ASSIGNMENT

Question 1:
International convergence of accounting standards has resulted in Malaysian Financial Reporting
Standards (FRS) being aligned to the International Financial Reporting Standards. However,
these standards are primarily designed for use by public listed companies and focuses on the
needs of capital market. In light of this, the Malaysian Accounting Standards Board has issued
Private Entity Reporting Standards (PERS) to fulfill the financial reporting requirement of small
and medium enterprises (SME) as well as an exposure draft to revise the standards.
The publication of IFRS for SMEs is a major breakthrough for companies throughout the world.
For the first time, SMEs will have a common high quality and internationally respected set of
accounting requirements. We believe the benefits will be felt in both developed and emerging
economies. - Comment by Sir David Tweedie, IASB Chairman
You are required to:
a. Justify the need to develop a set of accounting standards specifically for SMEs.
(10)
b. Explain the issues that need to be considered in revising the PERS.
(9)
c. Describe the type of entity to whom PERS should apply.
(6)
d. In the international arena, the International Accounting Standards Board (IASB) has also
issued accounting standards for SME. However, the Board has been criticised that it should
not bear the responsibility of formulating accounting standard for SMEs. Discuss the reasons
behind this criticism. (reference: Flower, J. (2004) The International Accounting Standard
Boards Proposal for Small and Medium Sized Entities: A fatally flawed project ?,
International Accountant, December, 17 18).
(20)
e. Discuss the key characteristics of IFRS for SMEs in comparison with full IFRS.
(10)
f. Explain the impact of adopting IFRS for SMEs for Malaysia private entities.
(10)
(Sub-total = 65 marks)
Question 2:
MFRS 124 Related Party Disclosures.
A Ltd
D Ltd seven companies:
a. The following
diagram shows the share ownership between
80%
B Ltd
10%
C Ltd*

45%
40%

Reporting Enterprise

90%
E Ltd
15%
F Ltd**

* The major shareholder of C Ltd, Mr Ma, is also the major shareholder of A Ltd.
** The managing director of F Ltd, Mr Lee, is also the managing director of the
reporting enterprise.
Required:
(i) Explain the term related party.
(3 marks)
(ii) Discuss whether the above companies are related parties of the reporting enterprise
and justify your answer.
(12 marks)
b. MFRS 124 requires disclosure of material related party transactions irrespective of
whether a price is charged and whether the transaction is conducted on arms length
terms.
Give five examples of related party transactions that may lead to disclosure being
required.
(5 marks)
c. Mr Man is the major shareholder of Universe Ltd and his wife is the major shareholder of
World Ltd. During the year, World Ltd made sales of RM10 million to Universe Ltd,
which accounted for 10% of World Ltds total sales of the year.
Discuss whether disclosure of these sales should be made in the accounts of Universe
Ltd and World Ltd and if so, the information to be disclosed.
(5 marks)
(Sub-total 25 marks)
Question 3:
MFRS 13 Fair Value Measurement applies to MFRSs that require or permit fair value
measurements or disclosures and provides a single MFRS framework for measuring fair value
and requires disclosures about fair value measurement. The Standard defines fair value on the
basis of an 'exit price' notion and uses a 'fair value hierarchy', which results in a market-based,
rather than entity-specific, measurement. MFRS 13 applies to annual periods beginning on or
after 1 January 2013.
You are required to answer the following:
a) Provide an overview of MFRS 13 Fair Value Measurement
b) Explain the benefits of the use of fair value in accounting
c) Explain the issues and problems in the fair value measurement debate

(30)
(10)
(10)

Link your answers to part b) and c) to part a) of your answer.

(Sub-total = 50 marks)

References / presentation
Overall total:

(5 marks)
(145 marks)