What are these financial statements?
Some might argue these are just the same as management accounts, but “formatted nicely in Microsoft Word”.
I wouldn’t disagree agree actually. Because it really depends on WHO actually gets this done for your company. For the uninformed, this could very well be the case, just a beautifully formatted version of the management accounts.
Is there more to it?
Unfortunately (or fortunately) there is.
Financial statements exist for the purpose of disclosure and reporting. That means the information from the management accounts gets re-presented in the form of an annual report. Important things to note here is that there are rules governing the preparation of these financial statements, rules imposed by SSM and the Companies Act. These rules require adherence to Malaysia Financial Reporting Standards (MFRS) or Malaysia Private Entities Reporting Standards (MPERS) set by the Malaysian Accounting Standards Board (MASB). These financial statements may also be audited (as is usually the case) or unaudited (a new exemption rule with some requirements). For companies with head offices or even subsidiaries in other countries, these financial statements may also be drawn up following International Financial Reporting Standards as well in addition to the MFRS or MPERS.
Why so many rules and standards?
Because what you present in the financial statements are meant to make it comparable to ALL other companies, not just companies in your trade, but all companies in Malaysia and across the globe. This enables any reader of the financial statements to understand them and because they all follow the same set of rules internationally, they become comparable and less susceptible to window-dressing or fraudulent misrepresentation. This becomes hugely relevant when you position the reader as a potential investor, a banker or the tax authorities.
Makes sense? Yup, we think so too.
Who gets this done?
Well, in case you haven’t checked the standards out, theres a whopping 400+ standards in the standards. And the Malaysian Companies Act is easily a thousand A4 pages worth of reading. Never mind the jargon.
It is clear that for audited financial statements, your appointed firm of auditors will prepare the same. However, if you meet the requirements for preparing unaudited financial statements, in place of your auditors, you should still get a professional firm of accountants to get this done for you. The accountants or partners in the firm should possess an international qualification like ACCA and be professional members of the Malaysian Institute of Accountants (MIA).
Since you have read our article on Director’s responsibilities, it is still your responsibility to get this done right so it really does make sense for you , as a director, to appoint a proper professional to get this done so you would have discharged your responsibility.
Talk to us
Get in touch with us today to find out how we can partner up with you to get this done in the most cost effective manner for you.
Be rest assured our partners and senior staff are all ACCA-certified and possess MIA recognition.
