Discuss about the Fair Value Measurement and Mandated Accounting.
MFRS refers to the Malaysian Financial Reporting Standards. It was set up by the Malaysian Accounting Standard Board. It came into effect on January 1, 2002. It is based on the IFRS that helps in improving the overall credibility and reliability of the Act. It was one of the most significant movement in the financial capital markets. There are different standards of auditing and accounting that have been introduced under the MFRS and the companies are expected to understand and deal with them. It helps in improving the quality of the accounting for the company and what they follow to generate effective results. It helps in presenting the best view of the accounting for the companies that helps them the investors in understanding the position of the company and ascertain whether they need to invest in the company or not.
Rational Behind Implmeneting MFRs
The main rational behind implementing MFRs is that companies are urged to adopt this framework as that would help them in following a proper method for accounting disclosures and treatment. And it will make the entire system very transparent for the company and its management. It will also provide a base on which the management of the company can place its decisions and take decisions accordingly (Abbott & Kantor, 2017). In case there is any issue with the standards the company can put its reliance on these accounting standards and judge what they should do in a situation so that they are able to generate effective results in the future. The previous system was not that reliable as there was no consistency so companies would find it difficult to adopt them and provide necessary results in their financial statements with respect to such system. Thus there was a srequirement of such a system that was more facts based and would help in the overall prepration of financials in such a way that the needs of all the stakeholders who are dependant on the company in some or the other way would be sufficied.
Changes with respect to implementing MFRs
The main changes after implementing MFRs would be that It will help in saving the company from unforeseen issues and discrepancies that would eventually help them for the future. MFRS is a standard regulation that the companies need to abide with so that in future the level of issues that the company would face with respect to its accounting would be minimum. It can also be seen that it is in line with IFRS, so that helps in improving the overall transparency of the accounts and would also help the companies in comparing their position in the international market based on their peers in the same industry so that in future the company gains from this. It also helps the management of the company in case of group companies to prepare consolidated financial statements based on similar terms so that in future the company would not have to suffer owing to its poor accounting methods and principles. The main challenges with respect to MFR is highlighted above.
There are certain challenges also that companies face with respect to MFRS and how they deal with it is the question:
Challenges faced with respect to MFRS
The main challenges that the companies face relates to that the management are not properly aware on how these standard works and so they are not able to make full utilization of the same with respect to their financial data. MFRS provides them a basis but having proper knowledge of that along with proper training is important. So, the company needs to train their employees so that they make effective use of these standards and generate positive results. These trainings require a lot of effort and cost so this is a big disadvantage that companies face. Another major challenge with respect to MFRS is that it is not a global accounting standard that is followed all over the world, it is based on IFRS but it is not IFRS, there are chances of difference between the two so that would make the companies difficult when it comes to consolidation with their parent companies that are situated in other parts of the world. So, the global aspect is one of the biggest challenges with respect to these accounting standards and it is important that the management should have proper knowledge before applying them (Alexander, 2016).
MFRS 15 that deals with automobile industry finds it very difficult to be implemented given the fact that these industries have unusual discount, warranties that are offered, so makes it difficult to value them accordingly. So, the need for the hour would be to that significant judgement should be made while implementing such standards in the company and having a proper understanding from the affected parties would help in generating effective results for the company.
The telecom industry is also affected largely by these standards, and the key challenges that they face would include Identifying Performance Obligations. Allocating the SSPs to the POs. Getting the Information Technology involved in case of operations of the company. The main challenge is deciding the approach that the companies would follow so that the overall effect is as low as possible. The challenges that the company faces can be reduced by taking help from experts and IT people (Maynard, 2017).
Based on the above analysis it can be said that the companies face a lot of challenges with respect to the MFRS but the underlying advantages cannot be ignored. In the global context it would help the companies to have a stand in comparison to their peers in similar industry and their investors can also rely on their financials. It would help them in generating the best results possible with respect to data analysis and data management and accounting system and accounting approach (Boghossian, 2017). The long-term benefits should not be ignored in comparison to short term challenges that the companies might face with respect to certain situations and certain areas. Experts are always there to guide and provide a solution. MFRS has a bright future that cannot be ignored given its credibility and reliability.
Abbott, M., & Kantor, A. (2017). Fair Value Measurement and Mandated Accounting Changes: The Case of the Victorian Rail Track Corporation. Australian accounting Review.
Alexander, F. (2016). The Changing Face of Accountability. The Journal of Higher Education, 71(4), 411-431.
Boghossian, P. (2017). The Socratic method, defeasibility, and doxastic responsibility. Educational Philosophy and Theory, 50(3), 244-253.
Maynard, J. (2017). Financial accounting reporting and analysis (second ed.). United Kingdom: Oxford University Press.