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ASEAN Linkage - accounting and reporting seminar 18 May 2012
www.pwc.com/th
To insert a picture…
PwC
Agenda
1. Introduction
2. Business reporting environment
3. Comparison of significant GAAP differences
4. Getting ready for the roadshow
2
PwC
Introduction
3
PwC 4
Introduction
IFRS
Thailand Malaysia Singapore
IFRS with some local
modifications
Adopted most of IFRS
2009
IFRS in 2012 except certain
standards
PwC
Business reporting environment
5
PwC
Malaysia
6
Business and reporting environment
Insert Picture for Malaysia
PwC
Overview of capital market
7
• Stock Exchange - Bursa Malaysia (MYX)
• Main market
• ACE market
• Financial reporting of listed companies is regulated by Securities Commission (SC).
Business and reporting environment - Malaysia
PwC
Overview of capital market
8
• 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
Business and reporting environment - Malaysia
PwC
Overview of independent oversight body
9
• Applies ISQC 1 from 1 January 2010
• Audit Oversight Board (AOB) - established by Securities Commission Malaysia
Business and reporting environment - Malaysia
PwC
Auditors
10
• 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
Overview
Business and reporting environment - Malaysia
PwC
Auditors
11
• Big-4 generally perform well under AOB review for ISQC 1 compliance
• Minimum 120 hours of training for every 3 years
• English competency
Quality of auditors
Business and reporting environment - Malaysia
Auditor rotation • 5 years partner rotation
• 2 years cooling period
PwC
Accountants
12
• No specific qualification required for accountants – generally have CPAs
• Quality
- Board spectrum between top tier and lower tier companies
Business and reporting environment - Malaysia
PwC
Accounting standards development
13
Business and reporting environment - Malaysia
Malaysian Accounting Standards Board
MFRS for PAEs from 2012
Separate set of standards for NPAEs
For listed companies – must also disclosed break down of realised and unrealised profit.
All financial statements must be prepared under Malaysian GAAP
PwC
Financial reporting requirements – Listed companies
14
Q1 Q2 Q3 Q4
60 days Quarterly
review (unaudited & unreviewed)
Quarterly review
(unaudited & unreviewed)
Quarterly review
(unaudited & unreviewed)
Due within
Audited financial
statements
120 days
Business and reporting environment - Malaysia
Quarterly report (un audited &
unreviewed)
Annual report 6 months
PwC
Auditing standards development
15
• Issued by the Malaysian Institute of Accountant (MIA)
• Adopted ISA Clarity in 2010
• Full ISA compliance
Business and reporting environment - Malaysia
PwC
Singapore
16
Business and reporting environment
Insert Picture for Malaysia
PwC
Overview of capital market
17
• Stock Exchange – Singapore Stock Exchange (SGX)
• Main Board
• Catalyst
• Financial reporting of listed companies is regulated by Accounting Corporate Reporting Authority (ACRA).
Business and reporting environment - Singapore
PwC
Overview of capital market
18
• Listing process
- Similar to Thailand and Malaysia
• Listing criteria
- 3 years track record/continuous management
- Minimum pre-tax profit or minimum market capitalisation
Business and reporting environment - Singapore
PwC
Overview of independent oversight body
19
• Applies ISQC 1 from 1 January 2010
• Oversight by ACRA
Business and reporting environment - Singapore
PwC
Auditors
20
• Must be a Singapore CPA
• Must register with SICPA
• Sign as audit firm
Overview
Business and reporting environment - Singapore
PwC
Auditors
21
• Big-4 generally perform well
• Minimum 120 hours of training for every 3 years
• English competency
Quality of auditors
Business and reporting environment - Singapore
Auditor rotation • 5 years partner rotation
• 2 years cooling period
PwC
Accountants
22
• No specific qualification required for accountants – generally have CPAs
• Quality
- Board spectrum between top tier and lower tier companies
Business and reporting environment - Singapore
PwC
Accounting standards development
23
Business and reporting environment - Singapore
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
PwC
Financial reporting requirements – Listed companies
24
Q1 Q2 Q3 Q4
45 days if market cap >
S$75m
Quarterly review
(unaudited & unreviewed)
Quarterly review
(unaudited & unreviewed)
Due within
Business and reporting environment - Singapore
Quarterly report (un audited &
unreviewed)
45 days if market cap <
S$75m
Half year (unaudited & unreviewed)
PwC
Financial reporting requirements – Listed companies
25
Q1 Q2 Q3 Q4 Due within
Unauditedannual
announcement
60 days
Business and reporting environment - Singapore
Annual report 120 days
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Auditing standards development
26
• Adopted ISA Clarity in 2010 Singapore Standards on Auditing (SSA)
• Full ISA compliance
Business and reporting environment - Singapore
PwC
Comparison of significant GAAP differences
27
PwC
Malaysia
28
Business and reporting environment - Malaysia Comparison of significant GAAP Differences
Insert Picture for Malaysia
PwC
MFRS vs IFRS
29
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.
Comparison of significant GAAP Differences
PwC
Singapore
30
Business and reporting environment - Malaysia Comparison of significant GAAP Differences
Insert Picture for Singapore
PwC
Singapore FRS vs IFRS
31
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.
Comparison of significant GAAP Differences
PwC
Singapore FRS vs IFRS
32
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 16.
Comparison of significant GAAP Differences
PwC
Singapore FRS vs IFRS
33
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.
Comparison of significant GAAP Differences
PwC
Singapore FRS vs IFRS
34
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 percentage-of-completion method.
Comparison of significant GAAP Differences
PwC
Thailand
35
Business and reporting environment - Malaysia Comparison of significant GAAP Differences
Insert Picture for Thailand
PwC
TFRS vs IFRS
36
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.
Comparison of significant GAAP Differences
PwC
TFRS vs IFRS
37
IFRS TFRS Key differences
IFRS 3 Business Combinations
TFRS 3 • IFRS 3 limits the choice to non-controlling 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.
Comparison of significant GAAP Differences
PwC
TFRS vs IFRS
38
IFRS TFRS Key differences
IFRS 4 Insurance Contracts
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 Financial Instruments: Disclosures
No existing TFRS
• IFRS 7 applies to all risks arising from all financial instruments, except certain instruments listed in the standard.
Comparison of significant GAAP Differences
PwC
TFRS vs IFRS
39
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.
Comparison of significant GAAP Differences
PwC
TFRS vs IFRS
40
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.
Comparison of significant GAAP Differences
PwC
TFRS vs IFRS
41
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 government-related entities and the government, and all other government-related entities.
• IAS 24 revises and simplifies the definition of a related party.
Comparison of significant GAAP Differences
PwC
TFRS vs IFRS
42
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.
Comparison of significant GAAP Differences
PwC
Typical GAAP differences for
Thai companies in selected industries
43
Business and reporting environment - Malaysia Comparison of significant GAAP Differences
PwC
Typical GAAP differences for Thai companies in selected industries
44
Comparison of significant GAAP Differences
• Functional currency
• Accounting for derivatives
• Deferred taxes
Oil & Gas
PwC
Typical GAAP differences for Thai companies in selected industries
45
Comparison of significant GAAP Differences
• Functional currency
• Accounting for derivatives
• Deferred taxes
• Arrangement which may contains a lease (IFRIC 4)
Utilities
PwC
Typical GAAP differences for Thai companies in selected industries
46
Comparison of significant GAAP Differences
• Accounting for derivatives
• Deferred taxes
• Arrangement which may contains a lease (IFRIC 4)
• Service concession
• Customer Loyalty Programmes
Telecommunication
PwC
Typical GAAP differences for Thai companies in selected industries
47
Comparison of significant GAAP Differences
• Accounting for derivatives
• Deferred taxes
• Revenue recognition
• Accounting for biological assets
Food and agricultural
PwC
Typical GAAP differences for Thai companies in selected industries
48
Comparison of significant GAAP Differences
• Revenue recognition & Customer loyalty programmes
• Accounting for derivatives
• Deferred taxes
Consumer products
PwC
Typical GAAP differences for Thai companies in selected industries
49
Comparison of significant GAAP Differences
• Revenue recognition – percentage of completion vs completion method
• Deferred taxes
Real estates
PwC
Financial reporting
requirements – for Banks
50
Business and reporting environment - Malaysia Comparison of significant GAAP Differences
PwC
Financial reporting requirements – for Banks
51
Business and reporting environment - Malaysia
- 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.
Comparison of significant GAAP Differences
Submission requirements
PwC
Financial reporting requirements – for Banks
52
Business and reporting environment - Malaysia
- 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.
Publication requirements
Comparison of significant GAAP Differences
PwC
Financial reporting requirements – for Banks
53
- 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
Submission requirements
Comparison of significant GAAP Differences
PwC
TFRS vs IFRS – Financial instruments
54
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-to-maturity assets.
• Loans and receivables and held-to-maturity investments are measured at amortised cost.
Comparison of significant GAAP Differences
PwC
TFRS vs IFRS – Financial instruments
55
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.
Comparison of significant GAAP Differences
PwC
TFRS vs IFRS – Financial instruments
56
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
Comparison of significant GAAP Differences
PwC
TFRS vs IFRS – Financial instruments
57
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.
Comparison of significant GAAP Differences
PwC
TFRS vs IFRS – Financial instruments
58
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.
Comparison of significant GAAP Differences
PwC
Getting ready for the roadshow
59
PwC 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?
PwC 61
• 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
Getting ready for the roadshow
PwC 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
PwC 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 50,00,000.
PwC 64
Getting ready for the roadshow
GAAP Reconciliation
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
Income statement reconciliation – Format 1:
Note: May consider presenting reconciliation for two or three years if needed.
PwC 65
Getting ready for the roadshow
GAAP Reconciliation
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 50 120 170
SG&A expenses (1,500) - (1,500)
Profit before tax 1,550 120 1,670
Taxation b (550) 50 (500)
Net profit after tax 1,000 170 1,170
Income statement reconciliation – Format 2:
PwC 66
Getting ready for the roadshow
GAAP 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
Statement of financial position reconciliation:
Note: May consider presenting reconciliation for two or three years if needed.
PwC 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
PwC 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 2011.
PwC 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
PwC 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
PwC 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
PwC 72
Q & A
PwC 73
If you need more information, please contact:
Sinsiri Thangsombat
Director, Assurance
Tel: 02-3441419
Email: [email protected]
Kanokporn Tirabanchasak
Senior Manager, Assurance & Capital Markets Group
Tel: 02-3441465
Email: [email protected]
Sanicha Acrakittilarp
Senior Manager, Assurance
Tel: 02-3441314
Email: [email protected]
Chanchai Chaiprasit
Partner, Assurance
Tel: 02-3441373
Email: [email protected]
Thank y0u
This publication has been prepared for general guidance on matters of interest only, and does
not constitute professional advice. You should not act upon the information contained in this
publication without obtaining specific professional advice. No representation or warranty
(express or implied) is given as to the accuracy or completeness of the information contained
in this publication, and, to the extent permitted by law, PricewaterhouseCoopers ABAS Ltd, its
members, employees and agents do not accept or assume any liability, responsibility or duty of
care for any consequences of you or anyone else acting, or refraining to act, in reliance on the
information contained in this publication or for any decision based on it.
© 2012 PricewaterhouseCoopers ABAS Ltd. All rights reserved. "PricewaterhouseCoopers"
and/or "PwC" refers to the individual members of the PricewaterhouseCoopers organisation in
Thailand, each of which is a separate and independent legal entity. Please see
www.pwc.com/structure for further details.