred tax assets of Baht 50,00,

64 Getting ready for the roadshow GAAP Reconciliation Income statement reconciliation Format 1: Notes 2011 Baht (million) Net profit under TFRS 1,000 Unrealised gain on forward contract a 120 Deferred income tax, including tax effect on the above adjustment b 50 Net profit under IFRS 1,170 Note: May consider presenting reconciliation for two or three years if needed. 64

65 Getting ready for the roadshow GAAP Reconciliation Income statement reconciliation Format 2: Notes TFRS 2011 (million) Recon adjustments 2011 Baht (million) Revenue 8,000-8,000 Cost of goods sold a (5,000) - (5,000) Gross profit 3,000-3,120 Other income SG&A expenses (1,500) - (1,500) Profit before tax 1, ,670 Taxation b (550) 50 (500) Net profit after tax 1, ,170 65

66 Getting ready for the roadshow GAAP Reconciliation Statement of financial position reconciliation: Notes 2011 Baht (million) Net assets under TFRS 30,000 Unrealised gain on forward contract a 120 Deferred income tax, including tax effect on the above adjustment b 50 Net assets under under IFRS 30,170 Note: May consider presenting reconciliation for two or three years if needed. 66

67 Getting ready for the roadshow GAAP Reconciliation Statement of financial position reconciliation (Cont d): Format: - No specific format: - Reconciliation of net assets or - Line-by-line reconciliation - Reconciliation of total assets, total liabilities and total equity 67

68 Getting ready for the roadshow GAAP Reconciliation Notes to reconciliation example: Note a: Fair value of derivative As at 31 December 2011, the Company has an outstanding of a forward contracts to hedge USD/Baht exchange rate. Under TFRS, there is no specific accounting standard on accounting for derivative. The Company does not recognise any unrealised gains or losses on forward contracts in its income statement. Under IFRS, in accordance with IAS 39 Financial Instruments: Recognition and Measurement, derivatives are recognised at fair value on statement of financial position. Any fair value changes on derivatives are recognised in income statement in the period in which the changes occur, unless hedge accounting is applied. The Company does not apply hedge accounting for this transaction. Under IFRS, the unrealised fair value gain on forward contract of Baht 120 million resulted in an increase in net profit before tax with a corresponding increase in net assets of Baht 120 million as at 31 December

69 Getting ready for the roadshow GAAP Reconciliation Notes to reconciliation example: Note b: Deferred taxes Consider disclosing: Current accounting policy Accounting policy under IFRS Sources of deferred taxes, including details of each statement of financial position items with deferred tax implications 69

70 Getting ready for the roadshow GAAP Reconciliation Notes to reconciliation example: Note b: Deferred taxes Under TFRS, the Company does not recognise any deferred taxes on temporary differences. Under IFRS, IAS 12 Income taxes required recognition of deferred tax assets or liabilities using liability method. The following table shows analysis of net deferred tax assets under IFRS: Deferred tax assets Deferred tax liabilities Net deferred tax assets Baht (million) Baht (million) Baht (million) Depreciation (114) Provision for retirement benefits 200 Derivative asset (36) 200 (150) 50 70

71 Getting ready for the roadshow Summary Planning & marketing Investment story Prepare to explain the differences Accounting and financial reporting differences Reconciliation vs narrative differences Consider the availability of resources & time and effort required 71

72 Q & A 72

73 If you need more information, please contact: Chanchai Chaiprasit Partner, Assurance Tel: Sinsiri Thangsombat Director, Assurance Tel: Kanokporn Tirabanchasak Senior Manager, Assurance & Capital Markets Group Tel: Sanicha Acrakittilarp Senior Manager, Assurance Tel:

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