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Tuesday, August 31, 2010

Deferred IFRIC 15 brings relief

PETALING JAYA: The Malaysian Accounting Standards Board (MASB) has deferred implementing the much-debated accounting practice that recognises developers’ revenue only on completion of projects to 2012, MASB announced on its website yesterday.

Under the current system, developers report profits progressively.

The new ruling under the International Financial Reporting Interpretations Committee (IFRIC) 15 is deferred to Jan 1, 2012 after much deliberation among property players and accounting associations and the Securities Commission (SC).

Datuk Michael Yam

MASB said the deferment was necessary to enable further deliberation on how the move would affect the property sector. It was supposed to have been implemented on July 1 but met with opposition from developers.

The deferment would give MASB the opportunity to get more feedback from industry players on a proposed new standard on revenue from contracts with customers, MASB said.

“The proposed new standard, anticipated to subsume IFRIC 15 requirements, is expected in the middle of next year,” MASB said.

The proposed IFRIC 15 has been met with criticism from local property players.

Real Estate and Housing Developers’ Association Malaysia (Rehda) president Datuk Michael KC Yam said he was pleased that the proposed ruling had been deferred.

“That’s good news. It would have been detrimental had it not been deferred,” he told StarBiz.

In April, Rehda wrote to the MASB seeking clarification on the implementation of IFRIC 15, given the current legal framework and practices in Malaysia.

Rehda also set up a task force, assisted by accounting and legal experts, to address issues arising from Malaysia’s adoption of the IFRIC 15.

Yam said the reason for the IFRIC 15 was to have a standard system worldwide that people could understand. However, he said, the current system in Malaysia “reflected the current process on the ground.”

“Our (Rehda’s) stand is that the ruling was too much of a reflection of the system practised in Europe and America where only upon (project) completion does the developer get to recognise profits.

“Our system has always been based on progressive profits. This is recognised under the Housing Development Act, a legislation recognised by Parliament,” he said. “There are valid and bonafide differences between both systems.”

Yam said Rehda had subsequently engaged in a series of meetings and discussions with MASB, the Malaysian Institution of Accountants and the SC to recognise the fact that the existing system was unique and that more time was needed before a final decision was made to implement the IFRIC 15.

MASB also said on its website that it had hosted a special forum on Aug 16, and noted that the primary business model of the real estate industry in Asia, namely the “sell and build” concept, might be different from real estate business models employed in other jurisdictions.

“Therefore, it would be timely and more productive for stakeholders to analyse and provide timely input to the IASB (International Accounting Standards Board) for consideration before they finalise the standard on revenue from contracts with customers,” it said.

Yam said he hoped the system that would be implemented in 2012 would be a modification of the IFRIC 15 in some way.

“I hope that by 2012 there will be some changes to what was supposed to be implemented initially. Our system is not perfect. We need to study other standards to come up with a suitable one,” he said.

By The Star

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