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MERGER & AFFILIATION

SEMINAR 2013

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SEMINAR 2013

5 DECEMBER 2013

Eastern & Oriental Hotel, Penang

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RECENT DEVELOPMENT AND

REGULATORY CHANGES


SEMINAR 2013

Disclaimer

The views and opinions expressed herein do not represent the official views of the

Disclaimer

The views and opinions expressed herein do not represent the official views of the

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The views and opinions expressed herein do not represent the official views of theMIA, its Council or any of its Committees. The materials presented are intended toconvey the general information only and they should not be taken as the officialMIA view. Neither the MIA, its Council or any of its Committees nor its staff shallaccept responsibility or legal liability arising from or connected to the accuracy,completeness or reliability of the materials and information contained herein.

The views and opinions expressed herein do not represent the official views of theMIA, its Council or any of its Committees. The materials presented are intended toconvey the general information only and they should not be taken as the officialMIA view. Neither the MIA, its Council or any of its Committees nor its staff shallaccept responsibility or legal liability arising from or connected to the accuracy,completeness or reliability of the materials and information contained herein.


SEMINAR 2013

PERSONAL DATA PROTECTION ACT (PDPA) 2010

INTERVIEW GUIDELINES FOR APPROVED COMPANY AUDITORS/ LIQUIDATORS

MIA BY-LAWS (ON PROFESSIONAL ETHICS, CONDUCT AND PRACTICES) FOR PROFESSIONAL ACCOUNTANTS

• Conflicts of Interest

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• Conflicts of Interest

• A breach of a Requirement of the Institute’s BY-Laws

• Redefinition of “Engagement Team”

• Partner Rotation

AUDITING

ACCOUNTING

TAXATION

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PERSONAL DATA PROTECTION ACT

(PDPA) 2010


SEMINAR 2013

PERSONAL DATA PROTECTION ACT 2010 COMES INTO FORCE 15 NOVEMBER 2013

• The PDPA is a legislation that seeks to regulate the processing of personaldata by data users in commercial transactions, so as to safeguard theinterests of data subjects.

• The PDPA is a legislation that seeks to regulate the processing of personaldata by data users in commercial transactions, so as to safeguard theinterests of data subjects.

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interests of data subjects.

• The Minister of Communications and Multimedia has recently annoucedthat the Personal Data Protection Act (PDPA) 2010 came into force on 15November 2013.

interests of data subjects.

• The Minister of Communications and Multimedia has recently annoucedthat the Personal Data Protection Act (PDPA) 2010 came into force on 15November 2013.


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Several new regulations have also took effect from 15 November 2013:

� Personal Data Protection Regulations 2013, which provide someclarification on the seven personal data protection principles;

� Personal Data Protection (Class of Data Users) Order 2013, whichprovide details on the class of data users that must be registered under

Several new regulations have also took effect from 15 November 2013:

� Personal Data Protection Regulations 2013, which provide someclarification on the seven personal data protection principles;

� Personal Data Protection (Class of Data Users) Order 2013, whichprovide details on the class of data users that must be registered under

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provide details on the class of data users that must be registered underthe PDPA;

� Personal Data Protection (Registration of Data User) Regulations 2013,which provide details on the process of registration as a data user anddocuments needed for submission; and

� Personal Data Protection (Fees) Regulations 2013, which deal with feespayable under the PDPA.

provide details on the class of data users that must be registered underthe PDPA;

� Personal Data Protection (Registration of Data User) Regulations 2013,which provide details on the process of registration as a data user anddocuments needed for submission; and

� Personal Data Protection (Fees) Regulations 2013, which deal with feespayable under the PDPA.


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• We wish to draw your attention to clause 9(b) in the Schedule of the Personal DataProtection (Class of Data User) Order 2013, which provides that a person whoentered into partnership under the Partnership Act 1961 is a data user.

• We wish to draw your attention to clause 9(b) in the Schedule of the Personal DataProtection (Class of Data User) Order 2013, which provides that a person whoentered into partnership under the Partnership Act 1961 is a data user.


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entered into partnership under the Partnership Act 1961 is a data user.

• Under section 15(1) of the PDPA, such a data user is required to register withPersonal Data Protection Commissioner using Form 15(1) (can be downloadedfrom www.pdp.gov.my).

entered into partnership under the Partnership Act 1961 is a data user.

• Under section 15(1) of the PDPA, such a data user is required to register withPersonal Data Protection Commissioner using Form 15(1) (can be downloadedfrom www.pdp.gov.my).


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• Member firms (in partnerships) are advised to take immediate steps in ensuring theiroperations are in compliance with the PDPA.

• Member firms (in partnerships) are advised to take immediate steps in ensuring theiroperations are in compliance with the PDPA.


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• There is a three month sunrise period to comply with the PDPA and all data usersare required to register themselves with the Personal Data Protection Department(PDPD) by 14 February 2014.

• Under section 16(4) of the PDPA, a person who fails to register, and processpersonal data without a certificate of registration, commits an offence and shall onconviction, be liable to a fine not exceeding five hundred thousand ringgit or toimprisonment for a term not exceeding three years or to both.

• There is a three month sunrise period to comply with the PDPA and all data usersare required to register themselves with the Personal Data Protection Department(PDPD) by 14 February 2014.

• Under section 16(4) of the PDPA, a person who fails to register, and processpersonal data without a certificate of registration, commits an offence and shall onconviction, be liable to a fine not exceeding five hundred thousand ringgit or toimprisonment for a term not exceeding three years or to both.


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• Nevertheless, member firms in other forms such as sole-proprietorship and limitedliability partnerships are still required to comply with the principles of the personaldata protection, although there is no data user registration requirement at this

• Nevertheless, member firms in other forms such as sole-proprietorship and limitedliability partnerships are still required to comply with the principles of the personaldata protection, although there is no data user registration requirement at this


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data protection, although there is no data user registration requirement at thismoment.

• Completed forms should be submitted to the Registration Unit, Personal DataProtection Department (PDPD), Ministry of Communications and MultimediaMalaysia.

data protection, although there is no data user registration requirement at thismoment.

• Completed forms should be submitted to the Registration Unit, Personal DataProtection Department (PDPD), Ministry of Communications and MultimediaMalaysia.


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For further details or enquiries, kindly contact the Registration Unit at 03-8911 5000:For further details or enquiries, kindly contact the Registration Unit at 03-8911 5000:


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�Noreen Iszani bt Yusak, Unit Head (ext 7925; [email protected]);�Muhammad Shamsul b A Majid, Administrative Assistant (ext 7802; [email protected]) or�Mohd Faudzan b Abd Latib, SPS Officer (ext 7919; [email protected])

�Noreen Iszani bt Yusak, Unit Head (ext 7925; [email protected]);�Muhammad Shamsul b A Majid, Administrative Assistant (ext 7802; [email protected]) or�Mohd Faudzan b Abd Latib, SPS Officer (ext 7919; [email protected])

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INTERVIEW GUIDELINES FOR

APPROVED COMPANY AUDITORS/

LIQUIDATORS


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CHANGES TO INTERVIEW GUIDELINES FOR APPROVED COMPANY AUDITORS/LIQUIDATORS

• There are positive developments in the interview guidelines with the advocacyof Institute.

• Effective from 1 July 2013:

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• Effective from 1 July 2013:

• Re-attempt is allowed for a single module if failed marginally in one module.

• Waiting period for next interview session is 6 months, regardless of how manymodules a candidate fails.


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Before 1 July 2013 Effective from 1 July 2013

A candidate must pass all modules (i.e. MIA,SSM, BNM, SC and MDI (for liquidator only)) inorder to obtain a pass to become an approved

Allow re-sitting for that failed module, if acandidate fails marginally in one module, i.e.obtain marks between 50 - 59.


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order to obtain a pass to become an approvedcompany auditor or liquidator.

The passing mark is 60 for each module.

No re-attempt is allowed. Candidates would haveto go through the entire application process againand be interviewed by the same panel consists ofMIA, SSM, BNM, SC and MDI (for liquidatoronly).

obtain marks between 50 - 59.

If the candidate does not pass the re-attempt,he/she would have to go through the entireapplication process again and be interviewed bythe same panel consists of MIA, SSM, BNM, SCand MDI (for liquidator only).


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Before 1 July 2013 Effective from 1 July 2013

Minimum waiting period for subsequentinterview (ranging from 6 to 18 months),

Waiting period is 6 months, regardless ofhow many modules a candidate fails.


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interview (ranging from 6 to 18 months),depending on how many modules acandidate fails:

Fail one module : 6 monthsFail two modules : 9 monthsFail three modules : 12 monthsFail all four modules : 18 months

how many modules a candidate fails.

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MIA BY-LAWS (ON PROFESSIONAL

ETICS, CONDUCT AND PRACTICE)


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MIA’S BY-LAWs (ON PROFESSIONAL ETHICS, CONDUCT AND PRACTICE)

CONFLICTS OF INTEREST

�OBJECTIVE TO THE AMENDMENTS:

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• To provide a more comprehensive guidance to PAIB and in public practice inidentifying, evaluating and managing conflicts of interest.

• To assist professional accountants in early identification of a potential conflict ofinterest.

• To prompt professional accountants to evaluate their ability to be objective in thatsituation and meet the other fundamental principles under the Institute’s By-Laws.

�The amendment will take effect on 1 July 2014. Early adoption is permitted.


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A BREACH OF A REQUIREMENT OF THE INSTITUTE’S BY-LAWs

�OBJECTIVE TO THE AMENDMENTS:

�To provide a robust framework for addressing a breach of an independence


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�To provide a robust framework for addressing a breach of an independencerequirement of the Institute’s By-Laws.

�The amendments requires that a professional accountant take whatever actionsthat might be available to satisfactorily address the consequences of a breach of anyprovision(s) of the Institute’s By-Laws; include:

- terminate, suspend, or eliminate the interest or relationship that cause the breach;- evaluate the significance of the breach, determine action to be taken;- communicate all breaches with those charged with governance; and- document the action taken and all the matters.

�The amendments are effective on 1 April 2014. Early adoption is permitted.


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THE DEFINITION OF ENGAGEMENT TEAM

� OBJECTIVE TO THE AMENDMENTS:

• To ensure consistency between the independence requirements for external auditors


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• To ensure consistency between the independence requirements for external auditorsunder the Institute’s By-Laws and the Malaysian Approved Standards on Auditing, aredefinition of ‘Engagement Team’ was made to eliminate the inconsistency.

� 'Engagement Team’ has been redefined by excluding external experts engaged by thefirm or by the network firm i.e. internal auditors who provide direct assistance toexternal auditors.

� The amendment is effective on 15 December 2014. Early adoption is permitted.


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PARTNER ROTATION

� Section 290.151 of MIA’s By-Laws (On Professional Ethics, Conduct andPractice) requires that an individual shall not be a key audit partner for morethan 5 years in respect of the audit of any Public Interest Entity (PIE). After such


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than 5 years in respect of the audit of any Public Interest Entity (PIE). After suchtime, the individual shall not be a member of the engagement team or be akey audit partner for the said client for 2 years.

� The requirement remains unchanged despite the key audit partner, togetherwith the audit client, resigned from one audit firm and joined/engaged anotheraudit firm.

� Applicable to an “individual”, not to the firm and firms are encouraged toapply the above-mentioned requirement.


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SUCCESSION PLANNING

OBJECTIVE :� Section 520 of the By-Laws provide for the compulsory requirement that all active sole

proprietor firms registered with MIA are to have a continuation arrangement, within


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proprietor firms registered with MIA are to have a continuation arrangement, withintwo (2) years from the date of the setting up of the sole proprietorship through a formalagreement or by satisfying the Council that other adequate provision has been made,for their practices as a contingency plan in the event of death or incapacity.

� Section 520.4 of the By-Laws further provides that Members in public practice shallensure that their executors and family are aware, in the event of death or incapacity, ofthe arrangements made for the management of the practice.

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AUDITING


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IAASB AUDIT QUALITY FRAMEWORK

�OBJECTIVE:• Raise awareness of the key elements of

AUDITING

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• Raise awareness of the key elements ofaudit quality;

• Encourage key stakeholders to exploreways to improve audit quality; and

• Facilitate greater dialogue between keystakeholders on the topic.


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IAASB AUDITOR REPORTING

� In July 2013, IAASB has proposed standards aiming to fundamentallytransform auditor’s report.


� In July 2013, IAASB has proposed standards aiming to fundamentallytransform auditor’s report.

AUDITING

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transform auditor’s report.

� IAASB released ED titled “Reporting on Audited Financial Statements:Proposed New and Revised International Standards on Auditing (ISAs)of which the AASB of MIA provided comments.

� ED builds upon by the indicative direction set out in the IAASB’s June2012 Invitation to Comment: Improving the Auditor’s Report of whichthe AASB of MIA provided comments.

transform auditor’s report.

� IAASB released ED titled “Reporting on Audited Financial Statements:Proposed New and Revised International Standards on Auditing (ISAs)of which the AASB of MIA provided comments.

� ED builds upon by the indicative direction set out in the IAASB’s June2012 Invitation to Comment: Improving the Auditor’s Report of whichthe AASB of MIA provided comments.


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�Key enhancements:� Prominent placement of the auditor’s opinion and other entity-specific


�Key enhancements:� Prominent placement of the auditor’s opinion and other entity-specific

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� Prominent placement of the auditor’s opinion and other entity-specificinformation in the auditor’s report.

� Auditor reporting on “Key Audit Matters”, required for audits of financialstatements of listed entities.

� Auditor reporting on going concern, including a conclusion on theappropriateness of management’s use of the going concern basis ofaccounting in preparing the financial statements and a statement as towhether a material uncertainty that may cast significant doubt on theentity’s ability to continue as a going concern has been identified.

� Prominent placement of the auditor’s opinion and other entity-specificinformation in the auditor’s report.

� Auditor reporting on “Key Audit Matters”, required for audits of financialstatements of listed entities.

� Auditor reporting on going concern, including a conclusion on theappropriateness of management’s use of the going concern basis ofaccounting in preparing the financial statements and a statement as towhether a material uncertainty that may cast significant doubt on theentity’s ability to continue as a going concern has been identified.


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�Key enhancements:� Auditor reporting on other information.


�Key enhancements:� Auditor reporting on other information.

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� Auditor reporting on other information.� An explicit statement that the auditor is independent of the entity and hasfulfilled the auditor’s other relevant ethical responsibilities, with disclosureof the source(s) of those requirements.

� Disclosure of the name of the engagement partner, required for audits offinancial statements of listed entities, with a “harm’s way” exemption

� Improved description of the responsibilities of the auditor and key featuresof the audit

� Auditor reporting on other information.� An explicit statement that the auditor is independent of the entity and hasfulfilled the auditor’s other relevant ethical responsibilities, with disclosureof the source(s) of those requirements.

� Disclosure of the name of the engagement partner, required for audits offinancial statements of listed entities, with a “harm’s way” exemption

� Improved description of the responsibilities of the auditor and key featuresof the audit


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ISA 610 (Revised 2013), Using the Work of Internal Auditors as Malaysian Approved Standards on Auditing.ISA 610 (Revised 2013), Using the Work of Internal Auditors as Malaysian Approved Standards on Auditing.

RECENT AUDITING TECHNICAL PRONOUNCEMENT ISSUED - 2013

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• [Effective date: Effective for audits of financial statements for periods ending on or after Dec 15, 2013, except for the direct assistance provisions, which is effective for audits of financial statements for periods ending on or after Dec 15, 2014.]

RPG 4 (Revised) – Example of Independent Auditors’ Reports.RPG 4 (Revised) – Example of Independent Auditors’ Reports.

• [Effective date: Effective for audits of financial statements for periods beginning on or after Jan 1, 2010 and auditors’ reports dated on or after Jul 1, 2013.]


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� Professional Skepticism.

� Sufficient Appropriate AuditEvidence.

CORNERSTONE OF GOOD AUDITING

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Evidence.

� Audit Documentation -Presumption is that the work hasnot been performed unlessdemonstrated otherwise.

A right audit opinion, not formed on appropriate

and sufficient audit work

done, its NOT a good

opinion


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KEY REMINDERS: AUDITORS INDEPENDENCE

� Audit and Review Engagement- As required under By Laws,

members of audit teams, firms and

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members of audit teams, firms and network firms shall be independent of audit clients.� Independence of Mind� Independence in Appearance- Applying safeguard

� Section 9 of Companies Act

AOB reprimanded four auditors for

failing to discharge professional duties


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Section 9(1)(c) of Companies Act

A person shall not knowingly consent to be appointed, and shall not knowinglyact, as auditor for any company and shall not prepare, for or on behalf of a

KEY REMINDERS: AUDITORS INDEPENDENCE

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act, as auditor for any company and shall not prepare, for or on behalf of acompany, any report required by this Act to be prepared by an approvedcompany auditor if he is an officer of the company; a partner, employer oremployee of an officer of the company; a partner or employee of an employeeof an officer of the company; or a shareholder or his spouse is a shareholder ofa corporation whose employee is an officer of the company.

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ACCOUNTING


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ACCOUNTING

EXPOSURE DRAFT ON AGRICULTURE: BEARER PLANTS

�Bearer plants are within the scope of IAS 16

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�Bearer plants are within the scope of IAS 16‘Property, Plant and Equipment’.

�Either cost or revaluation model is allowed toaccount for bearer plants.

�Produce growing on bearer plants remain in thescope of IAS 41 ‘Agriculture’.

�Measured at fair value less costs to sell


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EXPOSURE DRAFT ON REVENUE FROM CONTRACTS WITH CUSTOMERS

� Targeted to be issued in 1Q 2014

� Replaces IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’ and related

ACCOUNTING

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� Replaces IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’ and relatedinterpretations

� Effective date: 1 January 2017, early

application permitted


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EXTENSION OF TRANSITIONAL PERIOD FOR TRANSITIONING ENTITIES

� In view that the amendment to IAS 16 and IAS 41 and ‘Revenue FromContract with Customers’ have yet to be finalised, MASB has, on 7 August2013, announced to allow Transitioning Entities to defer the adoption of

ACCOUNTING

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2013, announced to allow Transitioning Entities to defer the adoption ofthe MFRS Framework for an additional one year.

� The adoption of MFRS Framework by Transitioning Entities is mandatory forannual periods beginning on or after 1 January 2015.


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PRIVATE ENTITY REPORTING STANDARDS (PERS)

�Local GAAP issued by the MASB in 1999-2004.

�Developed based on pre-2003 IASs.

ACCOUNTING

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�Applicable to private entities� private companies that do not required to lodgefinancial statements to the Securities Commission(SC)/Bank Negara Malaysia (BNM).

� private companies that are not subsidiaries orassociates of, or jointly controlled by, an entitywhich is required to lodge financial statements tothe SC/BNM.


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ROADMAP FOR PRIVATE ENTITIES FINANCIALREPORTING FRAMEWORK

�Financial reporting framework� FRS for SMEs

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� FRS for SMEs

� Stratification of private entities�Mandatory for private entities with revenue> RM500,000 for 2 preceding yearsconsecutively

�Other private entities have the option toapply FRS for SMEs or PERS

� Effective date� 1 January 2016 (early adoption permitted)


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ROADMAP FOR PRIVATE ENTITIES FINANCIAL REPORTING FRAMEWORK

�MIA and MASB have embarked on various road shows to seek publiccomments on the Roadmap proposal.

ACCOUNTING

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comments on the Roadmap proposal.

� Based on the feedbacks gathered, majority prefer all private entities toadopt new financial reporting framework on 1 January 2016 and nostratification of reporting for private entities.


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MALAYSIAN PRIVATE ENTITY REPORTINGSTANDARD (MPERS)

� Sets out the MASB’s revised proposals of the

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� Sets out the MASB’s revised proposals of thefuture financial reporting framework forprivate entities in Malaysia

� Effective date�1 January 2016 (early application ispermitted).


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MALAYSIAN PRIVATE ENTITY REPORTING STANDARD (MPERS)

�No stratification

�ED 72 ‘FRS for SMEs’ (identical with IFRS for SMEs) with proposed changes

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�ED 72 ‘FRS for SMEs’ (identical with IFRS for SMEs) with proposed changesto a few topics

≠

closely aligned


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PROPOSED CHANGES IN MPERS

� Scope - Preface to the FRS for SMEs and Section 1 ‘Small and Medium-sized Entities’� To prescribe the scope of the Standard in the Malaysian context

� Consolidation – Section 9 ‘Consolidated and Separate Financial Statements’

ACCOUNTING

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� Consolidation – Section 9 ‘Consolidated and Separate Financial Statements’� To require ultimate Malaysian parent company to present consolidated financial

statements.

� Real estate – Section 23 ‘Revenue’ and Section 34 ‘Specialised Activities’� To provide guidance on revenue recognition using MASB 32 ‘Property

Development Activities’

� Income Tax – Section 29 ‘Income Tax’�To follow MFRS 112 ‘Income Taxes’ tax based principle

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TAXATION


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TAXATION

The implementation of a Goods and Services Tax(GST)The implementation of a Goods and Services Tax(GST)

• GST is going to set its foot on 1 April 2015

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• GST is going to set its foot on 1 April 2015

• Businesses are given 17 transitional months toget GST ready and implementation

• The Institute has embarked on a 10-dayModular GST course with an examination


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Form CP 58 Form CP 58 • All companies are required to prepare the Form CP 58 and provide them to all agents, dealers and distributors by 31 March 2014.

• The Form CP 58 shall only need to be prepared if the monetary and non-monetary

ADMINISTRATIVE CHANGES AND COMPLIANCE RULES

TAXATION

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• The Form CP 58 shall only need to be prepared if the monetary and non-monetary incentives received by each recipient exceeded RM5,000.

• IRB has issued Guidelines and Addendum on this.

• An article on this will be published in Accountants Today by February 2014.

The End of Transitional Period for Imputation System (Section 108)The End of Transitional Period for Imputation System (Section 108)

• The existing imputation system has been in place since 1 January 1948.

• Effective 1 January 2014, all companies that have not already adopted the single tier system (STS) will automatically transition into it.

• Under the STS, the income tax paid by a company is the final tax and dividends will no longer be declared as taxable income in the hand of the recipients.

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