Accounting Standards in Malaysia

All companies must prepare their financial statements according to the relevant accounting standards.

• Malaysian companies are required to keep statutory financial statements under the accounting standards issued by the Malaysian Accounting Standards Board (MASB).
• Foreign companies listed on the stock exchange should prepare financial statements in accordance with the International Financial Reporting Standards (IFRSs).
• Private companies are required to comply the Malaysian Private Entities Reporting Standards (MPERS).
• Public companies are required to comply the Malaysian Financial Reporting Standards (MFRSs)

Financial Year End for Malaysia Companies

Each company is responsible for determining their preferred date for the financial year-end, as there is no specific date specified for this purpose under the Companies Act 2016. Majority of companies in Malaysia have opt to have their financial year-end on either:

• 31st December (final day of the calendar year)
• 31st March, 30th June , 30th September (last day of the quarter)

Every company is required to prepare financial statements for not more than 18 months from the date of incorporation and submit the financial statements to the Companies Commission of Malaysia (SSM) and the Inland Revenue Board of Malaysia.

Essential accounting & tax compliance requirements

1. Bookkeeping
2. Individual Income Tax
3. Annual Audit
4. XBRL

Requirement 1: Bookkeeping

In Malaysia, all companies are obligated to maintain accurate and complete records and accounts in compliance with the regulation.

The financial reports produced by each company are critical for both the accounting processes and business references. Examples of financial records includes invoices, serially numbered receipts, income records, purchase and business expense records and accounting and statement records.

The benefits of bookkeeping include:

• Clear financial foresight and better understanding of the company’s overall financial health
• Understanding of business performance
• Fast discovery of possible financial mismanagements
• Track your company’s expenses

Requirement 2: Individual Income Tax

According to section 248 of the Companies Act 2016,

• The company directors shall prepare the financial statements within 18 months from the date of the company’s incorporation and subsequently within six months of its financial year-end.
• The financial statements must be audited before being sent to every member of the company, every person who is entitled to receive the notice of general meetings, every auditor of the company and every debenture holder of the company.
• For public companies, the financial statements are to be sent to every member previously stated and presented at the annual general meeting.
  The penalty if a director violates this requirement, the director is liable to a fine not more than RM 500,000, or imprisonment for a term not exceeding one year, or both.

What is included in financial statements?

Under section 249 of the Companies Act 2016, the annual financial statements for a financial year shall give a true and fair value of the financial position as at the end of the financial year and the financial performance for the financial year of the company.

• The financial statements shall contain the following information:
• The director’s remuneration
• The director’s retirement benefits
• Compensation to directors for loss of office
• Loans, quasi-loans and other dealings in favour of directors
• The total amount paid to or received by the auditors as remuneration for their services as directors.

For private companies

The financial statements of the private companies are to be submitted to the SSM in the XBRL format within a period of 30 days from the date of distributing the financial statements and reports to the members of the company.

Requirement 3: Annual Audit

All Malaysia companies need to be audited unless they fall into the category of audit exemption. The qualifying criteria for audit exemption are that the private company has to be:

• A dormant company
• A zero-revenue company
• A threshold-qualified company

Dormant companies

A company is dormant if the company does not carry on business and has no accounting transaction in the financial year.

Zero-revenue companies

A zero-revenue company is qualified for audit exemption if:

• It does not receive any revenue during the present financial year
• Did not receive revenue in the past two financial years
• The total assets in the current statement of financial position does not exceed RM 300,000
• The total assets in the statement of financial position of the past two financial years do not exceed RM 300,000

According to the MASB, the revenue does not include credit entries for reversal of accounting entries arising from earlier entries, accounting entries related to taxation, a reversal of provisions made earlier and gain on recognition of property plant, equipment and investment property in the statement of comprehensive income.

Threshold-qualified companies

Three requirements must be met for the company to be eligible for audit exemption:

• Have an annual revenue of RM 100,000 or less during the financial year and the past two years
• The total assets in the current statement of financial position of RM 300,000 or less and in the past two financial years
• Five employees or less at the end of the current financial year and past two financial years.

Companies in Malaysia that are registered as a sole proprietor or partnership are not required by the Malaysian law to have its financial statements audited annually.

Requirement 4: XBRL

Many countries, including Malaysia, have adopted Extensible Business Reporting Language (XBRL) to process the financial data as it reduces costs, is efficient and accurate.

The Malaysian Business Reporting System (MBRS) is a platform based on the XBRL used to submit both the non-financial and financial information by registered companies in Malaysia.

The financial components include:

• Financial statements and reports (FS)
• Annual return (AR)
• Exemption applications related to the financial statements and reports and annual return applications
• Statement of comprehensive income or income statement
• Balance sheets
• Statement of change in equity
• Cash flow statement