FORWARD THE WAY ACCOUNTANCY PROFESSION: - Malaysian ...

January / February 2014Vol. 27 No. 1

A Bimonthly Publication of the Malaysian Institute of Accountants

Championing Business Zakat • Managing Personal Loans

GOING BEYOND AUDIT: SERVICE DIVERSIFICATION THROUGH M&As

CAN MALAYSIA GRADUATE INTO THE LEAGUE OF HIGH-INCOME COUNTRIES?

$pend to $ave

FORWARD THE WAYACCOUNTANCY PROFESSION:

+++

2 accountants today | JANUARY / FEBRUARY 2014

C

M

Y

CM

MY

CY

CMY

K

Censof.pdf 1 2/12/14 11:57 AM

Accountants TodayAccountants Today20142014 ADVERTISING RATESADVERTISING RATES

Frequency Full Page Half Page 1x 5,060 2,530 3x 4,715 2,358 6x 4,485 2,243 9x 4,255 2,128 12x 3,565 1,783

BLACK & WHITE DISPLAY

Frequency 2/3 1/3 Banner Strip 1x 3,400 2,200 1,800 1,400 3x 3,200 2,100 1,700 1,300 6x 3,000 2,000 1,600 1,200 9x 2,800 1,900 1,500 1,150 12x 2,400 1,300 1,300 1,000


Frequency Full Page Half Page 1x 3,335 1,668 3x 3,168 1,584 6x 3,000 1,500 9x 2,850 1,425 12x 2,565 1,283


Frequency 2/3 1/3 Banner Strip 1x 2,300 1,500 1,200 1,000 3x 2,200 1,400 1,100 950 6x 2,100 1,300 1,000 900 9x 2,000 1,200 950 855 12x 1,700 1,000 800 730

SPECIAL SIZE/ CREATIVE ADS

Advertorial/Gatefolds NegotiableFront Flap NegotiableLoose Insert NegotiableStick on/Sampling/Postcards Negotiable

PREMIUM POSITIONS / LOADING

PositionsFront Cover Gatefold NegotiableBack Cover Gatefold NegotiableCentre Spread 60%Inside Front Cover & Page 1 (DPS) 50%Double Page Spread 40%Outside Back Cover 40%Inside Front Cover 40%Inside Back Cover 30%ROP Specified Page/Position 20%Facing Inside Front Cover (page 1) 20%Facing Inside Back Cover 20%

FilmBlack & white ad Screened positive filmFour colour ad Screened process colour-separated positives with progressive proofsScreen 150 lines

CD-ROMFormats PDF, JPEG, Adobe Photoshop, Adobe Illustrator, Adobe Pagemaker, Quark XpressImages 300 dpiScanned images 300dpiColour contribution CYMK

Offset printing on 85gsm Matt Art paper with staple binding/perfect binding.

The Publisher reserves the right to revise advertising rates upon 30 days prior written notice. Payment must be in Ringgit Malaysia (RM) as per rates shown.

Dimension of advertisements must adhere to the Publisher’s specifications. The Publisher will only carry advertisements either in English or Bahasa Malaysia.

Advertisers who have contracted schedules must notify in writing to the Publisher of their intention to cancel advertisement orders before the booking deadline. Failure to fulfill the insertion order after the close of the booking deadline will entitle the Publisher to impose a penalty on the advertiser equivalent to 50% of the contracted advertisement rate.

FULL COLOUR DISPLAY


HORIZONTAL/VERTICAL (colour)

HORIZONTAL/VERTICAL (B&W)

PREMIUM POSITIONS/LOADING

SPECIAL SIZE/CREATIVE ADS

MATERIAL REQUIREMENTS

METHOD OF PRINTING/BINDING

ADVERTISING CONDITIONS

CANCELLATION POLICY

Please write to:

[email protected]

03-2279 9200 ext. 366/354

Malaysian Institute of AccountantsDewan Akauntan, 2 Jalan Tun Sambanthan 3, Brickfields, 50470 Kuala Lumpur, Malaysia. Tel : (603) 2279 9200 Fax : (603) 2279 9386

C

M

Y

CM

MY

CY

CMY

K

AT Rate 2014.pdf 1 2/12/14 11:48 AM

C

M

Y

CM

MY

CY

CMY

K

Censof.pdf 1 2/12/14 11:57 AM


ContentsJANUARY / FEBRUARY 2014

editor’snote5 Charting the Way ForWardn

president’smessage6 tranSForMing taLent

coverstory8 aCCoUntanCy ProFeSSion: the Way

ForWard IFAC President Warren Allen talks about the

way forward for the accountancy profession at the recent

MIA International Accountants Conference 2013. What are

the challenges and prospects for accountants in this brave

new world?

accounting+auditing12 FinanCe tranSForMation MeetS riSk

ManageMent Finance transformation and risk

adjusted performance (FTRAP) is key to improving

governance and risk management in financial institutions.

14 ChaMPioning BUSineSS Zakat Encouraging

more business and corporate organisations to pay zakat can

help close the economic gap between rich and poor and

improve financial inclusion and prosperity for all.

18 SMP iFaC PraCtiCe ManageMent and ServiCe diverSiFiCation

22 going Beyond aUdit: ServiCe diverSiFiCation throUgh M&as Mergers

and affiliations (M&As) are a means of driving service

diversification for small and medium practices (SMPs). To

help SMPs, MIA recently organised the Merger and Affiliation

(M&A) Seminar 2013, a one-day complimentary seminar

designed specifically for SMPs interested in exploring the

option of strategic alliance in the face of globalisation and

recent legislative changes.

JANUARY / FEBRUARY 2014 | accountants today 3

tax26 ShiFting to the goodS and ServiCeS

tax LandSCaPe - tranSitioning Period toWardS iMPLeMentation

30 gSt “Zero-rated” and “exeMPt” – What’S the diFFerenCe? What’s the difference between

zero-rated and exempt items in the upcoming GST system?

And what will be the impact on business and taxpayers?

34 SPend to Save

economy36 Can MaLaySia gradUate into the

LeagUe oF high-inCoMe CoUntrieS?

management+business40 deteCting Money LaUndering and

SUSPiCioUS tranSaCtionS - tiPS For aCCoUntantS As the backbone of the finance function,

accountants play a pivotal role in combating financial crime

44 SoCiaL Media Marketing May Be the key to PraCtiCe ProFitaBiLity

46 internationaLiSing SMes

50 MaxiMiSe yoUr heaLth

52 Managing PerSonaL LoanS Personal loans

can be a minefield for financial health unless managed

prudently.

56 Mia notiCe

58 Book revieW


publishingconsultantExecutive Mode Sdn Bhd (317453-P)Tel: +603-7118 3200, 3205, 3230 Fax: +603-7118 3220e-mail: [email protected]: www.executivemode.com.my

printerBHS Book Printing Sdn Bhd (95134-K)Lot 17-22 & 17-23, Jalan Satu, Bersatu Industrial Park Cheras Jaya, 43200 Cheras, Selangor DETel: +603-9076 0816, 9076 0825, 9074 7558Fax: +603-9076 0785, 9074 7573e-mail: [email protected]

EditorialAdvisoryBoardJohan IdrisDatuk Zaiton Mohd Hassan

EditorHo Foong Moi

Corporate CommunicationsIszudin Mohd Amin, HeadThane Meyyappan, ManagerP. Mohana Poopathi, ExecutiveNurul Nadira Muhammad Shaharudin, Executive

WritersNazatul Izma Majella GomesPatricia Francis

Vision and MissionMIA’S VISIONn To be a globally recognised and

renowned Institute of Accountants committed to nation building.

MIA’S MISSIONn To develop, support and monitor quality

and expertise consistent with global best practice in the accountancy profession for the interest of stakeholders.

Section 6 of the Accountants Act 1967 (the Act) states that the functions of the Institute shall be:• To determine the qualifications of persons

for admission as members;• To provide for the training and education;

by the Institute or any other body, of persons practising or intending to practice the profession of accountancy;

• To approve the MIA Qualifying Examination (QE) and to regulate and supervise the conduct of that Examination;

• To regulate the practice of the profession of accountancy in Malaysia;

• To promote, in any manner it thinks fit, the interest of the profession of accountancy in Malaysia;

• To render pecuniary or other assistance to members or their dependents as it thinks fit with a view to protecting or promoting the welfare of members; and

• Generally to do such acts as it thinks fit for the purpose of achieving any of the aforesaid objectives.

miACouncilACCOUNTANT GENERALDatuk Wan Selamah Wan Sulaiman

DEPUTY ACCOUNTANT GENERAL, CORPORATE(Nominee of the Accountant General in MIA Council)Dato’ Rosini Abdul Samad

PRESIDENTJohan Idris

VICE-PRESIDENTDatuk Zaiton Mohd Hassan

COUNCIL MEMBERSAssoc. Prof. Dr. Ayoib Che AhmadAssoc. Prof. Dr. Mohamat Sabri HassanDr. Nurmazilah Dato’ MahzanProf. Dr. Rozainun Ab AzizAssoc. Prof. Dr. Nor Aziah Abu KasimKen PushpanathanOoi Thiam Poh, AlexDato’ Abdul Rauf RashidMohd Noh JidinMohd Zabidi Md NorEugene Wong Weng SoonZahrah Abd Wahab FennerAhmad Zahirudin Abdul RahimChan Wan Siew, PaulDealanathan Joseph LourdesHeng Ji KengKua Choo Kai, SimonLeong Kah MunLim Thiam Kee, PeterDr. Mohd Nordin Mohd ZainDato’ Narendra Kumar JasaniSoo Hoo Khoon, Yean

CHIEF EXECUTIVE OFFICER Ho Foong Moi

CHIEF OPERATING OFFICERDatin SK Yap

REGISTRARSudirman Masduki

publisherMalaysian Institute of AccountantsDewan Akauntan2 Jalan Tun Sambanthan 3, Brickfields, 50470 Kuala LumpurTel: +603-2279 9200 Fax: +603-2274 1783, 2273 1016e-mail: [email protected] web: www.mia.org.my

Accountants Today is the official publication of the Malaysian Institute of Accountants (MIA) and is distributed to all members of the Institute. The views expressed in this magazine are not necessarily those of the MIA or its Council. Contributions including letters to the Editor and comments on articles appearing in the magazine are welcomed and should be sent to the Editor as addressed below. All material without prejudice appearing in Accountants Today are copyright and cannot be reproduced in whole or in part without written permission from the Editor.

Editor, Accountants Today, Dewan Akauntan,2 Jalan Tun Sambanthan 3, Brickfields,50470 Kuala Lumpur, Malaysia

Tel: +603-2279 9200, Fax: +603-2274 1783e-mail: [email protected]: www.mia.org.my

miARegionalOfficesREGION CHAIRMAN

Northern Region Penang Thong Seng LeeTel: 04-261 3320 Fax: 04-261 3321

JohorJohor Bahru Azizan ZakariaTel: 07-227 0369 Fax: 07-222 0391

SarawakKuching Tuan Haji Wan Idris Wan IbrahimTel: 082-418 427 Fax: 082-417 427

SabahKota Kinabalu Winson Chong Kan HiungTel: 088-261 291 Fax: 088-261 290

Advertising Sales & SubscriptionCorporate Communications Teamemail: [email protected]


editor’s note

A key element in the world of publishing is what readers have to say. We want to hear from you on just about anything that appears in each issue of accountants today. Why not drop us a line now? e-mail: [email protected]

letters to the editor /////

After bidding farewell to 2013, we have just ush-ered in the Gregorian New Year and more recently, the lunar Chinese New Year. The past

few years since the Global Financial Crisis of 2008 have witnessed volatility and a spate of global developments affecting business, and 2014 looks set to maintain the pace of change.

As the regulator and champion of the accountancy profession here in Malaysia, we have an obligation to our members and to all accountants and finance pro-fessionals to ensure that all are prepared for change. Nobody should be left behind. As such, the Institute is focusing intensively on education and development pro-grammes to help all accountants – senior, junior or those aspiring accountants still in school or training - make that necessary leap.

As the global body representing professional accountants’ interests, the International Federation of Accountants (IFAC) has its finger on the pulse of change. We were privileged last year to hear IFAC President Warren Allen talk about the game changers which will fundamentally reshape accounting and business as we know it today. Appropriately, his insights are captured in this issue’s cover story on Accountancy Profession “The Way Forward.” Mr. Allen singled out integrated report-ing, ethical reform, government accounting reforms, accounting education reform and the recruitment and nurturing of quality talent as being among the key fac-tors driving seismic change for the accounting and busi-ness ecosystem.

On the local scene, the implementation of Goods and Services Tax (GST) by 1 April 2015 at the rate of 6% with a seventeen (17) months transitional period is a key development which will definitely affect the profes-sion and business. The GST will replace the Sales Tax Act 1972 (STA 1972) and Service Tax Act 1975 (STA 1975) which are currently at the rate of 5%/10% and 6% respectively, making the tax system more efficient, transparent and broad-based and enhancing the level

of competitiveness of the country. In this issue, we carry a special focus on the upcoming GST, detailing the expected impact, the transition and implementation challenges and best practices and lessons to heed in the run-up to enforcement.

While change will affect all sectors of the accounting profession and business, small and medium practices (SMPs) and small and medium enterprises (SMEs) face a particularly tough transition because of constraints on resources and the changing business and regulatory landscape. To help our members in SMPs and SMEs, MIA continually runs initiatives aimed at facilitating and developing this sector. In particular, MIA encourages SMPs to collaborate and consolidate through mergers and affiliations and to diversify their services up the value chain in order to ensure long-term sustainability. Read more about SMP issues in our coverage on merg-ers and affiliations and service diversification and prac-tice management.

Finally, as accountants, we are expected to be finan-cially savvy. As the government implements subsidy rationalisations and price management mechanisms to improve austerity and fiscal and monetary health, Malaysians are feeling the pinch of rising prices. Since personal debt and household debt is a burden for the average Malaysian household, we have to improve our budgeting and personal financial management. This issue provides advice to our members on how to choose the personal loan that best fits their budgets. As an option to personal loans, there are other financing options available, such as home equity refinancing.

MIA hopes that the contents of Accountants Today will help our members and readers navigate the murky waters of the future with precision and sound judge-ment. Do drop me a line if you have ideas for enriching our content and serving you better.

Happy reading! nEDITOR

Charting the Way Forward


president’s message

Professionally qualified financial and business leaders are cru-cial for the accountancy sector’s future development, which in

turn will strengthen Malaysia’s aspira-tions of becoming a global and regional financial centre and business hub.

Education and training which starts right from youth will be one means to producing these leaders. As part of our mandate to champion the accountancy pro-fession, MIA is actively working to attract youngsters to the profession right from the secondary and tertiary levels. We are striv-ing to rebrand the profession as one that is cool and offers myriad opportunities for growth and career satisfaction. At the same time, we are collaborating with educators and employers to realign the accounting syllabus with the needs of the 21st cen-tury knowledge economy – our goal is to ensure that accountants aren’t only techni-cally and technologically competent but innovative, ethical, good business partners and are emotionally intelligent.

At the other end of the spectrum, we encourage professionals in the market-place to keep sharpening their knowledge

and skills to keep abreast of the new global and local developments. Invest intensively in your own human capital to remain relevant. Lifelong learning is just that – lifelong.

2014 – GallopinG Year for the accountancY professionIn line with our thrust on education, we at MIA are positioning `Accountancy Education’ as a top priority. We will contin-ue working closely with our stakeholders, namely the educators and the universities – to ensure that the accountancy profes-sion remains attractive to the aspirational generation. MIA, together with all its strategic stakeholders, wants to make the profession attractive and make the profes-sion `cool’… (yes, 2014 is going to be a “galloping” year for the profession).

Our focus on accountancy education - from cradle to grave - shows just how serious we are about this. While MIA has a key role to play, capacity building for the profession must begin much earlier on, at schools and universities. Students must acquire the needed competencies even before they enter the workforce. While

Hala Tuju 3 and (the Malaysian Education Blueprint 2013) for academic reform are commendable, we need to amplify the impact of reform by enhancing the cur-rent learning environment.

Students don’t learn by osmosis; they need inspiring teachers and role models in business to spark interest in accounting. While our teachers and lecturers are to be commended for doing an exemplary job with limited resources, research has shown that the students of Generation Y and the Millennium Generation are a different breed. Textbook learning needs to be connected to real life examples and the effective use of technology to make teaching/learning quality more interest-ing, consistent and accessible to even the remote areas of Malaysia. Teachers aren’t to teach solely by the book, they themselves need to enrich their skills and experience. For an academic, acquiring industrial and commercial experience and conducting relevant accountancy research projects won’t only benefit the profession and marketplace, but will beef up your aca-demic portfolio and resume. MIA would be delighted to help match up our academics with firms and employers to find out how both sectors can collaborate.

Since MIA believes that teachers and lecturers are instrumental in nurturing stu-dents, Malaysia must appreciate and rec-ognise its academics in order to improve the quality of accounting education at local institutions. It’s like cooking. If you have the best ingredients – i.e. facilities, and stu-dents – and a good chef or teachers, your food is of great premium. Let us reward teachers commensurately and restore them to a position of honour and respect like we used to when Malaysia’s education system was acknowledged as among the region’s best. n

Transforming Talent


Nazatul Izma

cover

The Way ForwardIFAC PRESIDENT WARREN ALLEN TALKS ABOUT THE WAY FORWARD FOR THE ACCOUNTANCY PROFESSION AT THE RECENT MIA INTERNATIONAL ACCOUNTANTS CONFERENCE 2013. WHAT ARE THE CHALLENGES AND PROSPECTS FOR ACCOUNTANTS IN THIS BRAvE NEW WORLD?

Has there ever been a more exciting – and challenging – era to be an accountant? Warren Allen, President of the International Federation

of Accountants (IFAC), said that major new developments augur well for the profes-sion when delivering his keynote address at the recent Malaysian International Accountants Conference 2013.

One seismic trend is the shift in the balance of economic power in the wake of the 2008 global financial crisis. As the global economic landscape keeps chang-ing and new economic powers and blocs emerge, the demand for accountants will grow exponentially. Going forward, Allen estimated that China alone will need 500,000 accounting professionals and Indonesia which has less than 50,000 accountants currently is “significantly

underserved.”“As emerging economies develop

their potential, there will be a tremen-dous demand for accountants. IFAC is recommending that accountants acquire professional qualifications to fulfill this demand. While accounting technicians have an important role, we will need pro-fessionally qualified accountants to help drive business and economies forward in emerging and developing economies.”

standards developmentThe ongoing reform of accounting, audit-ing and ethical standards will continue to pose challenges for the profession, said Allen. “The real challenge is implementa-tion. We cannot claim success unless we have globally consistent implementation of standards.”

Ground-breaking work is going on in

audit and assurance to revamp audit report formats and make them more business-relevant. “The current audit report is not fit for purpose. The IAASB (International Audit and Assurance Standards Board) is working on a newer form of audit report which is much longer and provides more information than existing reports. This will be a game changer for the audit pro-fession,” said Allen.

If standard-setters have their way, accountants also face ethical reform. According to Allen, accounting regula-tors have requested that ethical stand-ards be revised to compel accountants to report breaches of law. “This is highly controversial. It will be difficult to get agreement and compliance on a universal standard of this kind which will impact all accountants in the profession regardless of sector.”

Accountancy Profession:


Nazatul Izma

To ensure competent talent, educa-tional standards are also being revised to modernise them and make them fit for the future, said Allen.

Malaysian convergence with global standards is imperative to supporting economic development, and MIA as the champion of the profession will be inte-gral to promoting local implementation and compliance with standards. “MIA’s key goal is to be a partner in economic development. One way of doing this will be through implementation of global busi-ness practices and standards which will promote confidence in markets, enhance management transparency and accounta-bility. Convergence will foster cross body investment activity, especially as markets become more integrated regionally and globally,” said Allen.

inteGrated reportinG -Game chanGer

Integrated reporting (IR) is set to gain further traction as stakeholders and

users “are telling the profession that they need more and better informa-tion. Financial information alone is not enough for investors, lenders and fin-

anciers to understand how a company works,” said Allen.

This is where IR is positioned as a panacea, which will better reflect the reality of prevailing business models in the 21st century digital economy. For example, there needs to be more of a focus on intangibles and assets which are difficult to quantify. Comparing 1974 to the present day, Allen noted that 80% of organisational value used to be repre-sented by physical assets on the balance sheet. Today this is reversed – 80% of value is represented by items which are not on the balance sheet e.g. staff resources, innovation and intellectual property. A delegate asked how intan-gibles such as talent would be valued: “How would a football club for example value the football players’ talent on the balance sheet? How would you value

staff contributions?” Answered Allen: “It’s important to understand that IR doesn’t mean that you have to ascribe value to each item. IR is a tool for an organisation to assess how they enhance talent and develop staff and how this is acknowledged as capital. IR is not trying to pin a certain value on all intangibles.”

IR will integrate financial and non-financial disclosures and the different threads relating to sustainability – such as the GRI (Global Reporting Initiative), triple bottom line reporting and sus-tainability reporting – in a universal standard framework which will enhance the credibility and usability of financial reporting, said Allen.

MIA’s key goal is to be a partner in economic development. One way of doing this will be through implementation of global

business practices and standards which will promote confidence in markets, enhance management transparency and accountability. Convergence will foster cross body activity, especially as markets

become more integrated regionally and globally,” said Allen.

ACCOUNTANCY PROFESSION: THE WAY FORWARD



It will shift mindsets and paradigms. “IR will drive a whole new way of think-ing. IR will move companies away from thinking short-term about their impact on share price and the financial bottom line to thinking long-term and on a wider scope about sustainability and usage of resources, and how to add value to soci-ety and the community,” added Allen.

Enhanced transparency and account-ability among integrated reporters should give these companies a premium in the marketplace. Integrated reporters are expected to enjoy lower costs of capi-tal and financing, and increased investor confidence and interest compared to their non-reporting competitors.

Users and investors who have com-plained about voluminous financial reports following the implementation and global convergence of IFRS will wel-come integrated reports for their ease of use. “If you pick up an integrated report, it is very easy to read, even for laymen,” enthused Allen.

The shift towards IR will also open up tremendous opportunities in assur-ance as the scope of audit expands to accommodate the holistic perspec-tive championed by IR. “IR audits will

demand skills beyond financial auditing skills and expertise. We will see the emergence of multi-disciplinary audit teams, involving banking and finance specialists, engineers, water, energy, environment and resource sustainability specialists, to name a few examples. IR will create tremendous opportunities for talent, especially the younger generation which is very passionate about sustain-ability,” said Allen.

ipsas catalYst for accountants

Government is another arena where accountants are set to make an impact as stakeholders demand more account-ability and transparency. The demand for government to better manage their finances and become more accountable and transparent also augurs well for the accountancy profession. “The irony is that many governments demand strin-gent private sector accountability but run their own affairs on a cash basis very poorly,” said Allen.

Under the cash-based system, government accounting records were incomplete. The lack of balance sheets meant that governments lacked precise knowledge and values of their assets and liabilities, said Allen. However, the stage is set for reform as more and more governments migrate from a cash-based system to adopt International Public Sector Accounting Standards (IPSASs), which are accrual-based. “The sover-eign debt crisis was an opportunity for governments to improve their account-ing systems and for the accountancy

profession to push for improvement. The public is rebelling against how gov-ernments spend and utilise tax dollars (as can be seen from movements like Occupy Wall Street and similar protests in other urban business districts),” Allen explained.

Accrual-based accounting will pres-sure governments to be more account-able, in much the same way that gov-ernments require the private sector to be financially accountable to stakehold-ers through regulatory enforcement. Allen said that IPSASs are also great benchmarks for ratings agencies since it makes it easier for them to assess sov-ereign governments and debt and this in turn spurs governments to improve their quality of financial management and governance to access cheaper financ-ing. “Thus, IPSASs facilitate economic growth through quality information,” said Allen.

“Through IPSASs, the accountancy profession has the opportunity to dis-cuss and affect these issues positively. IFAC advocates public sector financial reform and accountants as profession-als need to do more to advance public sector accounting,” he stressed. “We probably, more so than any other profes-sion, have a great avenue into the public sector.”

A delegate remarked that IPSASs are the “poorer cousin” of IFRS and receives less investment and funding for stand-ards development. “Yes, the amount of funding is much less, but we are trying to find other avenues of funding. We are trying to encourage governments

IR audits will demand skills beyond financial auditing skills and expertise. We will see the emergence of multi-disciplinary audit teams, involving banking and finance specialists, engineers, water, energy, environment and

resource sustainability specialists, to name a few examples. IR will create tremendous opportunities for talent, especially

the younger generation which is very passionate about sustainability,” said Allen.


that IPSASs are an investment that they should fund but this is a hard road. Work is being undertaken predominantly by volunteers to improve public systems.”

He praised Malaysia for its plan to introduce accrual-based accounting by 2015 which will “drive a proper account-ing system, enhance transparency and have a huge impact on the efficiency of government.”

Allen predicts that public sector accounting reform will heighten demand for accountants and finance profession-als in Malaysia. “When New Zealand first introduced accrual-based account-ing, less than 1% of accountants worked in the public sector. Today, just less than 10% are employed in the public sector.”

attractinG new talentThe changes and exciting developments will open up bountiful new prospects and increase demands for relevant and quali-fied talent. “We have a responsibility to attract new talent and convince them of the wonderful opportunities that this profession can provide them through their professional lives,” said Allen.

The profession is doing a good job in marketing the prospects. Allen remarked that accounting schools in the US are full for the first time in decades. “The chal-lenge is to expand our capacity to meet the demand and to build student’s sound judgement,” he said.

Sound judgement and professional skepticism are key attributes of com-petent accountants. But can these be taught, asked a delegate? “I think that you can teach sound judgement by introducing examples and comparing it to poor judgement and outcomes. Decisions and judgements need to be

made according to context. I learnt to apply judgement during my early years in practical training and it’s very impor-tant to have a mentor to guide you. The roles of mentors and coaches are essen-tial to impart sound judgement, knowl-edge and skills to juniors,” he explained.

What we can glean from Allen’s words is that the future is tremendously bright for members of the accountancy profession. But professional account-ants will have to keep on learning and developing their competencies in order to thrive in a world where volatility is a constant companion. n

A delegate remarked that IPSASs are the “poorer cousin” of IFRS and receives less investment and funding for standards

development. “Yes, the amount of funding is much less, but we are trying to find other avenues of funding. We are trying to encourage governments that IPSAS is an

investment that they should fund but this is a hard road. Work is being undertaken predominantly by volunteers to

improve public systems.”



accounting + auditing

Finance transformation meets risk managementFINANCE TRANSFORMATION AND RISK ADJUSTED PERFORMANCE (FTRAP) IS KEY TO IMPROvING GOvERNANCE AND RISK MANAGEMENT IN FINANCIAL INSTITUTIONS.

John Foulley

In recent times, financial institutions are facing daunting challenges to enhance their business models and at the same time to comply with a plethora of new regulations. Strong pressures from

regulators are driving financial institutions to embark on a more integrated risk and finance approach to ensure reliable results and sound-ness of their financial structure.

Key regulations such as Basel II, Basel III and IFRS (specifically IAS 39 and IAS 9) are placing greater demands onto ASEAN financial institutions to streamline their financial, man-agement and regulatory reporting. Regulators are requesting financial institutions to present all relevant financial and risk information per-taining to performance, liquidity and capital in a transparent and consistent manner based on agreed metrics and methodologies and under a controlled environment to ensure consistency between risk policy and management decisions.

Regardless of whether it is provisioning, hedging, scoring systems or risk assessment, financial institutions need to prove that man-agerial decisions are consistently translated into risk governance. This requirement can be accomplished only through consistent reporting across the entire organisation.

However, most financial institutions today view their ‘supply chain’ of financial informa-tion as fragmented. This may result in mul-tiple sets of general ledgers (GL) with differ-ing charts of accounts, inconsistencies with accounting rules, and overly cumbersome GL structures. These institutions have responded by segregating management reporting and analysis from core financial processing causing unfulfilled risk governance and unmet regula-tory requirements.


FINANCE TRANSFORMATION MEETS RISK MANAGEMENT

These institutions therefore recognise the need for a more responsive and pro-gressive integration of risk and finance data that can support ad-hoc requests and provide proof points for use-tests to regulators. The supporting architecture is generally known as finance transfor-mation and risk adjusted performance (FTRAP).

settinG ftrap riGht for risk manaGementWhilst the business and functional requirements of FTRAP development may vary depending on the size and complexity of the financial institution, the overarching objective is to maintain an acceptable level of profitability in this ever-changing business and regulatory environment. Following are some identi-fied regulatory and business drivers that can translate into the FTRAP business and functional requirements.

i) Comprehensive accounting process and financial reporting control• The FTRAP process should sup-

port a complete and efficient multi-GAAP accounting for all financial transactions. Controlled, manage-able and timely updates to the GL are paramount to provide transpar-ency and auditability. The design of process flow has to be done with careful consideration of the chart-of-account complexity; lever-aging core system’s embedded GLs where appropriate, and focus-ing on the speed of support for the financial close. The architec-ture and data flows should also accommodate accounting that is driven by valuations rather than by accounting rules alone, as IFRS and other emerging standards will need robust support in the accounting flow.

ii) Virtually seamless and transparent consolidation and close process• Financial institutions require sup-

port for an efficient, timely and accurate monthly close. While the

regulatory and business needs are trending towards a faster and more controlled process, closing still requires significant manual intervention in most cases. This is because the majority of financial institutions’ systems still remain not automated and prone to inef-ficiencies and quality issues.

• Current and incoming regulations, such as Basel II, Basel III and IAS 9, involve an increasing amount of reference and reconciliation as an integral part of financial reporting. Financial institutions need to dem-onstrate the practical connections between risk appetite, policy and accounting approaches to be com-pliant with these and other regula-tions.

• To overcome this challenge, a har-monised integrated view of risk and finance with a formal well-articulat-ed reconciliation framework has to be in place.

iii) Consistent financial and management reporting including risk-adjusted per-formance• Crucial for financial institutions is

the timely availability of all rel-evant financial information at the GL level and at the required granu-larity. Enforcement of consistency across financial and management reporting has to be exercised at the data level with a robust capacity to manage top-line adjustments.

• The financial and management reporting process need to pro-vide the ability to incorporate risk information into the management results, which allows financial insti-tutions to perform any risk and finance action on data concurrently and to support a unified data flow for reporting.

movinG forward with a finance and risk inteGrated approachCurrent regulator y and business requirements call for a more progres-

sive and integrated approach between risk and finance. This takes place in many areas of the bank, specifically for provisioning, risk-based pricing and reconciliation of operational loss with accounting data.

To progress towards this integrated approach, financial institutions need to ensure all relevant systems work togeth-er based on the same principles and data. The system should also provide regular reconciliation to prevent additional man-ual intervention. Manual intervention is to be treated on an individual basis and should be constrained to cases such as large exposures, exception to credit poli-cies and management decisions.

The integration of risk and finance is a process that is becoming an increasingly important requirement in the financial services industry. The FTRAP process is positioned to help seamlessly handle multiple accounting regulations, provide consistency in management and finan-cial reporting and lastly to leverage a single, unified analytical repository for risk, finance and accounting.

Starting with a quintessential bottom up approach, from data to strategy, the FTRAP process can force financial institu-tions to reconsider the entire governance approach and enable a truly risk-based decision-making approach with much greater transparency and efficiency. n

John Foulley is Director of Financial Services Analytics, Oracle Financial Services Global Business Unit, Asia Pacific & Japan. He is a regular speaker in industry forums and has presented at many industry events

including the Asian Banker Summit, GARP, PRMIA, Hong Kong Institute of Bankers, and Financial Times Enterprise Risk Management Series. John holds a Master in Finance from ESC-Nice Ceram in France (now SKEMA).



Encouraging more business and corporate organisations to pay zakat can help close the economic gap between the rich and poor and improve financial inclusion and prosperity for all. MIA recently organised the National Business Zakat Symposium 2013 to promote understanding and collection of business zakat. Apart from education, improving accounting and reporting practices for business zakat can help improve transparency and credibility, and convince more organisations to donate zakat.

Championing Business Zakat

“

“

Nazatul Izma

Plus, there are still issues to be ironed out in determining

which corporations should pay

business zakat. For example, does a

corporation need to be majority Muslim-owned

to be eligible for zakat?


CHAMPIONING BUSINESS ZAkAT

should businesses and corpo-rate orGanisations paY zakat?The third pillar of Islam, zakat or tithes are a test of faith for Muslim individuals and it is mentioned in thirty verses of the Al-Quran. “Zakat is the twin brother of solat (prayer) which confers great spiritual benefit. The two are closely interrelated,” said Dr. Zaharuddin Abdul Rahman, Assistant Professor, Kulliyah of Economics, International Islamic University Malaysia (IIUM) at the recent inaugural National Business Zakat Symposium 2013 jointly organised by MIA and Universiti Tenaga Nasional (UNITEN).

convincinG companies to paY zakatWhile corporations are able to pay zakat, many don’t. Many lack knowledge and awareness of zakat, there is scant regu-latory enforcement, and in the current scenario, business zakat is an extra bur-den with limited tax deductibility and lit-tle incentive for companies to pay. Plus, there are still issues to be ironed out in determining which corporations should pay business zakat. For example, does a corporation need to be majority Muslim-owned to be eligible for zakat?

Leadership and tone from the top is necessary to improve the low collection of business zakat nationally, said Mohd Rais Alias, Chief Executive Officer, Pusat Pungutan Zakat Wilayah Persekutuan (PPZWP). Some of his recommenda-tions include making it compulsory for all eligible companies to pay business

zakat. Meanwhile, regulators such as Bank Negara Malaysia (BNM) and the Companies Commission of Malaysia (CCM) should strive to create wider awareness of the obligation to pay busi-ness zakat among financial institutions and corporations.

Like many other forum panellists,

Leaders in Business ZakatFront-runners in business zakat share their best practices and lessons learnt.As an excellent tool to promote financial inclusion and socio-economic development, “business zakat should be more of an economic agenda and more than a spiritual obligation,” noted Abdul Rahim Abdul Hamid, Chair, MIA Islamic Finance Committee and moderator of the forum on Zakat Practice and Sharing of Experience: How Do We Do It?. “Enactments should promote this.”

Currently, zakat allows for utilisation of a 2.5% deduction from aggregate income to offset income tax, said Salihin Abang, Founder and Managing Partner, SALIHIN, a pioneer in zakat advi-sory and planning services for businesses and high net worth individuals. “We hope for a standardisation of zakat rebates with CSR (corporate social responsibility) deduction of 10% against income to promote business zakat.”

To help promote business zakat, Salihin has put interesting innovations into place. For example, Salihin sends out letters and SMS blasts to clients reminding them of their zakat obligations, and offers free zakat and tax consultations to clients on Fridays. Salihin is also empowered to collect business zakat on behalf of the state zakat agencies. However, there are challenges. For instance, some clients may choose to adjust their accounts for tax planning which results in low zakat payable. Therefore, there is the need to account for these adjustments to compute the correct amount of zakat payable. “We lack specialists to do this. There is also no zakat software currently available to compute zakat,” said Salihin.

Hence, solutions to improving business zakat collection include training more specialists in zakat accounting and creating zakat software applications to compute zakat. Salihin has devel-oped an intelligent accounting software embedding GST (Goods and Services Tax) and zakat solutions. “One message to take away is that there are plenty of opportunities for practitioners to start offering zakat consultancy and services,” said Rahim.

Launching ceremony: Minister of Finance II, Dato’ Seri Ahmad Husni Mohamad Hanadzlah (centre) officiating the Symposium. He is joined by (L-R) Symposium Chairman Abdul Rahim Abdul Hamid, MIA President Johan Idris, UNITEN Academic Vice-Chancellor Dato’ Prof. Dr. Ibrahim Hussein and UNITEN Department of Accounting and Finance Faculty Member Mohmad Sakarnor Deris.


Rais stressed that improved national legislation is the key to raising business zakat collection. Currently, legislative powers for zakat are retained by the indi-vidual states; zakat is a state matter. Rais stressed the need for a National Zakat Act, which will harmonise or standardise business zakat and facilitate enforce-ment. “Efforts must also be made to secure higher tax rebates for business zakat against corporate tax to reduce the burden borne by business institutions,” he added.

accountinG for business zakatSince the one-day Symposium was pri-marily organised to convey accounting knowledge on business zakat to the accounting practitioners and preparers, there was heavy emphasis on key issues like zakatable items for businesses, the requirements and application of MASB TR i-1 and the future direction of zakat accounting.

To help standardise accounting for zakat in Malaysia, the Malaysian Accounting Standards Board (MASB) had issued an Islamic technical pro-

nouncement on zakat MASB TR i-1 Accounting for Zakat on Business in 2006. This pronouncement standardises the practice of zakat calculation and disclosure in financial statements. Till today, Malaysia is among a select few countries to have issued an accounting treatment for business zakat.

Dato’ Syed Mohd Ghazali Wafa Syed Adwam Wafa, CEO, Koperasi Pembiayaan Syariah Angkasa Berhad (KOPSYA) and Project Leader of MASB TR i-1 said that determining full or par-

tial ownership and management con-trol is the key to assessing business zakat. Determining nisab (the minimum amount required for zakat) and haul (completion of the mandatory period which is one Islamic or Hijri year) can also be a challenge, he said. He talked about the various assets that are sub-ject to zakat, namely tangible current assets such as cash, stock in trade, trade receivables and short term investments. On the other hand, operating liabilities and certain current asset items such as miscellaneous deposits and prepay-ments are deductible from the list of zakatable items. Items in the Balance Sheet that are not subject to zakat may include among others fixed assets, long term investments and encumbered fixed or Mudharabah deposits. Items such as shareholders equity, debt by borrowings or financing as well as other financial liabilities are sources of funds to the business entity and as such the zakat is assessed on the available balance of the cash and not merely the equity account.

Here in Malaysia, business zakat is calculated using the adjusted growth model or the adjusted working capital


WaNTED: MORE aWaRENESSEducation and creating awareness are integral to encouraging more companies to pay business zakat. Datuk Seri Zainal Abidin Syed Mohamed Tahir, Executive Chairman of Brainy Bunch Islamic Montessori and the former Group Managing Director of Proton Holdings Berhad, makes it a rule that “every company I’m involved in must pay zakat.”

To promote zakat, he said that it was especially critical to get buy-in from the board of directors. On one hand, it is easy to convince directors who are spiritually committed – regardless of religious affiliation - that zakat is good. To convince the rest, it may be effective to repackage zakat as part of corporate social responsibility (CSR) and good corporate citizenship, he said.

Zakat takes a lot of selling. Zainal met with the Proton board to advocate zakat on three occasions; the third time was suc-cessful. “You have to bridge the information gap and brand zakat in different forms.” He advised zakat bodies to create public and stakeholder confidence through transparency and strategic out-reach programmes to bridge the information gap.

At the same time, it is vital to train accountants and finance pro-fessionals to calculate business zakat and to account and report for

it, he said. Interestingly, as they seek to professionalise their services, zakat agencies such as Lembaga Zakat Selangor and PPZWP have begun appointing accounting firms and tax agents as their zakat assessors and agents. Many are also hiring business and accounting graduates in addition to holders of Shariah or Islamic degrees.

Zakat IN ThEIR OWN WayA leading role model for corporate zakat, Bank Rakyat is a strong advocate of business zakat and it started paying zakat in 1997. For the last financial year, the Islamic bank paid zakat of RM293.7 million. It chooses to distribute three-eighths of its annual business zakat with the remainder being paid to the zakat col-lection bodies. It uses zakat to promote a strong CSR and socio-economic agenda and to assuage the needs of the eight zakat asnaf or categories. Some measures include providing housing for the needy, funding for students up until masters degree level, funding the propagation of Islam or da’wah, supporting mu’alaf or reverts associations, and providing seed funding for those who want to start a business and become economically self-sustaining, explained Datuk Mustafha Abd Razak, Managing Director, Bank Rakyat.

Salihin Abang



model; the former is more suitable for financial institutions and the latter for trading companies.

Mas Sukmawati Abu Bakar, Associate Director, Islamic Research, Malaysian Accounting Standards Board (MASB) noted that the TR i-1 deals strictly with financial reporting issues related to zakat. She talked about the require-ments of the TR i-1 and provided exam-ples of disclosure in her presentation on MASB TR i-1: Accounting Principles and Application. Mas also explained why Malaysia did not adopt AAOIFI FAS No. 9 Zakat and chose to provide its own

To help standardise accounting for zakat in Malaysia, the Malaysian Accounting Standards Board (MASB) had issued an Islamic technical pronouncement on zakat MASB TR i-1 Accounting for Zakat on Business in 2006.

“

“

accounting treatment. The two differ in terms of scope, determination of zakat base, treatment of zakat and disclosure, among others.

Meanwhile, Professor Dr. Abdul Rahim Abdul Rahman, Vice-Chancellor, Kuala Lumpur Metropolitan University College delved deeper into emerging issues on accounting and reporting for zakat. With respect to valuing zakatable assets, AAOIFI FAS 9 uses cash equiva-lent values (CEV) whereas IFRS uses fair value, but is CEV equivalent to fair value? He stressed the need for caution in valua-tion in order to respect the rights of both

the zakat payers and the beneficiaries. Dr. Rahim also addressed the need

to differentiate between short-term and long-term holdings in determining the zakat assessment of shares and sukuk. In his closing remarks, Dr. Rahim asked whether conventional accounting and reporting standards reflect the needs of zakat accounting and reporting. If the conventional framework does not provide a true and fair view for business zakat, hence there is a need to develop GAAP (generally accepted accounting principles) and standards for business zakat. n

about the Business Zakat Symposium

The inaugural Business Zakat Symposium held on 8 October 2013 was jointly organised by the Malaysian Institute of Accountants (MIA) and Universiti Tenaga Nasional (UNITEN), in collaboration with Lembaga Zakat Selangor (LZS), Pusat Pungutan Zakat Wilayah Persekutuan (PPZWP), Persatuan Akauntan Percukaian Malaysia (MATA) and Universiti Sultan Zainal Abidin (UniSZA), and offici-ated by Dato’ Seri Ahmad Husni Mohamad Hanadzlah, Minister of Finance II Malaysia. The Symposium drew over 300 participants comprising business and corporate leaders, regulators, zakat agen-cies, academicians and students.

Datuk Hj. Mustafha Hj. Abd Razak (left) and Datuk Seri Zainal Abidin Syed Mohamed Tahir

Mas Sukmawati Abu Bakar


Q: What are the challenges facing audi-tors with regards to improving audit effi-ciency and practice management, both from a technical and operational per-spective? What would you say are the chief areas in which auditors struggle to enhance practice management?

a: Arguably auditors are most chal-lenged when it comes to realising audit efficiencies on audits of SMEs. International Standards on Auditing (ISAs) were designed to accommodate audits of businesses of all shapes and sizes. This means auditors need to get adept at the scalable application of these standards to SME audits in order to realise efficiencies while maintaining a high standard of quality. In the absence of such efficiencies audit firms will likely fail to earn a reasonable return. Auditors need to work smarter rather than harder

and nowhere is this more true than in the documentation of work done. Inspection bodies around the world complain that documentation is often excessive in quan-tity and yet fails to hit the mark. These technical inefficiencies are often exacer-bated by operational inefficiencies arising from poor practice management, such as inadequate investment in training of staff and IT applications.

Q: What strategies and solutions would you recommend that auditors implement to improve audit efficiency and enhance practice management?

a: There are various measures auditors can take to boost audit efficiency while mitigating audit risk including: a. Study the ISAs - invest time and

effort to study and fully understand the ISAs. This needs to be regarded


Paul Thompson, Deputy Director, SME & SMP Affairs, International Federation of Accountants (IFAC) was recently in Malaysia to conduct a seminar on ‘Performing Audits Efficiently and Expanding Service Offerings’ for SMPs as part of MIA’s continuing professional development for members. Christina Foo, Managing Director, Priority One Consultancy Services and member of the IFAC SMP Committee and Eddie Wong, Director, Professional Standards and Practices Department, MIA, also shared their insights at the seminar. via e-mail, Thompson tells Accountants Today how auditors in public practice can enhance their practice management and expand their growth through service diversification.

SMP IFAC Practice Management and Service Diversification Nazatul Izma


as an exercise in change manage-ment and so it’s best to appoint a team leader. Understanding all the ISAs is the key to perform-ing effective and efficient audits of SMEs. Through a carefully consid-ered assessment one can determine the requirements relevant to your audits. It will demand some time to digest it all and talk to your colleagues and clients about. The investment in time to understand the ISAs will be recouped through ef ficient audits where work is focused on areas of most risk.

b. Improve audit documentation – for example, avoid keeping inter-esting but irrelevant information on the file, use extracts rather than full documents, employ electronic cross-referencing and tailor check-lists to fit the client.

c. Automate the audit – consider using standardised templates and customised checklists. Auditors might also wish to adopt commer-cially available audit software prod-ucts to help streamline processes.

d. Plan the audit. Proper planning of the audit – sketching a timeframe,

identifying a list of deliverables, setting up meetings with the client etc. – will reap significant efficien-cies throughout the audit.

e. Staf f training / supervision – ensure you have the right staff for the audit and make sure they get the appropriate supervision.

f. Communication – the ISAs impress on the need for regular and open communication with relevant client staff and officers as well as amongst the audit team.

SMP IFAC PRACTICE MANAGEMENT AND SERvICE DIvERSIFICATION

Q: How will practice management and audit efficiency among SMPs be affected by changes in compliance and regulations, such as the IAASB’s proposed changes to auditor’s reports and proposed audit exemption regulations, for example? Could you provide some lessons learnt and best practices from more advanced jurisdic-tions?

a: IFAC’s SMP Committee, and many IFAC member bodies like the MIA, have been closely following the IAASB Auditor Reporting project and providing input from an SMP/SME perspective. Naturally our concern is that the outcome works for our constituents - in terms of them being relevant to the needs of SMEs and their stakeholders and in terms of the incremental costs of implementing the new requirements are more than com-pensated for by the incremental benefits. Our preliminary view is that the proposed new and revised ISAs can be applied in a proportionate manner.

The issue of audit exemption is an increasingly contentious issue in many jurisdictions. Recent years have wit-nessed a wave of jurisdictions either introducing audit exemptions, such as Singapore, or increasing existing thresh-olds, such as many member states in the European Community (EC). Experience from these jurisdictions suggests that in the long run the profession is better off – practices diversify into other professional services, such as business advisory and other types of assurance services, which often offer a better return with less risk. But inevitably there is some short-term pain to bear as fee revenue from audit drops, and practices have to reengineer and reposition so as to offer different services.

Plan the auditProper planning of the audit – sketching a time-frame, identifying a list of deliverables, setting up meetings with the client etc. – will reap significant efficiencies throughout the audit.

Paul in a group photo with Eddie Wong (left) and Christina Foo (centre).


Q: How can practice growth be enhanced through marketing services and IT adop-tion for SMPs? How would this be executed practically?

a: In many jurisdictions, Malaysia and many ASEAN nations included, audit has been a mandatory requirement for all limited liability companies. Consequently audit has been a staple service offering of SMPs for many years. And being a regulatory requirement has meant that practices in particular and the profession more generally has not had to market it. This has meant that practices, and the profession, have / has not honed the abil-ity to proficiently market their / its role and the value of their services.

Our research suggests that SMEs have a large and growing appetite for business advice and that accountants are their most preferred source of that advice. If practices are to expand the market for professional services, such as business advisory and other types of assurance services, then they will need to get adept at marketing and exploiting IT. We are witnessing significant change in the technology space, not least with cloud computing, which offers the oppor-tunity to lower costs of providing existing services as well as offer new services and serve new markets. Building the neces-sary expertise in marketing and IT will demand that practices either train and develop existing staff, maybe those most keen to learn new skills, or else recruit new staff that already have the skillset.

Q: What new service lines should SMPs consider for practice diversification and enhancement, especially in Asian and

SMP IFAC PRACTICE MANAGEMENT AND SERvICE DIvERSIFICATION

ASEAN markets? How do you think local SMPs should prepare for upcoming regionalisation e.g. the ASEAN Economic Community - what opportunities for diver-sification and expansion could regionalisa-tion offer? How can SMPs manage the talent crunch, since talent would seem to be pivotal to expansion and diversification?

a: Experiences in other countries and regions offer insights into what might work for SMPs in ASEAN countries. ASEAN looks set to follow the example of the EC (European Community) – an economic bloc with free movement of capital and labour. Hence Europe might be the region that offers the lessons for the profession in ASEAN. For example, many European SMEs operate in and trade across multiple nation states. This brings with it an appetite from SMEs as to how to go about internationalising their business – what markets to serve, how to fund operations, how best to manage foreign exchange risks etc. SMPs are well placed to offer this kind of advice and build referral networks with like-minded SMPs in other countries so that inter-national clients can get access to local knowledge from a trusted expert source. Again SMPs need to build the expertise to offer such advice and this will require them to develop or acquire the requisite talent. If the ASEAN vision is realised,

and labour is free to move, then the talent crunch can be mitigated by recruiting from an ASEAN wide talent pool.

Q: What free resources and tools should SMPs be leveraging?

a: The MIA, like many larger IFAC member bodies, provides extensive sup-port to its members in practice in the form of CPD courses, resources and tools and networking media. IFAC, on behalf of the global profession, has resources and tools to supplement member body sup-port which are housed at http://www.ifac.org/about-ifac/small-and-medium-practic-es-committee/smp-resources-and-tools. In 2014 a new ‘Gateway’ will offer practition-ers globally the opportunity to share their experiences and advice as well as access resources from member organisations around the world.

Q: What is the one key message or takeaway that you’d like to share with SMPs in Malaysia and ASEAN?

a: Change and pace of change are increasingly a fact of business life. Accepting this demands a mindset change and a commitment to free up valuable ‘thinking’ time to determine how best to maximise the opportunities that often come hand in hand with change. n

If the ASEAN vision is realised, and labour is free to move, then the talent crunch can be mitigated by recruiting from an ASEAN wide talent pool.


Staying Ahead of the Curve

Global capability and consistency are central to the way we work. We are committed in guiding our

clients through challenges based on deep industry knowledge and translating that into local and

global opportunities.

Our focus on global industries helps KPMG professionals develop a rich understanding of our clients’ businesses and the insight, skills, and resources required to address industry-

specific issues, challenges and opportunities.

kpmg.com/my



GOING BEYOND AUDIT: Service diversification through M&As

MERGERS AND AFFILIATIONS (M&As) ARE A MEANS OF DRIvING SERvICE DIvERSIFICATION FOR SMALL AND MEDIUM PRACTICES (SMPs). TO HELP SMPs, MIA RECENTLY ORGANISED THE MERGER AND AFFILIATION (M&A) SEMINAR 2013, A ONE-DAY COMPLIMENTARY SEMINAR DESIGNED SPECIFICALLY FOR SMPs INTERESTED IN ExPLORING THE OPTION OF STRATEGIC ALLIANCE IN THE FACE OF GLOBALISATION AND RECENT LEGISLATIvE CHANGES.

Audit and assurance engage-ment services remain a sig-nificant part of Malaysia’s accountancy public practice sector. Increasing regula-

tory requirements, coupled with rapid changes in accounting and auditing stand-ards, have somewhat hindered SMPs in Malaysia in keeping up the required level of compliance. The matter is made worse with the general low level of audit fees observed within the segment, contrib-uted by various factors, including treating audit and assurance type of engagements

as a commodity. Also, unregulated indi-viduals who choose to operate outside the auspices of the main regulatory bod-ies often undercut regulated firms with qualified staff, coupled with clients often not appreciating the differences in value of audit offered by regulated accounting firms.

In addition, there are innumerable threats to SMPs such as the introduction of Limited Liability Partnership (LLP) and the possibility of audit exemption for small companies in future. SMPs also find it difficult to recruit and retain talent

in view of their size and the long working hours with limited career development opportunities within SMPs.

In a recent press release, the MIA President advocated greater con-solidation such as through M&As of SMPs to scale up resources and thus improve audit quality. M&As could be the most appropriate solution since merged accounting firms can optimally achieve economies of scale by combin-ing resources, reaping tax advantages, achieving service diversification and eliminating inefficiencies.

MIA Professional Standards and Practices

Panel Discussion (From L-R) Eddie Wong, Dato’ Raymond Liew, Yap Soon Hin, Dr. Chua Hock Hoo.


what is the difference between a merger and a strategic affiliation?A merger is more than merely an agglom-eration of two or more firms; it is similar to that of a marriage between a husband and a wife. In the case of a merger, the legal and related costs can be exorbitant.

Unlike a merger, strategic affiliation generally attains all the benefits of a merg-er and there is no risk of a “divorce” and incurring huge legal and related costs when there is a break-up, as in a merger. The costs of a strategic affiliation are prob-ably only the membership and related fees together with a notice period for exit from the local or international network of firms.

Speaking at a M&A seminar in KL organised by the Professional Standards and Practices Division of MIA, Dato’ Narendra Jasani (MIA Council Member and Chairman of Public Practice Committee (PPC)) stressed that SMPs need to consider either option in order to build capacity and pool resources to cope with the various challenges arising from the ever changing landscape of the accounting profession.

complimentary seminars on merger and affiliation 2013The Merger and Affiliation (M&A) Seminar 2013 was a one-day complimen-tary seminar designed specifically for SMPs interested in exploring the option of strategic alliance in the face of globalisa-tion and recent legislative changes, such as the introduction of Limited Liability Partnership (LLP) and the possibility of introducing audit exemption in the near future. SMPs should consider the pos-sibility of merger or affiliation if they are to remain competitive in this market-place. The seminar was held in two loca-tions, i.e. in Penang on 5 December 2013 and in KL on 12 December 2013, with financial support from the Ministry of International Trade and Industry (MITI). The seminars attracted 80 practitioners in Penang and 170 practitioners in KL.

This full-day seminar was packed with up-to-date information on M&A among accounting firms and updates

on current regulatory changes in accounting, auditing, ethics and practis-ing guidelines. The facilitators for the event were Dato’ Raymond Liew, Dato’ Narendra Jasani, Dr. Chua Hock Hoo, Yap Soon Hin, CK Ooi, Eddie Wong and Yeong Hoon Li.

The seminars started with a presenta-tion by Liew on the key drivers for M&A such as international branding, better client retention and continuity / succes-sion planning. Liew highlighted that any strategic affiliation must be on an affirma-tive basis where all participating firms are fully committed to one another, just like a merger. The key word is ‘commitment’ in order to achieve a successful affiliation.

Among the consensus achieved at the panel discussion was that M&A could assist in capacity building and better staff retention. Pooling of staff as a result of M&A may lead to better staff retention

because a better pool of resources allows firms to specialise in different areas of expertise, provides for a greater shar-ing of technical information, and higher budgets can be allocated for training and development, which in turn, can lead to better service offerings.

M&A enables firms to expand their range of services and geographical cover-age. SMP firms will also be able to dem-onstrate better commitment to fulfilling clients’ needs by providing better personal attention, even at the partners’ level.

As about 80% of the accounting firms in Malaysia are sole proprietor practices, M&A activities will reduce the concentra-tion of sole proprietor firms, which are

plagued with continuity and succession issues. Clients will also be at ease and more reassured of continuity of service if practice continuity and succession con-cerns have been taken care of.

Sole proprietors and small firms are that size for a reason, as they prefer to be. But sometimes there are good rea-sons for small firms to merge or affiliate. However, despite the best intentions of all involved parties, some accounting firms’ merger or affiliation exercises are not as successful as originally planned; indeed, some end as failures. When question-ing on whether there is a need for a demerger clause, panellists opined that one must not have the demerger in mind when entering into a merger or strategic affiliation. Meanwhile, those practitioners who have failed in M&A are urged to take the bull by the horns and view M&A as the way forward.

tax incentives for merger of small entitiesYeong Hoon Li, Manager, Tax Unit, MIA Professional Standards and Practices (PSP) presented the incentives given by the Government in encouraging the merger of small entities. Currently there is a flat tax rate of 20% on all taxable income for a period of five years (effec-tive from the date of the merger) and stamp duty exemption on the merger doc-ument. To be eligible for these incentives, mergers must take place within three years from 3 July 2012 to 2 July 2015 and enterprises that intend to merge must be 100% Malaysian owned, have annual sales turnover of less than RM5 million or have

GOING BEYOND AUDIT: SERvICE DIvERSIFICATION THROUGH M&As


full-time employees of less than 50, and are in approved sectors as prescribed in the Guidelines.

Professional services such as account-ing and taxation are one of the eligible sectors under this incentive. The appli-cation is to be submitted to the Inland Revenue Board (IRB) and the incentives are to be provided through Exemption Order under the Income Tax Act 1967 and Stamp Act 1949 respectively. The rel-evant Income Tax (Exemption) (No. 11) and Income Tax (Exemption) (No. 12) Order 2013 and Stamp Duty (Exemption) (No. 11) Order 2013 were issued on 30 August 2013.

Based on the current corporate tax rate, Small and Medium Enterprises (SMEs) enjoy the preferential tax rate of 20% for its first chargeable income (CI) of RM500,000 and 25% on CI exceeding RM500,000. Whereas, individuals besides those at the highest tax brackets of 26%, may be effec-tively taxed at 21% or 22% of their CI.

mia e-portal on m&aYeong also highlighted the electronic portal on Member Firms’ Merger & Affiliation Listing, which provides a platform for member firms who would like to seek local mergers or affiliations. Member firms could publish their inten-tion to merge or affiliate on a complimen-tary basis. To view the portal, member firms can log on to www.mia.org.my/e-merger/.

updates on the recent changes in legislation and guidelinesBefore the closing of the seminar, Mr. Eddie Wong, Director of MIA Professional Standards and Practices (PSP) Division also touched on the Personal Data Protection Act (PDPA) which came into operation on 15 November 2013, in addi-tion to changes to audit licence interview guidelines. He also updated the audience on recent developments and regulatory changes affecting the audit/accounting profession.

To view all the slides presented at the M&A seminars, member firms can log on to www.mia.org.my/e-merger. n

GOING BEYOND AUDIT: SERvICE DIvERSIFICATION THROUGH M&As

Yeong Hoon Li

2014-001 AT Advert - 275 x 210 - FA.indd 2 15/01/14 12:29 PM


2014-001 AT Advert - 275 x 210 - FA.indd 2 15/01/14 12:29 PM


tax

Shifting to the Goods and Services Tax Landscape

In 1983, 21 out of the 24 OECD countries had implemented the Goods and Services Tax (GST). Thereafter, we have observed an increasing number of countries around the world adopting or reforming their VAT or GST systems in line with the demands of a rapidly changing global economy. VAT or GST systems have now been implemented in more than 156 countries around the world. The trend away from direct taxation and towards indirect taxes seemingly continues inexorably.

Transitioning Period towards Implementation

MIA Professional Standards and Practices


SHIFTING TO THE GOODS AND SERvICES TAx LANDSCAPE

One of the main thrusts of the 2014 budget announcement is none other than the much disputed and controversial issue which has ultimately

set foot in the country i.e. the implemen-tation of Goods and Services Tax (GST) by 1 April 2015 at the rate of 6% with a seventeen (17) months transitional peri-od. The GST will replace the Sales Tax Act 1972 (STA 1972) and Service Tax Act 1975 (STA 1975) which are currently at the rate of 5%/10% and 6% respectively. The reason for the implementation is to enhance the level of competitiveness of the country.

Escalating budget deficits have put pressure on many governments to ensure that they can raise additional revenues. All countries face the need to improve their tax receipts, and increas-ingly the Government is turning to indi-rect taxes as the solution. Malaysia is no exception. The current direct tax system despite coming with numerous exemp-tions and incentives, is adding to the bur-den on taxpayers to comply, resulting in the embedded inefficiencies in terms of collection and administration especially tax evasion.

This article merely provides a gen-eral overview of the considerations and terms used which business entities should look into during the transitional period to ensure a smooth and success-ful GST implementation.

repeal of sales tax act 1972 and service tax act 1975

With effect from 1 April 2015 [also known as the appointed date (AD)], sales tax and service tax will cease to be charged and these two tax licensees will cease to be registered under the respective Sales and Service Tax Act. This also implies that the facilities and exemption given under

the sales tax and service tax system will become null and void.

The Guide on Transitional Rules (the Guide)1 was revised and reissued by the Royal Malaysian Customs Department (RMC) on 28 October 2013. As provided in the Guide, the GST registration exer-cise will commence six months before the AD. A person who has exceeded the annual threshold of RM500,000 is required mandatorily to be registered for GST three months prior to the AD. The application may be done manually in the prescribed form or via online at www.gst.customs.gov.my. Failure to observe this requirement is considered as committing an offence.

savinGs provision with the repeal

Despite sales tax and service tax ceas-ing effective from the AD, there is a certain savings provision which is still enforceable where tax is due and pay-able and liability (offences) incurred is concerned. Examples of the implementa-tion of the savings provisions on or after 1 April 2015 are: (a) any claims of overpayment of sales

tax made before 1 April 2015; (b) where a claimant had paid sales tax

before 1 April 2015 prior to the deci-sion to remit the taxes made on or after 1 April 2015, the claimant can claim a refund of the taxes paid;

(c) credit notes issued on or after 1 April 2015 for the return of goods under Section 31B of the STA 1972 and Regulation 19C of the Sales Tax Regulations 1972 (STR 1972) which were supplied before 1 April 2015; or

(d) any sales tax due or any liability incurred (offences committed under the Act) before 1 April 2015 that will be collected on or after 1 April 2015.

if a sales tax licensee is not a reGistered person on

1 april 2015:(a) he is required to account and pay

sales tax on: i) raw materials and components

held on hand on 1 April 2015 that he had acquired free from sales tax (Section 9 of STA 1972)

ii) raw materials and components held on hand which he had claimed deduction of sales tax under the credit system (Section 31A of STA 1972);

iii) goods which are exempted from sales tax under Section 10 of STA 1972; and

iv) finished and semi-finished goods held on 1 April 2015.

(b) he is required to account for sales tax on goods he had supplied before 1 April 2015 (where the invoice is issued or payment is received for that supply on or after 1 April 2015); and

(c) the amount of sales tax due and pay-able on those goods shall be made in his sales tax return (CJP1) in his last taxable period2 and furnished to the Director-General not later than 28 days after 1 April 2015.

There will be no liability to account for sales tax on such goods when the last sales tax return is submitted in the last taxable period if the sales tax licensees are registered for GST on 1 April 2015.

A service tax licensee irrespective of whether he is a registered person or not, is required to furnish his service tax return (CJP1) for his last taxable period3 and state the amount of service tax pay-able in CJP1: (a) the service tax not received for tax-

able services provided preceding the

1 The Guide provides that GST is generally payable on supplies of goods and services made on or after the appointed date i.e. 1 April 2015. Similarly, input tax credit is claimable on acquisitions or purchases made on or after the said date.

2 Last taxable period means the period of two calendar months or part of it ending on 1 April 2015.3 Return for his last taxable period shall be furnished to the Director-General (DG): • Not later than 28 days after the appointed date; or • Any longer period not later than the end of a 12 month period from 1 April 2015 subject to the Director General’s approval.


last taxable period and the service tax has remained unpaid exceeding 12 months from the date of invoice;

(b) the service tax not received for taxable services provided preceding and succeeding the last taxable period and the service tax has remained unpaid but has not exceed 12 cal-endar months from the date of invoice;

(c) service tax on all taxable services provided in the last tax-able period;

(d) service tax on all taxable services provided before 1 April 2015 where the invoice is issued or payment is received for supply to be made on or after 1 April 2015.

bad debt reliefGenerally, a licensee under the STA 1972 or a taxable person under the STA 1975 is eligible to claim bad debt relief under Section 31C and 31D or Section 21B and 21C under the STA 1972 and STA 1975 respectively on or after 1 April 2015 pro-vided the licensee was eligible for the relief before the AD. This rule applies regardless if the person is / is not a registered person.

GOODS OR SERVIcES SupplIED BEfORE aD, ThE SupplIER haS SupplIER

• paid all the sales tax or service tax

• made efforts to recov-er the bad debt

• eligible before ad to claim bad debt relief, is allowed to claim sales tax [subregulation 19d(1)(a)] or service tax [subregulation 16a Service tax Regulation 1975]

• allowed to claim from ad up to six years from the date sales/service tax has been paid

• required to account for sales/serv-ice tax claimed if subsequently col-lected after refund had been made

proGressive and periodic supplY spanninG Gst Supply spanning GST refers to a supply of goods or services made for a period or progressively over a period before and ends on or after 1 April 2015 (e.g. airline tickets and cinema).

Based on the General Rules, any supply • made before the AD will not be subject to GST • supply made on or after AD will be subject to GST• importation of goods will be subject to GST if released from

customs control on or after the AD

However, the supply will not be subject to GST if the provi-sion of services where service tax has been charged and goods sold where sales tax has already been charged.

special refund for Goods held on hand A person is entitled to a special refund on goods held on hand on 1 April 2015 provided that he fulfills the following conditions:- (a) the claimant must be a registered person (mandatorily

being a GST registrant. Voluntarily registered persons are excluded). Failure to be registered by 1 April 2015 will mean not being eligible for the refund;

(b) the goods held on hand on 1 April 2015 are for the purposes of making taxable supplies;

(c) the goods are subject to sales tax and sales tax has been paid by the claimant before 1 April 2015;

(d) the claimant must hold the relevant supplier’s invoice for which sales tax has been paid; and

(e) for imported goods held on hand, the claimant must hold rel-evant documents to prove that he is the importer or consignee or owner of the goods for which sales tax had been paid.

Under certain circumstances where the eligible claimant is unable to prove sales tax has been paid on the goods held on hand on 1 April 2015, special refund at 20% method is available based on the formula stipulated in the Guide. The claim must be submitted within six months from the AD. For a refund of RM10,000 or more, an approved company auditor’s certificate is required, whilst for a refund of less than RM10,000 a chartered accountant’s certificate will be required.

supplies made before and after 1 april 2015GST is charged on any supply of goods made on or after 1 April 2015 even though the whole or part payment is made before 1 April 2015 or a tax invoice is issued before 1 April 2015. For services, GST is charged on any supply of services performed on or after 1 April 2015.

The time of supply for goods made on or after 1 April 2015 is treated as having taken place at the time: (a) when the goods are removed; or (b) when the goods are made available to the person to whom

the goods are supplied if the goods are not removed.

preparation durinG transitional periodGetting yourself registered after reviewing the past records or at least the latest 12 months preceding period will determine whether the company needs to be registered mandatorily. Alternatively, the company may opt to register voluntarily. Once the company has vol-untarily registered, the company has to stay on for at least two years before necessary action can be taken to deregister from the GST.

Review all the contracts whether there is a clause for the contract to be reviewed by taking into account the GST imple-mentation. Negotiate or alter the agreement / price stated in the contract, if there is a need. The Guide provides some rules to deal with contracts and agreements entered into prior to 1 April 2015. The GST impact on the contracts or agreements will depend on whether the contracts have the opportunity to review or no opportunity to review4 on or after 1 April 2015.



Non-reviewable contract refers to a written contract with no provision to review the consideration or contemplates a change to the price of a supply until a review opportunity arises and the contract is entered into two years before the AD. Taxable sup-plies made under such contracts will be treated as zero-rated sup-plies (the recipient of the supply is entitled to claim full input tax on the supplies he makes) for a period of five years from the date of implementation of GST or when a review opportunity arises, whichever is earlier, if both supplier and recipient are registered persons and the supply is a taxable supply.

As GST may seem to impact all the business units within the organisation, the general perception that it is the responsibilities of both the accountants and director/CFO may not seem right. Instead, it is important for all levels of staff to be trained and have at least the minimum comprehension on GST law and the transitional regulations. The 2014 Budget proposed that the Government provide a training grant of RM100 million to busi-nesses that send their employees for GST training in the Years 2013 and 2014. Expenses incurred for GST training in account-ing and ICT will be given further tax deduction in the years of assessment 2014 and 2015. The accounting system, whether purchased off-the-shelf or internally developed, shall comply with the requirement provided in the “Guide on GST Accounting software for Software Developers in Malaysia” i.e. the account-ing or invoice system purchased or developed is able to support the requirements for GST reporting e.g. various tax codes for the purchase or supply of standard-rated, zero-rated, exempt, deemed and out-of-scope transactions and those stipulated in the aforesaid Guide. In connection with this, please note that the Government is to provide financial assistance amounting to RM150 million to SMEs for the purchase of accounting software

supplY of Goods or services not subject to sales tax and service tax the supply of non-taxable goods or services before 1 april 2015 is not subject to sales tax or service tax but such supplies if they were made on or after 1 april 2015 are subject to GSt.

GST lIaBIlITy SupplIES MaDE

invoice issued or payment received on or after 1 april 2015

Supplies made before 1 april 2015 the consideration for the supplies is not sub-ject to GSt

Supplies made before 1 april 2015 but ends on or after 1 april 2015 (spanning 1 april 2015)

the proportion of supplies made on or after 1 april 2015 is subject to GSt

invoice issued or payment made/received before 1 april 2015

Supplies made on or after 1 april 2015 the consideration for the supplies is deemed GSt inclusive

Supplies made before 1 april 2015 but ends on or after 1 april 2015 (spanning 1 april 2015)

the consideration for the supplies is deemed GSt inclusive for the proportion of supplies made on or after 1 april 2015

4 Review opportunity means opportunity for supplier either by himself or with agreement to change the consideration because of the imposition of GST, to conduct a review before or after the AD, negotiate or alter consid-eration or renewal of contract.

in 2014 and 2015. As such, getting the IT and accounting system ready for GST is the foremost crucial thing besides ensuring the computer systems are able to get in place all the features required for charging and processing GST filing.

The business entities may alternatively create their own GST manual to use as a reference guide to provide a readily available resource for reference and thus eliminate the concern for busi-ness entities when dealing with high staff turnover issues. The entities shall also ensure that certain GST information may have to be collated outside the accounting system for instance, calcula-tion of the de minimis limit for input tax claims etc.

conclusion The registered persons are required to ensure the accounting system (no matter when the company’s financial year end is) has to be closed by 31 March 2015 to make way for the new system to step in by 1 April 2015.

Understanding of the relevant treatments on taxable goods sold /services rendered before 1 April 2015 and returned/termi-nated on or after 1 April 2015; progressive and periodic supply spanning GST implementation are important. It is equally impor-tant to take note that payment received / invoice issued before the AD but goods only supplied or service performed after the AD, will fall under the GST jurisdiction i.e. the supplier is required to charge GST on the supplies made, if he is a GST registrant.

GST is seen as a self-assessed tax system and requires the accurate application of the GST rate to each transaction with the correct calculation of GST payable. As such, proper record- keep-ing is necessary for accurate tax declaration and evidence to sub-stantiate for any GST input claimed. On this note, GST rules and regulations will not be so simple. Hence, it is therefore pertinent for businesses to get prepared and ready for GST implementa-tion within the transitional period as time and tide waits for no man. The readers are advised to refer to the Guide for a better understanding and clarification on matters on GST. n



WHAT’S THE DIFFERENCE BETWEEN ZERO-RATED AND ExEMPT ITEMS IN THE UPCOMING GST SYSTEM? AND WHAT WILL BE THE IMPACT ON BUSINESS AND TAxPAYERS?

Gst “zero-rated” and “exempt” What’s the difference?

tax

Mooted more than two decades ago, first mentioned in Budget 2005, and delayed for nine more years until its roll-out in

Budget 2014, Malaysia’s Goods and Services Tax (GST) has arguably one of the longest gestation periods of any tax law to be implemented in the country. But underlying the long development period is a fiscal policy with transformative potential and ramifications for the populace.

Kenneth Yong Voon Ken


Following the Budget 2014 announce-ment, Malaysia’s GST will come into effect on 1 April 2015 at the rate of 6% based on a “taxable turnover” threshold of RM500,000 per annum. Businesses below the threshold do not need to be registered (and by extension, do not need to charge GST) although voluntary registration is allowed. GST in a nutshell is a consumption tax or value added tax (VAT) that is levied on the supply of taxable goods and services made in the course or furtherance of any business by a taxable person in Malaysia and the importation of goods and services into Malaysia. It is called value added as the tax is charged at stages by the interme-diaries in the production and distribution process (value added) and ultimately, will pass on to the final consumer. GST is a replacement for the existing Sales Tax and Service Tax which is adminis-tered by the Royal Malaysian Customs Department.

tYpes of supplYIn describing GST, the mass media has frequently referred to “taxable” items and “exempt” items. While these choice of terms allow for easy reading and com-prehension, they do not aptly reveal the technical operations of GST.

In general, Malaysia’s GST model mainly comprises three types of supply:a) “standard rated” supply which carries

6% GST:b) “zero-rated” supply which carries 0%

GST; andc) “exempt” supply which does not attract

GST.

Both “standard-rated” and “zero-rated” supplies are collectively termed as “tax-able supply” (ostensibly, this seems a misnomer, since the term “zero-rated” implies no GST, but there are techni-cal reasons for this apparently-misplaced classification).

Most goods and services will fall into the “standard-rated” category where sup-pliers who are GST-registered will collect 6% GST from customers. In order to reduce the risk of GST-driven inflation, certain items are prescribed as either “zero-rated” or “exempt” supplies that do not attract any GST.

“Zero-rated” and “exempt” supplies have markedly different technical applica-tions in the operations of GST law. Thus, their separate identification and treat-ment is of paramount importance.

Figure 1 presents a list of “zero-rated” and “exempt” items summarised from the Budget 2014 announcement and grouped into broad categories.

General observations: Goods vs servicesMost items under the “zero-rated” list are goods such as basic food and utili-ties (Schedule 1 of the GST Bill 2009 defines water and electricity as goods). The notable exception in the “zero-rated” list is exported goods/services whose inclusion in the list is to encourage an export-driven economy.

On the other hand, the “exempt”

list contains mostly essential services involving public transport, healthcare, education and other basic services – the odd exceptions are residential, agricul-ture and general purpose land which are goods, not services.

In Singapore, the list of “zero-rated” items is woefully limited to: “providing international services”; and “exporting goods out of Singapore”.

Meanwhile, Singapore’s “exempt” items are limited to “financial services”, “sale and lease of residential properties” and “investment gold, silver, platinum or investment precious metals1”.

By contrast, Malaysia’s list of “zero-rated” and “exempt” supplies covers a wider spread of essential goods and ser-vices, and even a neutral party in the GST-debate would concede that Malaysia’s model has, on paper, more steps towards reducing GST-driven price inflation.

conversion of itemsGiven the nature of “zero-rated” items (which are mostly goods), it is not dif-ficult to imagine that many “zero-rated” items can be readily converted into other goods or value added. Upon conversion, “zero-rated” items may not retain their “zero-rated” status, but may be con-verted into “standard-rated” items. For instance, raw chicken meat (“zero-rated” item) acquired from the market, upon

GST “ZERO-RATED” AND “ExEMPT” – WHAT’S THE DIFFERENCE?

1Only precious metals in the form of a bar, ingot, wafer and coin which meet certain criteria can qualify as IPM. Precious metals which do not meet the criteria cannot qualify as IPM i.e. non-IPM and the supply of non-IPM contin-ues to be taxable. Examples of non-IPM are jewellery, scrap precious metals, numismatic coins and precious metals which are refined by refiners who are not on the ‘Good Delivery’ list of the London Bullion Market Association or the London Platinum and Palladium Market.

Zero-Rateditems(summarised into broad categories)

• agriculture products – paddy & various fresh vegetables

• Beef, mutton, swine• Fish, salted fish, prawns, cuttlefish,

crabs, oyster etc.• Rice, sugar, table salt, plain flour,

cooking oil• Selected poultry and eggs• Water for domestic use• First 200 units of electricity

(domestic use) for minimum 28 days

• exported goods and services• Selected services related to exports

Exemptitems(summarised into broad categories)

• Public transportation – rail, bus, taxi (excludes luxury/airport taxi)

• tolled highway or bridge• land for residential, agriculture or

general use• Funeral-in-a-package• Private healthcare & education• Selected financial services• Childcare services• Selected accommodation (28 days

or more)• Selected supplies made by

societies

Figure 1


cooking and being served in a restau-rant, gets converted to a cooked meal (“standard-rated” item). Similarly, sugar and eggs are “zero-rated” but once pro-cessed and transformed into a cake, the latter becomes “standard-rated”. On the other hand, a cake (“standard-rated”) may be converted into a “zero-rated” item if exported (since export of goods and services are “zero-rated”).

However, “exempt” supplies (apart from land) are mostly services and so being, do not directly undergo a conver-sion, but instead, gets consumed in the business. Even residential land, when converted into a house, still retains its “exempt” status when sold by a property developer to the end-consumer.

end-consumer’s view pointFor all our initial preparation and expo-sure to GST literature, our first real con-tact with GST is likely to be a rather hands-on affair at the supermarket or convenience store – this is unsurprising as all of us are consumers.

Towards this end, sufficient aware-ness of “zero-rated” items and “exempt” items are essential to prevent being wrongly charged GST by unscrupulous traders. For all practical intent, there is no difference to the end-consumer between “zero-rated” and “exempt” supply as both are free from GST.

Nonetheless, the classification rules for what constitutes “zero-rated” and “exempt” supplies are very specific, so much so that hair-splitting distinctions are not uncom-mon. Anything not falling squarely within the “zero-rated” and “exempt” categories will be subject to the full 6% GST.

classification rules are specificPoultry and eggs are “zero-rated”, but are limited to chicken and duck only. Goose meat or turkey meat (despite both resembling oversized chickens) are excluded from the “zero-rated” list and hence, carry GST at 6%. Given the visual similarities of such items, it remains to be seen whether creative re-labeling will become rampant.


Another tricky example is cooking oil. Quite understandably, palm oil, coconut oil and groundnut oil (which are com-monly consumed by the populace) are “zero-rated”. However, other cooking oils such as corn oil are not zero-rated, but will carry 6% GST. Such distinctions may be a triumph of technicality over intuition, but are unlikely to win praise from the segment of the populace bred on corn oil.

Another complication arises from foods that have undergone minor pro-cessing: meats that have been cleaned and cut still retain their “zero-rated” sta-tus, but meats that have been marinated (with sauce and seasoning) will become “standard-rated”. As there is little visual distinction between the former and latter, the uninformed shopper will take some convincing that GST has been rightfully charged. These are, unavoidably, the ini-tial quirks of GST implementation.

supplier’s view pointHowever, upon stepping into the shoes

of a supplier, the differences between “zero-rated” and “exempt” supplies become more pronounced and pro-found.

Businesses whose revenues exceed the annual threshold of RM500,000 are required to register for GST. However, in determining the “taxable turnover” to be compared against the RM500,000 threshold, only “standard-rated” and “zero-rated” supplies are taken into account. “Exempt” supplies do not count towards the RM500,000 threshold. Hence, “exempt” supplies do not play a role in triggering GST registration, but “zero-rated” supplies do. Suppliers of “zero-rated” items must be aware of this technicality.

Once a business is registered, the GST return form needs to be submitted for every taxable period, which could be “monthly” for businesses with annual revenue exceeding RM5m, or “quarterly” for businesses with annual revenue below RM5m.

Mechanism for sale of “exempt” items

Mechanism for sale of “zero-rated” items

Supermarket End-Consumer

Royal Malaysian Customs Department

(RMCD)

A business selling “standard-rated” and/or “zero-rated” items can claim back (from RMCD) all GST paid on “standard-rated” inputs.

Sell eggs (zero-rated)

No GST collected

Claim back GST from RMCD

Pay GST 6%

No GST paid

Buy eggs (zero-rated)Egg supplier

Other inputs:Standard-rated items,

Electricity, Plant & Equipment etc.

Inputs:Petrol, Bus, Plant & Equipment etc.

Bus Company(Public Transportation)

End-Consumer

Royal Malaysian Customs Department

(RMCD)

A business providing “exempt” supplies cannot claim back (from RMCD) the GST paid on inputs. This may encourage the business to embed into the selling price all the GST paid on inputs.

Bus Fare(exempt)

No GST collectedPay GST 6%

Cannot claim back GST from RMCD because “bus fare” is an exempt supply


“exempt” supplies and input tax creditThe biggest difference between “zero-rated” and “exempt” sup-plies is the availability or denial of input tax credit claimed by a supplier.

A GST-registered supplier of “taxable supplies” is allowed to claim input tax credit on GST incurred on purchases, capital goods and overheads. Because “zero-rated” supplies are techni-cally regarded as a “taxable supply”, they qualify the supplier for input tax credit recovery. Conversely, a supplier making an entirely “exempt” supply is not allowed to claim input tax credit on its purchases, capital goods or overheads.

As a result, any GST incurred by a supplier of “entirely exempt” supplies is not recoverable but will become part of the “exempt” supplier’s cost base and will most likely be “marked-up” into the final selling price to the end-consumer. It is possible that the price of “exempt” supplies may potentially increase (marginally) due to the embedded GST.

the “exempt” classificationThis line of thought may evolve a natural question: To avoid “embedding” GST into the selling price of “exempt” supplies, why doesn’t the government zero-rate all items destined for “exempt” status?

The most likely explanation is that “zero-rated” supplies represent a loss of GST-revenue to the government. Having too many “zero-rated” items will effectively reduce governmental GST-revenues and compel the government to raise the GST rate (higher than the current 6%), as the remaining “standard-rated” items must make up for the loss of GST from the “zero-rated” list.

In contrast, “exempt” suppliers suffer the GST on behalf of end-consumers since the former cannot recover GST incurred on their purchases, capital goods and overheads. Thus, the “exempt” status allows the government to provide relief to end-consumers while still collecting part of the GST along the supply chain.

mixed suppliersThe term “mixed supplier” is used to describe a business which supplies both taxable supplies (“standard-rated” and/or “zero-rated) and “exempt” supplies.

A mixed supplier, as the name implies, will have to apportion and part-claim its input tax credits based on an agreed formula (usually based on sales value of “taxable” supplies as a propor-tion of the total of “exempt” and “taxable” supplies). The por-tion of input tax credits attributable to “exempt” supplies is not allowed to be claimed, while the remaining portion attributable to “taxable” supplies is claimable.

There are specific rules such as “Partial Exemption” and “Capital Goods Adjustment” rules that govern the apportionment of input tax credits of mixed suppliers; however, they are beyond the scope of this article.

For a mixed supplier, detailed tracking of its “zero-rated” and “exempt” supplies is critical in order to correctly compute its net GST position.

The culmination of all the above is that the initial joy evoked from the term “exempt” gives way to an inescapable sensation of a GST-trap, whereby input tax credits are denied and GST com-pliance becomes a complicated affair.

conclusionLike income tax self-assessment once was, GST is, to the public, an unknown element. As yet, it is difficult for general businesses to get truly enthusiastic about the new GST system because of the little that is known: more taxes and more compliance cost.

But given the inevitability of GST, public awareness and early preparation will be the cornerstones of a successful transition to the GST era come 1 April 2015.

Moving beyond this is Malaysia’s aspiration to reduce its dependency on direct taxes (e.g. income taxes) and petroleum taxes to consumption-driven tax (i.e. GST) which is theoretically a more stable stream of tax revenue. Undeniably, this replace-ment tax system is here to stay. Let us get ready and make use of the transitional period to understand and demystify GST instead of lamenting over it.

To ensure minimal disruption to the consumer pricing mechanism, the proper selection and application of “zero-rated” and “exempt” supplies is crucial. n

Kenneth Yong Voon Ken is a practising accountant based in Kuala Lumpur. Email: [email protected]


JOB VACANCY

TAX PARTNER/DIRECTOR/ MANAGER PART TIME/FULL TIME (KUALA LUMPUR/SELANGOR)

Japanese global accounting firm is seeking for suitable candidate:

Mandatory Criterion: A member must possess a valid tax practicing license issued by Malaysia Ministry of Finance under Section 153 of the Income Tax Act 1967 Responsibilities: • Specialized in tax advisory services, tax compliance and returns, indirect taxation, international tax, tax field audit review and tax investigation; • Representing company and acting as tax agent, reviewing and signing on customers’ (individual and company) tax submission form with using own tax license; • Oversee the tax division and ensure client tax submission is fulfilled Malaysia Income Tax Act, following tightly on submission timeline, monitoring tax payment and tax returns , preparing tax report; • Identify areas where technical judgment is required and recommend appropriate solutions to clients; • Assist and advise clients regarding taxation;

Potential of offering partnership and profit sharing for the right candidate.

Please send a resume to: [email protected] (Managing Director) Or call us at 03-27258030 or 012-3450775

ADVERTISEMENT


It might sound like a paradox, but small and medium enterpris-es should be spending more on allowed expenses in order to save from tax incentives and grants.

“If you are an SME, and you have incorporation expenses, you will be allowed an incentive in the form of deduc-tions subject to meeting conditions,” said Ravi Balakrishnan, Director of Division Bell Sdn. Bhd. speaking on the topic of “Cash Savings from Tax Incentives and Grants, and Others,” at MIA’s recent Public Practitioners’ Forum.

Saving through incentives is particu-larly important in an environment where investments are decreasing. “Foreign direct investments (FDIs) are declin-ing every year, and there has been a decrease in investments all round. We are in trouble; we have to find ways to

help ourselves, including being more vigilant (and diligent) about follow-ing methods that will decrease costs,” warned the chartered accountant who has more than 15 years of tax service experience with both local and foreign concerns.

Emphasising that accountants must be aware of the grants or incentives being offered, he listed eight possibili-ties, including single deductions for non-allowable expenses, double deductions, income tax exemptions, R&D incentives, R&D grants and funds and CSR-based deductions.“In the case of CSR, a com-pany building a ramp for disabled staff could qualify for a deduction,” he said. “Single deductions can be made on incor-poration expenses, patent registration for SMEs, and raising loans or other facilities based on Shariah principles.”

tax

Spend to SaveMajella Gomes

SMEs ARE ADVISED TO THOROUGHLY STUDY THE GRANTS AND TAx INCENTIvES AvAILABLE IN ORDER TO OPTIMISE THEIR COSTS IN AN ERA WHEN INvESTMENT FUNDS ARE DRYING UP.


Focus on double deductions too. Among expenses that qualify for double deductions are expenses related to remuneration for disabled employees, marine insurance pre-miums for cargo import and export, export promotion, and R&D, he added.

However, in the case of double deduc-tions for marine insurance, one of the conditions was that a local company must be used, which doesn’t always go down well with businesses because they find local companies sometimes more expen-sive than foreign ones. “A lot of FDIs are ceasing because of higher costs here,” he commented. To qualify for tax incentives, all companies must be tax resident, he explained, or be engaged in manufacturing a promoted product, or in one of the recog-nised activities listed in the tax incentive application procedures. Specific conditions must be met, but generally tax holidays are granted for five years. Balakrishnan’s presentation covered tax incentives which apply to the manufacturing, agriculture, tourism, services and exports sectors.

Manufacturing has the most tax incen-tives, including pioneer status, investment tax and reinvestment allowances, and single and double deductions. The value-added, knowledge-based service sectors and agriculture and tourism sectors have also been the focus of our government where tax incentives are also given. Tax incentives given under pioneer status are for a relief period of five years, and can be extended for another five, depending on capital expenditure or type of industry. In the case of MSC (Multimedia Super Corridor) and PNSI (Project of National & Strategic Importance) and Bio-Nexus status companies, the relief period is for 10 years. He pointed out, however, that most other incentives – like investment tax allowance, reinvestment allowance and export incentives – cannot be claimed when pioneer status is claimed. Pioneer status, which are based on a list of pro-moted products and activities, brings with it many benefits including tax holiday and deferring claims of infrastructure allow-ance, accumulating expenses for claim in the post-pioneer period such as export promotion, R&D and packaging design

SPEND TO SAvE

expenses.Clarifying what constitutes reinvest-

ment, he said that conditions or require-ments that will allow it include expan-sion, modernisation or automation, or the diversification of the existing business within the same industry. A business has to be in operation for at least 36 months to qualify for this. “Modernisation will involve upgrading of equipment or proc-esses, improvement in product quality and cost reductions and savings,” he explained further. “If the manufacturer installs new state-of-the-art machines on existing pro-duction lines to streamline processes and production time, and to cut down on labour costs, this would qualify.” Incentives for R&D also apply to cases where this serv-ice is contracted out, although companies which carry out R&D as their core serv-ices will not be eligible for this.

In some cases, even second-round incentives are available,. There are also tax incentives for the acquisition of for-eign companies for high technology, Balakrishnan added. “This is in the form

of an annual deduction of 20% of the acquisition cost, over a five-year period,” he said. “The acquirer must be a locally-owned company that is incorporated with at least 60% Malaysian equity ownership in manufacturing or services activities.” Research and development in Malaysia is not yet at a competitive level, he stated. “It is of concern because Indonesia and Philippines and other countries in the region are becoming more aggressive and progressive,” he said. “Our com-petitive edge is being slowly eroded, and we will be left behind if we are not proactive about looking at ways to help businesses.”

Stressing that in reality, the era of big manufacturing was over, he pointed out that this was quite evident in Malaysia, which has more than 645,000 SMEs in its business sector. “SMEs need to do a lot more because funds are decreasing,” he concluded. “So do your homework, look for benefits, and learn to optimise what-ever is on offer, because nobody else is going to help you.” n

Tax incentives given under pioneer status are for a relief period of five years, and can be extended for another five, depending on capital expenditure or type of industry. In the case of MSC- (Multimedia Super Corridor) and PNSI – (Project of National & Strategic Importance) and Bio-Nexus status companies, the relief period is for 10 years.

Ravi Balakrishnan


economy

Can Malaysia graduate into the league of high-income countries?

If Malaysia doesn’t fix glaring flaws in education and labour quality, it can kiss goodbye to meaningful economic transformation.Saravanan Ramasamy

Cases of rapidly growing econo-mies stagnating at middle-income levels and failing to graduate into the league of high-income nations are not

uncommon. This phenomenon, often described as the‘middle-income trap’, is best demonstrated by Latin American countries such as Mexico, Brazil and Peru where a period of growth was sud-denly followed by noticeable slowdowns, resulting in rapid deviations from the upward growth trajectory.

An IMF Working Paper entitled ‘Growth Slowdowns and the Middle-Income Trap’ published in March 2013 compares several successful East Asian economies and some unsuccessful Latin American economies. Although Latin American countries such as Mexico, Brazil and Peru reached the middle-income level before any of the other countries, they did not progress further as compared to two of the Asian “Tigers”, Korea and Taiwan. Despite their relatively late start, Korea and Taiwan managed to

Source : IMFNote : t = 0 defines as the year when GDP per capita for a particular country reached US$3,000 in PPP terms

progress rapidly, increasing their per cap-ita income from US$3,000 (MYR9,949.50) to surpass US$23,000 (MYR76,280.18) in a relatively short time.

The IMF research went further, look-ing at drivers of growth and deceleration amongst these Latin American countries. It decomposed growth rates into physical

capital, human capital and an expansion of the working age population and the resid-ual is called Total Factor Productivity Growth (TFPG).

TFPG, in its most fundamental defini-tion, is the residual that measures ‘every-thing and anything’ that is not accounted for by input growth.



Saravanan Ramasamy

It can also refer to the additional output generated through enhancement in effi-ciency arising from advancements in work-ers’ education, skills and expertise, acquisi-tion of efficient management techniques and know-how, organisational improve-ments and gains from specialisation.

The IMF paper claimed that steep falls in TFPG appear to have played an impor-tant role in past growth slowdowns of the Latin American countries in the 1980s.

What’s also interesting to note is that the paper proved empirically that coun-tries that have attained middle-income status are more likely to experience slow-downs than low-income and high-income countries.

the malaYsian scenarioBased on the World Bank’s 2012 defini-tion which categorises a high-income nation as a country with a Gross National Income (GNI) per capita of more than US$12,615 (MYR41,838), Malaysia, with a GNI per capita of US$9,820 in 2012 (MYR32,568), is already ranked in the upper-middle income league.

While Asia continues to set the pace as the world’s fastest growing region, some Asian middle-income countries are showing signs of economic slowdown and face stiff competition from lower-cost economies. Malaysia is not an excep-tion. While the headline numbers con-tinue to paint a somewhat rosy picture for Malaysia’s economy amid a weak global economic environment, these obscure the risks that may hinder the country’s continued progress. Indeed, one would question whether Malaysia can indeed graduate into the league of high-income countries.

According to the IMF working paper, Malaysia, as compared to other Asian countries, faces a larger risk of slowdown stemming from institutions and mac-roeconomic factors (see table on page 38). The paper considered 42 growth fac-tors, grouped into five categories, name-ly; (1) Institutions, (2) Infrastructure, (3) Macroeconomic Environment and Policies, (4) Trade Structure and (5) Others.

Source : IMF

Source : IMF Note • 1/12 refers to a low income threshold of US$1,000 and a high income threshold of US$12,000 in PPP terms • Frequencies are calculated as the ratio of slowdown episodes to the total

number of observations per income class

Source : United Nations’ Statistics Divisionadopted from: the Star Business 11 January 2014


1. Institutions include small government involvement in the economy, strong rule of law and light regulation.

2. Infrastructure includes telephone lines and road networks.

3. Macroeconomic factors include low gross capital inflows, the change over 2008-2012 in capital inflows and trade openness and the (negative of the)

change in the investment-to-GDP ratio.

4. Trade structure includes strong regional integration.

The findings of the IMF paper were also echoed in a report by The Asia Foundation (TAF), an international non-profit organi-sation headquartered in the United States.


Source : IMFNote – A higher risk of slowdown arising from institutions in Malaysia than in Vietnam does not mean that the latter has “better” institutions than the former but rather that its institu-tions have improved more rapidly over the last period of the sample

2000-2007 2008-2012 2000-2012

average change (%)

GdP 5.57 4.24 5.06

labour 1.46 1.49 1.47

labour Quality 0.19 0.18 0.19

labour Quantity 1.27 1.31 1.29

Capital 1.99 2.00 1.99

non-iCt Capital 1.09 1.04 1.07

iCt Capital 0.90 0.95 0.92

tFPG 2.12 0.76 1.6

contribution to GDp (%)

GdP 100 100 100

labour 26.27 35.08 29.11

labour Quality 3.46 4.19 3.69

labour Quantity 22.82 30.89 25.42

Capital 35.65 47.09 39.34

non-iCt Capital 19.50 24.63 21.16

iCt Capital 16.14 22.46 18.18

tFPG 38.08 17.83 31.55

Source : Department of Statistics, Malaysiaadopted from: The 20th Productivity Report, Malaysia Productivity Corporation

While institutions are important, indeed crucial, for growth, there has been much more attention paid recently to the role of institutions in Malaysia.

According to the TAF report, there is a compelling need for Malaysia to shift from a race-based to a needs-based policy in order to address imbalances in society and improve the democratic process to ensure good governance and that the rule of law prevails. Poor institutions could deter innovation, hamper the effi-ciency of resource allocation and reduce the returns to entrepreneurship.

The TAF report goes on to reason that despite the numerous bold policy measures and long-term plans intro-duced by the Government over the years, Malaysia’s economic progress continues to be plagued by a lack of innovation and skills, a low level of investments in tech-nology, declining standards in education, relatively high labour cost and sluggish productivity growth.

productivitY improvement badlY neededBased on the 20th Productivity Report issued recently by the Malaysia Productivity Corporation, while Malaysia enjoyed an average GDP growth rate of 5.06% for the period 2002-2012, the econ-omy grew at a slower pace during the period 2008-2012 at an average growth rate of 4.24%, as compared to 5.57% dur-ing the period 2000-2007. Decomposing the growth rates into Labour, Capital and TFPG contribution reveals that while TFPG contributed significantly at 38% during the period 2000-2007, the contri-bution decreased more than half to 18% during the period 2008-2012 (please see table on the left).

The concern over the drop in TFPG was raised in the 20th Productivity Report. In order to ensure that the Malaysian economy remains on a sus-tainable growth path, the focus will have to be on labour quality, said the report. Countries like Hong Kong and South Korea reaped the benefits of a significant-ly high contribution of labour quality dur-ing the period 2008-2012. It was not so in


the case of Malaysia, where labour quan-tity contributed much more than labour quality in improving TFPG’s contribution to economic growth. The growth of TFPG is expected to raise per capita income and living standards for the long-term.

The report stressed that the driver of TFPG will have to be R&D, investment in human capital as well as investments in capital equipment that can fundamentally change the focus of the economy. This is where the level of ‘knowledge’ plays a criti-cal role in raising TFPG. Increasing the level of knowledge will drive the level of ‘critical thinking’ and in turn improve the contribu-tion and quality of labour productivity.

education reform is inevitableEducation reform is the key to raising productivity and quality. A comparison of Malaysia’s labour composition over the period 2000-2012 showed total employ-ment with secondary education remained high at 55%. Total employment with terti-ary education increased by 12% from 14% to 26% which was substituted by the drop in primary education from 31% to 19% (see graph above). While tertiary education’s contribution has increased, nevertheless, total employment with secondary and pri-mary education still remained the major employment group, constituting 74% of the total employment in 2012. This trend has to change.

To put things into perspective, in a recently published report by Hong Kong’s Economic Analysis Division, it was report-

ed that the proportion of the local work-force with tertiary education increased steadily from 31% in 2007 to 34% in 2012. If we want to compete and not just pay lip service to transformation, Malaysia must produce a high-quality workforce through improving the quality of education.

But the journey will be arduous. A World Bank report entitled ‘Malaysia Economic Monitor: High Performing Education’, noted that the cognitive skills of Malaysian students, as measured by standardised international tests, is not on par with the country’s aspirations to become a high-income economy.

While Malaysia spends billions on education, the end result is school-ing, and not learning. The World Bank report stated that Malaysia has exten-sive coverage with its schools and achieved near-universal access that has 9 in 10 Malaysian adults undergoing at least lower secondary education. The Malaysian government spent the equiva-lent of 3.8% (approximately US$12 billion or MYR39.8 billion) of its GDP on basic education, or more than twice the average of 1.8% within ASEAN nations. This is also higher than the 2.2% average of the Asian tiger economies of South Korea, Hong Kong, Japan and Singapore. However, this larger spend does not commensurate with an increase in quality.

As we all know, Malaysia underper-formed shamefully in the Programme for International Student Assessment (PISA) survey results released in December

Source: Labour Force Survey, Department of Statistics, MalaysiaCited in: The 20th Productivity Report, Malaysia Productivity Corporation

2013, ranking 52nd overall out of the 65 countries. Malaysia did not only trail high-performing education systems in East Asia, but also poorer nations such as Vietnam, which outperformed the coun-try by a significant margin.

Aside from the abysmal PISA per-formance, Malaysia continued to decline against the Trends in International Mathematics and Science Study (TIMSS) benchmark in which Malaysia once per-formed well. Although Malaysia attained the international average between 1999 and 2003, we dropped sharply in 2007 and further in 2011.

what lies ahead?With the Malaysian economy aspiring to reach high-income heights by 2020, the focus of growth must increasingly lean towards an innovation-driven growth strategy. This strategy emphasises the creation of high value-added activities, of which a key ingredient is the quality of labour. Thus far, Malaysia’s education system has failed in producing the skills and talent required to take the country’s economy to the next level.

Apart from labour quality, it is impor-tant to focus on government involvement in promoting a fair and open economy. Insufficient checks and balances con-tinue to dog the country’s economy, thus leading to opaque governance practices. Reforms are critically needed to promote economic inclusion among all ethnic groups by doing away with rent-seeking behaviour and patronage politics.

Reaching the target as set by the World Bank does not really make one a high-income nation as countries can always fall back to previous levels. What is important is for Malaysia to address the underlying dynamics that are deter-ring meaningful structural reforms – spe-cifically those relating to labour quality and education. n



Detecting Money Laundering and Suspicious Transactions - Tips for Accountants

management+business

Patricia Francis

“All Chartered Accountants have a role to play in detecting money laundering activities no matter which sector one is attached to, be it in financial, prac-tice or industry,” said Adrian Bond, the founder of Bond Associates Ltd, a Fraud Investigator and Chartered Accountant who specialises in financial crime which includes fraud, bribery and corruption.

Bond, who was speaking at the recent MIA International Conference 2013, said that all chartered accountants whether in practice, in banking or in the financial services form part of the regulated sector and must abide by the relevant regula-tions.

In order to detect money laundering activities, one requires a sound under-standing on how to identify and prevent money laundering. It is impossible to be effective gatekeepers without being able to detect and assess suspicious activities.

GettinG started on moneY launderinG prevention measuresMoney laundering prevention should be implemented right at the very beginning, through customer due diligence meas-ures. For accountants, before any engage-

AS THE BACKBONE OF THE FINANCE FUNCTION, ACCOUNTANTS PLAY A PIvOTAL ROLE IN COMBATING FINANCIAL CRIME.


DETECTING MONEY LAUNDERING AND SUSPICIOUS TRANSACTIONS - TIPS FOR ACCOUNTANTS

ment kicks off, get to know your custom-ers and have a complete understanding of the clients’ businesses in order to detect suspicious transactions.

The following ‘customer due dili-gence’ measures should be performed in order to identify who your customers are and certify that they are who they say they are:• Know your customer • Know your customers’ customers• Know your intermediaries• Risk assess your customer (RBA)

– this is the most essential stage in preventing financial crime

• Are they Politically Exposed Person/s (PEPs)? – business trans-actions involving a current or former senior foreign political figure, their immediate family, and their close associates would always have a risk of bribery.

• The risks of different legal entities

“knowinG Your customer” is the buildinG block of anti-moneY launderinG (aml)It is not feasible to assess the risk of money laundering activities unless you know your customer in depth, as unusual and suspi-cious activities can only be detected by knowing the difference between normal behaviours and anomalies. If you lack a sound understanding of your customer, it is almost impossible to detect any money laundering activities or suspicious transac-tions. Typically, suspicious transactions to watch out for are those that require signifi-cant handling of cash or involve the use of an offshore bank account.

Hence, it is very crucial to set up a regular risk assessment of every part of the company’s operations in order to ascer-tain where the fraud risks are. The whole idea is to move towards risk-based assess-ments because it helps to reduce the vol-ume of fraud and prioritise high-risk areas.

Obviously, in the banking sector where one needs to deal with high volumes of transac-tion, risk assessment becomes even more important. Diverse legal entities, whether sole proprietors, limited companies, public companies or charities and trust organisa-tions all have different risk profiles.

focus on suspicious transactionsWhen anti-money laundering legislation first came into being in 1993, it was con-fined to money laundering transactions. Now though, after more than two decades its scope has expanded to encompass all suspicious activities. In other words, AML may not necessarily be linked directly to the inflow of money but relates to the web of these doubtful transactions and activities.

For example, in early 2013, Bond’s client came under suspicion with regards to the distribution of chemicals in Syria, Iran and Lebanon, despite there being no monetary transactions. It might also be worthwhile to study a client’s offshore banking relationships to establish suspi-cious patterns; however, bear in mind that many companies hold their patents offshore for legitimate tax reasons.

Bond explained the three basic stages in the money laundering cycle which are Placement, Layering and Integration. Placement is the area of highest interest and key issue.

moneY launderinG cYcle• Predicate Crimes• Corruption and Bribery• Fraud• Organised crime• Drugs and human trafficking• Environmental crime• Terrorism• Other serious crimes

1 Placement, the physical disposal of proceeds derived from illegal activi-ties, which involves:• Initial introduction of criminal

proceeds into the stream of com-merce

• Most vulnerable stage of money laundering process

Adrian Bond Saravana Kumar


DETECTING MONEY LAUNDERING AND SUSPICIOUS TRANSACTIONS - TIPS FOR ACCOUNTANTS

Many use property investment to dis-guise money laundering as they are not really interested in profits but in place-ments. Look at the commercial reality of the transaction; the money launderer may not mind losing 10%-20% because his primary motive is to place the money to make it look like a normal commercial transaction. Hence, when transactions seem to not make any economic sense, this could be a red flag.

2. Layering is the process of separating the illicit proceeds from their sources through transactions that disguise the audit trail and provide anonymity, which involves:• Distancing the money from its

criminal source by movements of amounts into different accounts or to different countries

• And makes illicit proceeds increas-ingly difficult to detect

3. Integration is the step where the laun-dered proceeds are introduced into the economy as normal funds. This is the last stage in the layering proc-ess that occurs when the laundered proceeds are distributed back to the criminal and creates an appearance of legitimate wealth.

tax evasionMeanwhile, S. Saravana Kumar, Partner with Lee Hishammuddin Allen & Gledhill’s Tax, GST & Private Client’s practice chose to concentrate his views on tax evasion, which has recently been included as one of the serious offenses in Malaysia and the link between tax eva-sion and money laundering.

“Tax evasion includes failure to sub-mit tax returns and the incorrect sub-mission of income tax returns under the Income Tax Act in Malaysia. Tax evasion also requires the intention to defraud the government of revenue,” said Kumar, who is a tax lawyer.

He stressed that exchange of informa-tion between government departments and authorities is essential to help with proper investigation of money laundering

cases from the perspective of tax evasion. In Malaysia, the government has formed a task force led by the Attorney-General and the various representatives from the Revenue, Customs, Anti-Corruption agen-cies and the Central Bank, who work together to identify persons whom they should investigate, where about 300 indi-viduals have been investigated to date.

Kumar remarked that illegal income is taxable and illegal expenditure is deduct-ible in Malaysia. If a bribe was paid to acquire a particular contract, it may form part of the capital expenditure. However, one needs to understand that offering bribes and failure to report a bribe is also an offence in Malaysia under the Anti-Money Laundering and Anti-Terrorism Financing Act 2001 (AMLATFA). Kumar also explained that AMLATFA was put in place to provide for the offence of money laundering, the measures to be taken for the prevention of money laundering and terrorism financing offences and to pro-vide for the forfeiture of terrorist prop-erty and property involved in, or derived from, money laundering and terrorism financing offences, and for matters inci-dental thereto and connected therewith.

saravana kumar’s tips to handle tax evasion:• Do not get involved in suspicious

activities in regards to tax evasion. It is not worth the money.

• Do not go in between investigative

officers on behalf of your clients. Do not have any relationship with Income Tax officers which may compromise the professional integrity of both par-ties. Accountants should not facilitate investigations.

• Do not bribe officers. • Do not take bribes for yourselves

and/or facilitate any form or bribery or related activities.

• Always consult a tax solicitor for fur-ther legal advice in respect of your rights and your client’s.

adrian bond’s tips on how to detect suspicious activities and transactions:• Where does your client do business?

Highly corrupt countries (charities!!)• What sector does your client trade in?

Oil and Gas – look closely at commis-sions and consultants’ fees.

• Do the activities/transactions make commercial sense? Enron is a good example.

• Beware of complicated transactions where you do not understand the commercial logic.

• Businesses where cash transactions predominate.

• High volume businesses – banks – automated detection systems.

• Why an offshore transaction? It is important to understand whether it is for tax evasion or it is from proceeds of fraud or bribery. n


© 2014 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” and/or “PwC” refers to the individual members of the PricewaterhouseCoopers organisation in Malaysia, each of which is a separate and independent legal entity. Please see www.pwc.com/structure for further details. CS06510

Back2Work

The Back2Work programme is an initiative under PwC’s Work Life Plus Programme aimed at helping professional individuals rejoin the world of work.

For the pilot, we’re looking for:

1. Qualified accountants/tax professionals with three years experience or more;

2. Those who have been away from the profession for not more than three years;

3. Relevant working experience in a Big 4 accounting firm.

Supporting initiatives

Technical training in the form of audit methodology and updates on accounting/tax standards will be provided.

Flexible work arrangements and short-term contracts are also available.

To find out more, please visit: http://www.pwc.com/my/experienced-hiresEmail us at: [email protected]

www.pwc.com/my

www.pwc.com/my/experienced-hires

MIA Accountants Today Ad_Final.indd 1 08/01/2014 4:20:54 PM


Social media marketing may be the key to practice profitability

management+business

Stuart Black and Paul Thompson

marketing strategy is to have people associate your brand with their needs and desires, choose you over the competition, and, if you do it right, pay a premium for your services.

promotion and marketinGAn organic growth strategy involves lever-aging promotion and marketing activities to build brand and attract new clients or sell additional services to existing cli-ents. Remember that most businesses in the market are likely to already have an accountant. In the majority of cases, that means for you to grow your practice you will need to win clients from rival practic-es. And, in order to do that, you must offer a compelling reason for them to switch. This makes promotion and marketing more important than ever - and demands that practices build the capability to pro-ficiently promote and market their brand

and service offerings. You will likely be faced with the classic “make-or-buy” dilemma, that of using (and training as needed) existing staff to do promotion and marketing, or else recruit-ing or outsourcing for the req-uisite skills.

Promotion and marketing efforts are most effective when a number of activi-ties and channels are used simultane-ously: this harnesses the momentum of such efforts and is likely to be more impactful. There are many “tried and true” strategies for marketing but the newest one, social media, has already broken the mould. Social media market-ing has rapidly grown in prominence and gone from marginal to mainstream in the marketing space. Social media is a low-cost channel with a very wide reach into your target market.

LEARnABOutthEwhAt,why,AndhOw- take the time to read and educate yourself about social media, including Twitter (see Twitter’s Small Business Guide), LinkedIn, Facebook, and blogging, and see what your peers are doing.

The acquisition of new clients continues to be a dominant driver of profitability for small- and medium-sized practices (SMPs). Indeed, in the latest

edition of the IFAC SMP Quick Poll, the largest portion of respondents identified acquisition of new clients as the main driver of practice profitability – by a wide margin.

While SMPs understand the impor-tance of improving operational leverage (doing more with less), improving pro-ductivity (e.g., changing work practices or introducing technology), reducing overheads, and better utilisation of assets, these are not the main drivers of profit-ability for most SMPs. This is not surpris-ing given the fact that practice overheads are relatively fixed.

The poll results seem to question the wisdom of many practice management “gurus” who say that the cost of acquiring a new client is far higher than the cost of retaining, or selling more services to, an existing client. What those “gurus” may be failing to recognise is the full poten-tial and cost-effectiveness of a marketing campaign that includes low-cost social media.

This article looks at promotion and marketing and, in particular, the role of social media in acquiring new clients and driving practice profitability.

brandinGThe first step of a marketing strategy is to identify your target customers and what they need. You then have to determine how you can satisfy those needs at a profit and, at the same time, differenti-ate yourself from your competitors. This becomes your brand. The aim of your


SOCIAL MEDIA MARKETING MAY BE THE KEY TO PRACTICE PROFITABILITY

social media marketinGSocial media essentially has taken traditional word-of-mouth marketing (historically the norm for accountants) and moved it to a digital space, exponentially increasing opportunities to influence. It is one of the most powerful tools to engage customers and drive revenue growth. But according to Steven D. Strauss, small business expert and author of The Small Business Bible, while small business owners recognise how important social media is to their success, they’re not taking advantage of social media’s full potential. And, chances are, the same applies to SMPs: after all, SMPs are effectively small businesses in the accountancy sector.

Getting started in social media marketing and decid-ing whether it can benefit your practice can be quite overwhelming - even scary, at first. Here are some steps to take when building a social media presence:• Set aside preconceived notions - social media carries

risks but the rewards are greater: it will take time and expense to plan and execute but there are many tools, resources, and articles to help.

• Learn about the what, why, and how - take the time to read and educate yourself about social media, includ-ing Twitter (see Twitter’s Small Business Guide), LinkedIn, Facebook, and blogging, and see what your peers are doing.

• Check out the tools and resources available to help - there is a growing suite of tools, resources, and guidance available, for example, the AICPA PCPS has developed a number of resources, many of which are available for free, including a social media toolkit and articles.

• Create a strategy and action plan - define goals, decide how you will measure success and allocate responsi-bility, then start out small by, for example, pilot test-ing one of the tools. See “10 Questions to Ask When Creating a Social Media Marketing Plan.”

• Implement the plan - aim to provide content that cre-ates conversation rather than advertises and involve staff from the millennial generation as they often have the most experience.

• Periodically evaluate, analyse, and update the plan - track your efforts and monitor the return on invest-ment using common metrics including likes, shares, followers, traffic, and conversions.

• Consider the need for a policy - this can help manage the risks and reap the rewards. n

Copyright © October 2013 by the International Federation of Accountants (IFAC). All rights reserved. Used with per-mission of IFAC. Contact [email protected] for permis-sion to reproduce, store, or transmit this document.


management+business

Internationalising SMEsIN ANY ECONOMY, small and medium enterprises (SMEs) are the catalysts for economic and social development. Similarly, in Malaysia, SMEs are important as they account for 97.3% of total establishments, 59% of employment and 19% of exports. Nevertheless SMEs only account for 32.7% of GDP in Malaysia compared to a high income economy, where the contribution ranges between 40-60%. Hence, the SME Masterplan was developed to raise the contribu-tion of SMEs to the economy towards Malaysia achieving a high income nation status by 2020. One of the four goals

of the Masterplan stresses on internationalisation of SMEs. For countries with a small market like Malaysia, it is inevitable that SMEs have to aspire to go beyond our shores to grow to become a major player. In this context, the Government has developed a number of programmes and facili-ties to build up the capacity of SMEs including enhancing market access and their overall competitiveness. While many challenges await SMEs in going global, many opportunities are also available. Size can be a plus factor for SMEs in globalisation as small is the “New Big”. We have various programmes and tools to support SMEs in going international,” explained K. Karunajothi, Senior Director of Economics and Policy Planning Division, SME Corporation Malaysia at the recent MIA International Accountants Conference 2013.

defininG smesSMEs generally refer to entities whose personnel in terms of numbers fall below a certain threshold, or they can be defined by various other criteria, including asset size, sales turnover, paid-up capital etc. In Malaysia, the SMEs are defined based on annual sales turnover or number of employees, she said.

According to the Small and Medium Enterprises Corporation Malaysia (SME Corp), these SMEs can be further cat-egorised into medium-sized companies, small enterprises and micro-enterpris-es. For the manufacturing sector, firms that employ between 50-150 full time employees are considered medium-sized; small firms are those employing between 5 - 50 staff , while microenter-prises refer to those employing fewer than five staff.

SMEs are the backbone of the econ-omy accounting for 645,000 of the total 662,000 establishments in Malaysia. Bulk of these SMEs are in the services sector (90%), while distribution by size shows that about 77% of SMEs are microenter-prises. SME development has come to the forefront and has been accorded as part of the national agenda since 2004 with the establishment of a high level Council namely the SME Development Council. The Council chaired by the hon-ourable Prime Minister with members comprising Ministers and heads of rele-vant ministries and agencies has provided the policy direction for SME development in Malaysia. Through its comprehensive and coordinated approach, SME develop-ment has progressed over the years, with its contribution rising from 29% in 2005 to 32.7% in 2012.

Patricia Francis

K. Karunajothi


INTERNATIONALISING SMEs

GRAPHIC 1: SMEs IN MALAYSIASMEs account for a large proportion of businesses in Malaysia:• 97.3% of total establishments (645,136/662,939)• The bulk of SMEs are microenterprises, with fewer than five workers• 90% of SMEs are in the services sectorSource: Economic/ SME Census 2011, DoSM

GRAPHIC 2: DEFINITION OF SMEs Source: National SME Development Council (NSDC)

the role of support aGenciesKarunajothi said that the National SME Development Council (NSDC) has facilitated significant progress in SME development since its establishment in 2004. “Prior to that, no single agency was looking at the overall performance of the SMEs in Malaysia,” she said. NSDC, which is the highest policy-making authority on SME development in the country, was formed to look into the challenges faced by the SMEs. Its mandate is to provide direction for the comprehensive development of SMEs across all sectors;

formulate broad policies and strategies; and oversee coordina-tion and ensure effectiveness in policy implementation.

SME Corp is the Secretariat to NSDC and acts as the central point of reference for information and advisory services for all SMEs in Malaysia through the One Referral Centre. As the Secretariat to NSDC, SME Corp is tasked to propose to NSDC the overall policies and strategies for SMEs for the country and to coordinate programmes across the related Ministries and agencies.

GRAPHIC 3: THE ROLES OF SME CORP AND AGENCIES SME Corp also focuses as the central point of reference for information and advisory services for all SMEs in Malaysian Ministries and Agencies. SME Corp also focuses as the central point of reference for information and advisory services for all SMEs in Malaysia.

In recent years, SME growth has outperformed the overall GDP growth with SME GDP expanding at an average annual growth rate of 6.3% versus the overall economic growth of the country of 4.7% during 2006-2012. This is the outcome of NSDC policies along with other supportive policies (e.g. improvement in gov-ernment delivery, higher domestic demand and focus on tour-ism, small farmers and small contractors). The services sector is expected to be the main growth driver of the economy with its share of GDP projected to rise from 54% currently to 65% by 2020, which augurs well for SMEs in services.

internationalisation ambitionThe aim of the SME Masterplan (2012-2020) is to create globally competitive SMEs and to increase their contribution to GDP from 32% currently to 41% by 2020. One way of doing this is for SMEs to spread their wings abroad.

“However, the challenge is to persuade local businesses to get out of their comfort zone and to seek the overseas market for their products and services. Most of them are hesitant to go global due to the high risk factor involved and the uncertain

In Malaysia, SMEs are defined based on annual sales turnover or number of employees

3

Common definition adopted since 2005

Annual Sales

No. of employees

Manufacturing, MRSs & Agro-based < RM25milOR

< 150

Services, ICT & Primary Agriculture < RM5mil < 50

Revised definition endorsed by NSDC on 11 July 2013

Effective 1 Jan 2014 Annual Sales

No. of employees

Manufacturing ≤ RM50mil OR ≤ 200

Services & other sectors ≤ RM20mil ≤ 75

Formulate policy & undertake

economic assessment

One ReferralCentre

Secretariat to NSDC

Coordinateprogrammes &

policies

7

SME Corp. a dedicated Agency for SME development

NSDC

Ministries & Agencies

SMEs

Chambers & Industry

Associations

4

SMEs are the backbone of the economy

Source: Economic/SME Census 2011 , DOSM

• SMEs account for large proportion of businesses in Malaysia: - 97.3% of total establishments (645,136)- Bulk are microenterprises, with less than 5 workers- 90% are in the services sector

• Services: 90% share, largest subsector is distributive trade

• Manufacturing: 6% share, mainly in textiles/apparels and F&B industries

• Construction : 3% share, non-residential buildings and civil engineering

Distribution of Business Establishments by Size



market conditions. They are aware that the operating environ-ment is completely different in another country and they have to be fully prepared to face the challenges and at the same time seize the opportunities that may arise that could provide them a larger market share. In this context, the government has a number of initiatives and programmes to assist SMEs in mar-ket access. However, the take-up rate of government assistance schemes by SMEs could be better. The provisions have not been fully utilised due to the lack of knowledge and information,” she said.

Karunajothi goes on to explain that internationalisation goes beyond exports and imports. It involves far more activities which SMEs should pay attention to such as licensing, subcontracting agreements as well as avenues for foreign direct investment (FDIs), joint-ventures (JVs) and exchange of technology.

While SMEs may face certain challenges in going interna-tional, such as achieving domestic acceptance in local markets; meeting international standards; sourcing, marketing and brand-ing products; being able to adjust to demand changes, and vul-nerability to global developments, it also opens up opportunities for SMEs to enhance their market share.

GRAPHIC 4: CHALLENGES FACING SMEs, ranked differ-ently according to the level of impact on the SMEs and policy makers’ perspectives. Source: Ranked by SMEs and OECD/ APEC member policy makers; Small business: a global agenda, ACCA 2010

Karunajothi said that “Internationalisation will enable them to become more competitive and enjoy global acceptance by becom-ing part of the global network. They will be better placed to ride out business cycles due to diversification of markets as lower demand in some markets could be cushioned by better perform-ance in other regions, and they can grow in size due to bigger markets,” she said.

“Internationalisation is the way forward for SMEs particu-

larly in small markets. By population size, many countries have very small domestic markets. Therefore, in order to grow, it is imperative to tap on global markets.”

Being small in size provides various advantages for SMEs. “Being small enables businesses to be agile and have the organi-sational flexibility. Small firms are also an impetus to innovation while enjoying better linkages and outsourcing. Small companies are also able to benefit from the differentiation strategy as they can customise their products or services and create jobs at a low cost of capital,” enthused Karunajothi.

GRAPHIC 5: MARKETS BY POPULATION SIzEReadiness to Export

According to a survey conducted by SME Corp in the fourth quarter of 2012 on 2,307 respondents, there is a potential group of respondents (SMEs) ready to export but are not exporting currently .

Approximately 10.4% of the total respondents are currently exporting, while those who were ready to export make up about 14% of the total respondents, and these are mainly small-sized firms in the manufacturing sector. The survey also revealed that 55.4% of those who were ready to export were not aware of the current export assistance services provided by EXIM Bank.

In terms of assistance that is required, of those who respond-ed to the survey, two-thirds requested for expert assistance in the following areas to help them venture into new markets: • Networking and overseas business contacts• Professional help in managing overseas operations• Assistance in branding and promotion

take advantaGe of sme support proGrammesKarunajothi said that in 2013 there were 50 support pro-grammes for SMEs in the services sector and SMEs should take advantage of these to enhance their capacity and capability. These include:

Shortage of working capital

Identifying foreign business opportunities

Limited information to locate / analysemarket

Inability to contact potential overseas customer

Lack of managerial time to deal with internationalisation

Inadequate quantity of and /or untrained personnel for internationalisation

Ranked by SMEs

Ranked by policy makers

1

2

3

4

5

7

2

4

3

6

5

1

Source: Ranked by SMEs and OECD/APEC member policy-makers, Small business: a global agenda, ACCA 2010

…the challenges rank differently in the view point of policy makers

15

17

Internationalisation is the way forward for SMEs particularly in small markets...

352mil

589mil

1,033mil

4,167mil

36mil

733mil

Malaysia 27mil

• By population, many countries have very small domestic market• To grow, imperative to tap on global markets• Internationally active businesses:

More likely to grow into larger firms Upgrade their human and technological capital in order to meet the

demands of supply chain partners

484mil


• Financing – 23 programmes, RM14 billion

• Human capital – 12 programmes, RM48 million

• Infrastructure – 6 programmes, RM17 million

• Market access – 5 programmes, RM48 million

• Innovation and technology – 4 pro-grammes, RM150 million

specific initiatives have also been put in place to encour-aGe smes to Go Global such as: • The Market Development Grant• 10 FTAs (Free Trade Agreements)

and 9 Bilateral MoUs (Memorandum of Understanding)

• Malaysia – Singapore Business Development Fund

• 64 Investment Guarantee Agreements• Export Financing Facilities• 58 MITI Offices Abroad• Tax Incentives• Google Analytics• Trade and Market Information

With imminent liberalisation and regional-isation, the government is offering attrac-tive tax incentives for small Malaysian service providers to merge into larger entities. “Mergers are a means for small service providers to build up their capacity and competitiveness,” said Karunajothi. “This can be done by merging two firms into a new firm or by acquisition of an existing firm.” The incentive provided is at a flat tax rate of 20% on all taxable income for a period of five years (effective from the date of merger) along with the stamp duty exemption on the merger document. The incentive has been offered to nine eli-gible services sub-sectors including engi-neering services. However, the incentive will only be effective until 2 July 2015.

As the Central Coordinating Agency, SME Corp provides advisory services as well as programmes to build up capacity; enhance access to technology, market and finance, explained Karunajothi. Of signifi-cance, is the 1-Innovation Certification for Enterprise Rating and Transformation Programme (1-InnoCERT), which was

created to identify and accelerate growth of innovative SMEs through certification. The 1-InnoCERT programme consists of the following assessment criteria:• Innovation ability• Commercialisation ability• Innovation management• Innovation outcome

amonGst the tarGeted ben-efits of 1-innocert are:• Access to financial incentives and

wider market• Eligibility to participate in the Annual

SME Innovation Award• Eligibility for business coaching• Green Lane Policy

benefits of malaYsian brandBranding and marketing are areas where domestic SMEs are tradition-ally weak. SME Corp is encouraging the use of the Malaysian Brand, which was created to increase the awareness and importance of branding; creating and building a strong brand presence to enhance customer recognition and to increase global and regional market penetration

amonGst the benefits provided bY the malaYsian brand scheme are:• Mentoring by MICCI-SME

Corporation Malaysia• Incentives for qualified SMEs• Invitation to specific training schemes• Access to local and international

trade promotion activities.

One of Malaysia’s SME success stories cited by Karunajothi was Les’ Copaque Production, the producer of the “Upin & Ipin” cartoon franchise. Les’ Copaque Production achieved its success through high commitment and perseverance; emphasis on extensive R&D; focus on human capital and training; and emphasis on story-telling quality, said Karunajothi. More Malaysian SMEs need to emulate pioneers like Les’ Copaque.

movinG forwardKarunajothi said that under the SME Masterplan, a new programme is being developed namely the Going-Export (Go-Export) programme. The pro-gramme encompasses a customised approach to provide end-to-end facili-tation to new exporters or exporters going to new markets or introducing new products. “As I mentioned earlier, SMEs are afraid to step abroad due to the high upfront cost and lack of knowl-edge on the market. Hence, the potential SMEs will draw up an export plan and will be provided links to expertise and buyers who can help them penetrate the market.

All these initiatives are expected to place our SMEs in the global map and to create a few global and regional cham-pions, and hence support Malaysia in achieving the socio-economic agenda and becoming a high income nation by 2020. n

All these initiatives are expected to place our SMEs in the global map and to create a few global and regional champions, and hence support Malaysia in achieving the socio-economic agenda and becoming a high income nation by 2020.



ll exerciseKevin kicked off his session by getting the audience to do some light exercises while pointing out the right way to do squats and sit-ups. He mentioned that exercise is not a must for weight loss but it’s a booster to help lose weight faster.

ll riceRice can be a diet buster. An individual doesn’t need more than a fistful of rice at each meal. However, if you want to have a glass of teh tarik, reduce your rice intake for that meal to less than a fistful because both are sources of carbohydrate.

Personal and wellness management is just as important as business management to value creation and sustainability. During the edutainment session at the recent MIA International Accountants Conference 2013, leading personal trainer Kevin Zahri imparted key tips on how to reduce stress, the right amount of rice to eat, the right way to do sit ups in order to lose belly weight – and even, the right way to do the horizontal shuffle.

Maximise Your Health

Patricia Francis

management+business

Accountants under-stand better than any other profes-sion that health is wealth. Getting sick

not only affects the quality of life but can also cost a bomb in medical expenses. Malaysia’s fitness guru or Cikgu Fitness Kevin Zahri shared some point-ers on how accountants can get started on the road to better health and wellness at the recent MIA International Accountants Conference 2013 (MIAC).


MAxIMISE YOUR HEALTH

ll stressAlthough stress is inevitable, many who struggle with stress do not know how to deal with stress.

It is a myth that stress makes one gain weight, said Kevin. Stress alone does not make one gain weight. However, stress can make one eat more which will ulti-mately lead to weight gain. Don’t blame stress for weight gain but take account-ability for eating more than you should when under stress.

He also added that it is difficult for one to lose weight when stressed because the cortisol hormones will protect the body when in stress by storing more fat.

Hence, manage stress, and you can manage your weight. Worse, when people are obese, the body is stressed 24 hours a day.

Kevin revealed the best way to deal with stress is to identify the source and how to overcome it, if possible. To help deal with stress, Kevin advocated:• Exercise• Chocolates (in moderation. Too much

can cause one to put on weight and

provoke stress because of the addi-tional weight gain)

• Sex (if done correctly). However, Kevin did not elaborate on the right and wrong ways of having sex.

ll blastinG bellY fatThe best way to reduce a tummy is through sit-ups, done correctly, he added. However, the right way to do a sit-up does not require one to do an actual horizontal sit-up. Kevin took time to demonstrate the right way of doing sit-ups which is to lift the body up verti-cally by looking at the ceiling with both arms on the chest. There is no fixed requirement or recommended number of sit-ups to lose weight because it very much depends on the quality of the sit-up, said Kevin.

ll weiGht loss manaGementWeight loss management is all about calo-rie management, which is all about input versus output.

For example, if a person who weighs 88kg consumes 2,000 calories and burns

2,000 calories in a day, how much would the person weigh the next day (with-out taking into account water retention)? Since the input and output are the same, his weight would remain the same. Therefore, in order to reduce weight, the output needs to exceed the calorie input.

Fitness guru Kevin mentioned that in order to reduce weight, the output - or calories burned - needs to exceed the calorie input.

Kevin Zahri is a US certified per-sonal trainer and nutritionist with over 10 years’ experience. Over the years, Kevin has published over 10 books, written for Men’s Health and other fitness and lifestyle magazines, hosted TV shows and appeared on various TV shows, pro-grammes and magazines. Kevin is also an avid corporate wellness speaker and web entrepreneur. n

More details on Kevin can be found on his blog http://kevinzahri.com/blog/ or by following him on Facebook or Twitter.


management+business

Managing Personal LoansPeRSonal loanS Can Be a mineField FoR FinanCial health unleSS manaGed PRudently.

Preetha Nadarajah

what would You have done had You received this offer?After due consideration, I turned down what seemed initially like a generous and exclusive offer, much to the chagrin of the sales representa-tive who suggested that I could put this amount into a fixed deposit of 3.65% p.a.!

Would others have jumped at the opportunity? Maybe. According to Bank Negara Malaysia’s loan classification statistics for 2013, the third largest component of household debt comprises personal loans and credit card debt, at about 8% of the total household debt, with the larger share of the pie being home loans at about 30% and car loans at about 13%. I can’t imagine that these households would have agreed with my seemingly conservative decision. I am a great believer in buy-ing what I need, not simply what I want and having emergency savings of at least eight months of household expenses to cater for emergencies and so I struggled to see how I could use this offer to reduce my cost of debt.

Personal loans are typically taken for the short term to cater for emergency expenses or when there are significant purchases that one’s income is not able to cover in the short term, such as home renovations, wedding expenses, educa-tion loans, etc. The structure of personal loans is mostly similar to that of a hire purchase loan. Flat interest rates are typically quoted making the personal loan seem very attractive indeed. As per the call-for-cash example above, i.e. the quoted 3% flat interest rate per year translates to an effective interest rate (EIR) of 5.4% p.a.

Reminder – the rule of thumb is to multiply the quoted flat interest rate by 1.8 to estimate the EIR before comparing it to home loans, for example. This is a significantly higher cost of debt than the returns from fixed deposit with rates of 3.65% p.a. that the sales person was trying to bait me with.

Not long ago, i received a very tempting offer from a financial institution whose credit card i had been using for less than one year. it was a “one-time offer for select

privileged customers only.” the offer was for a pre-approved call-for-cash amount of Rm51,000 at an interest rate of 3% p.a. for a tenure between 6 – 12 months, with no handling fee or early settlement fee. that would mean that for an upfront Rm51,000, i would have to pay Rm4,377.50 monthly for 12 months, i.e. Rm51,000*1.03/12, amounting to cumulative interest payments of Rm1,530. For late payments or

minimum payments, there would be late payment charges of 1%

and finance charges of 1.5% on the monthly outstand-ing amount instead of the whole sum. Quite attractive indeed, especially if i could be sure that i could pay up the monthly charges so as to not incur the additional late payment and finance

charges.



MANAGING PERSONAL LOANS

Personal loan interest rates are depen-dent on the loan amount and whether or not the borrower is a civil servant or staff from government-linked-companies (GLCs). The higher the loan amount, the lower the interest rate. Civil servants or GLC employees have lower borrowing rates for personal loans ranging from an EIR of 5.85% - 10% (typically quoted as 3.25% flat rate onwards). For the rest of us mere mortals, personal loan inter-est rates vary widely from an EIR of 12% - 24% p.a. The interest rate itself is independent of the loan tenure. However, the actual total interest paid increases with a longer loan tenure. Other one-time costs to be considered are processing or handling fees, stamp duty (0.5% - 0.55% of the borrowed amount). In rare cases, a collateral or guarantor may be required. The maximum allowed lending rates under the Money Lender’s Act 1951 are 12% p.a. flat for secured loans and 18% p.a. flat for unsecured loans, i.e. EIR of 21.6% and 32.4% p.a. respectively for secured and unsecured personal loans!

Why did I turn down this offer? As you can see, the one-time offered rate of an EIR of 5.4% p.a. was definitely very attractive compared to the going market rates for personal loans and I did feel very special because this offer was made to me! However, since I didn’t actually have any personal loans or credit card

debt or any other debt that cost higher than an EIR of 5.4%, as generous as the offer was, I had no use for it. I admit that I was very tempted to use this to make some short-term investments that could not only cover the cost of 5.4% but pos-sibly make about 13%-15% p.a. returns. Why 13%-15%? Because there has to be a significant upside to taking on the risk of the debt as there is not much point to taking on the risk of an investment that would only cover the cost of the debt. However, given my risk-averse nature, since I couldn’t guarantee generating more than 5.4% p.a. returns within the repayment period of 12 months on an investment of my choice, I chose not to take this on.

However, if one had to take a per-sonal loan, which one should you go for? Based on the BNM monthly statis-tics of personal loans for each month

in 2013, there is a nearly equal split across conventional and Islamic personal loans. Although the interest rates for the conventional and Islamic personal loans from a given financial institution are typically the same resulting in the same monthly payment amounts, a key differ-ence is in the case of early settlement or early redemption. With the conven-tional personal loan, only the outstanding principal (not including interest) loan amount needs to be paid off at the point of early settlement, in addition to any early payment charges imposed and/or advance notice periods required. However, for Islamic personal loans, the outstanding amount from the bank’s sell-ing price needs to be settled (including the profits) and only then will the rebate (ibra’) be granted, in addition to any early payment charges imposed and/or advance notice periods required.

Personal loans are typically taken for the short term to cater for emergency expenses or when there are significant purchases that one’s income is not able to cover in the short term, such as home renovations, wedding expenses, education loans, etc. The structure of personal loans is mostly similar to that of a hire purchase loan. Flat interest rates are typically

quoted making the personal loan seem very attractive indeed.



Let’s take a look at an example to illus-trate the difference. Alice takes a conven-tional personal loan of RM10,000 at a 10% p.a. flat interest rate over a period of three years, from a given bank, with early settle-ment penalty of 3% on the outstanding balance of the loan or RM200, whichever is higher. Alice subsequently wants to make a full settlement at the beginning of the third year. The payment towards the principal per month is RM277.78, i.e. RM10,000/(3 years * 12 months) and towards inter-est is RM83.33, i.e. 10%*RM10,000/12, making up RM361.11 per month. By the beginning of the third year, the total pay-ment to date towards the loan amount is RM6,666.67, i.e. 24 months*RM277.78, which means that the remaining principal payments towards the full loan amount is RM10,000-RM6,666.67 = RM3,333.33. Alice would also need to pay the early settlement penalty of RM200 (which is higher than the 3% of the outstanding bal-ance of RM3,333.33). For early settlement at the beginning of the third year for the conventional personal loan, Alice would need to pay RM3,533.33.

Alice could also have taken an Islamic personal loan of RM10,000 at 10% p.a. flat interest rate over a period of three years, available from the same bank, with no early settlement penalty. For full settle-

ment at the beginning of the third year, Alice will need to pay the full amount of what is known as the bank selling price minus total payments to date and the ibra’, a rebate based on the formula below:

Ibra’ = {n (n + 1)/ T (T + 1)} x P, where n=number of monthly installments remain-ing, T=loan tenure, in months and P=total interest payable over the entire loan tenure.

With n = 12, T=36, P=10%*RM10,000*3, i.e. RM3,000, ibra’=(12*13)/(36*37)*RM3,000=RM351.35.

Bank selling price = Total pay-ments over the entire loan duration, i.e. RM10,000 + RM3,000=RM13,000.

Total payments to date at the beginning of the third year = 24 months*RM361.11 = RM8,666.64

As such, for early settlement at the beginning of the third year for the Islamic

personal loan, Alice would need to pay RM13,000-RM8666.64-RM351.35, i.e. RM3,982.01.

Given the comparisons above, if I had to take a personal loan which I would want to settle as quickly as possible, I would definitely prefer to go for the con-ventional personal loan, rather than the Islamic one.

other options – fullY flexible home loansThat said, rather than consider taking a personal loan, I would much rather use the prepayments done on a fully flexible home loan (home equity) to cater for unexpected financial demands since the cost of a home loan is typically much lower at 4+% p.a. Another alternative is to evaluate getting a cash advance from credit cards, if I was

Based on the BNM monthly statistics of personal loans for each month in 2013, there is a nearly equal split across conventional and Islamic personal loans. Although the interest rates for the conventional and Islamic personal loans from a given financial institution are typically the same resulting in the same monthly

payment amounts, a key difference is in the case of early settlement or early redemption.


certain that I could at least make the minimum monthly payments. Cash advance from credit cards present greater flexibility with quicker repayments and also allow 0% bal-ance transfers to other credit cards to postpone payments at minimal cost for those who are financially savvy to manipu-late these financial instruments. If the demand for sudden funding is for medical costs or for Hajj or for education, the Employees Provident Fund (EPF) allows for withdrawals to support these with some terms and conditions. Whether or not it is prudent to withdraw EPF funds depends on many fac-tors – one’s age, one’s retirement plans and retirement fund-ing, the number of financial dependants, one’s risk appetite, etc. Making an informed decision in the light of many options isn’t an easy task.


In order to support your decision-making process, there are many means of boosting financial awareness, including but not limited to the following:

l Financial counselling is available free of charge from Credit Counselling and debt management agency (aKPK, a subsid-iary of Bnm) which helps individuals take control of their financial situation and gain peace of mind that comes from the wise use of credit.

l tune in to doctor Wang on the malay lan-guage radio station Suria Fm, on tuesdays from 8 a.m. – 9 a.m., during the breakfast show, Ceria Pagi Suria. aKPK representatives will play the role of doctor Wang to share simple and practical financial tips.

l Similarly, tune in to doctor Wang on the Chinese language radio station 988, on thursdays from 8 a.m. – 9 a.m, during the morning up show.

l ePF plans to offer retirement and financial advice at ePF branches in Klang Valley (to start in 2014) with plans to roll this service out nationwide.

l tune in to CnBC’s Suze orman programme on Saturday’s at 4 p.m. this programme is targeted for the uS market, but most of the key lessons are also applicable to malaysians. n

Preetha Nadarajah has an MBA from Insead, France, one of the world’s leading and largest graduate business schools. She strongly advocates that everyone regardless of financial background should actively manage their personal finances.


MIA noticesORDER Of ThE DIScIplINaRy appEal BOaRD

MalaySIaN INSTITuTE Of accOuNTaNTS

the Council of the malaysian institute of accountants (“the institute”) hereby gives notice that after due consideration by the disciplinary appeal Board of the institute (“the disciplinary appeal Board”) in respect of an appeal by Wong Kian leon (Membership No.: 20325) who appealed against the imposition of fine of Rm3,000.00 by the disciplinary Committee of the institute (“the disciplinary Committee”), the disciplinary appeal Board in exercise of its powers under Rule 28 of the malaysian institute of accountants (disciplinary) Rules 2002 [P.u. (a) 229/2002] (“disciplinary Rules”) has made an order to confirm the said imposition of fine.

the order of the disciplinary appeal Board took effect on 25 october 2013.

the said member did not appeal against the following decision and order of the disciplinary Committee which therefore stands:(a) the decision of the disciplinary Committee that found the said mem-

ber to have committed an act amounting to ‘unprofessional conduct’ within the meaning as provided under Rule 2 of the disciplinary Rules, in relation to the said member’s failure to ensure that his firm renewed and maintained a policy of Professional indemnity insurance; and

(b) the order made by the disciplinary Committee to pay a sum of Rm3,000.00 to the institute in respect of costs and expenses of and incidental to the disciplinary hearing before the disciplinary Committee and the investigation conducted by the investigation Committee of the institute.

SuDIRMaN BIN MaSDuKIRegistrarOn behalf of the Council of the Malaysian Institute of Accountants

ORDER Of ThE DIScIplINaRy appEal BOaRDMalaySIaN INSTITuTE Of accOuNTaNTS

the Council of the malaysian institute of accountants (“the institute”) hereby gives notice that after due consideration by the disciplinary appeal Board of the institute (“the disciplinary appeal Board”) in respect of an appeal by Ng chee Wai (Membership No.: 23200) who appealed against the imposition of fine of Rm2,000.00 by the disciplinary Committee of the institute (“the disciplinary Committee”), the disciplinary appeal Board in exercise of its powers under rule 28 of the malaysian institute of accountants (disciplinary) Rules 2002 [P.u. (a) 229/2002] (“disciplinary Rules”) has made an order to confirm the said imposi-tion of fine.

the order of the disciplinary appeal Board took effect on 25 october 2013.the said member did not appeal against the following decision and order of the disciplinary Committee which therefore stands:(a) the decision of the disciplinary Committee that found the said member to

have committed an act amounting to ‘unprofessional conduct’ within the meaning as provided under Rule 2 of the disciplinary Rules, in relation to the said member’s failure to purchase a policy of Professional indemnity insurance;

(b) the order made by the disciplinary Committee for the said member to be reprimanded; and

(c) the order made by the disciplinary Committee to pay a sum of Rm2,000.00 to the institute in respect of costs and expenses of and incidental to the dis-ciplinary hearing before the disciplinary Committee and the investigation conducted by the investigation Committee of the institute.

the decision of the disciplinary Committee is effective from 3 october 2013.

SuDIRMaN BIN MaSDuKI RegistrarOn behalf of the Council of the Malaysian Institute of Accountants

ORDER Of ThE DIScIplINaRy appEal BOaRD MalaySIaN INSTITuTE Of accOuNTaNTS

the Council of the malaysian institute of accountants (“the institute”) hereby gives notice that after due consideration by the disciplinary appeal Board of the institute (“the disciplinary appeal Board”) in respect of an appeal by pang Teng lee (Membership No.: 3118) who appealed against:(a) the decision of the disciplinary Committee of the institute

(“disciplinary Committee”) that found the said member to have committed an act amounting to ‘unprofessional conduct’ within the meaning as provided under Rule 2 of the malaysian institute of accountants (disciplinary) Rules 2002 [P.u. (a) 229/2002] (“disciplinary Rules”), in relation to the said member’s failure to ensure that his firm renewed and maintained a policy of Professional indemnity insurance;

(b) the imposition of fine of Rm2,000.00 by the disciplinary Committee; and

(c) the order made by the disciplinary Committee to pay a sum of Rm2,000.00 to the institute in respect of costs and expenses of and incidental to the disciplinary hearing before the disciplinary Committee and the investigation conducted by the investigation Committee of the institute,

the disciplinary appeal Board of the institute in exercise of its powers under Rule 28 of the disciplinary Rules has made an order to confirm the said decision, imposition of fine and order in respect of costs and expenses. the order of the disciplinary appeal Board took effect on 24 october 2013.


ORDER Of ThE DIScIplINaRy appEal BOaRDMalaySIaN INSTITuTE Of accOuNTaNTS

the Council of the malaysian institute of accountants (“the institute”) hereby gives notice that after due consideration by the disciplinary appeal Board of the institute (“the disciplinary appeal Board”) in respect of an appeal by Manoj a/l MV Krishnan (Membership No.: 14230) who appealed against:(a) the imposition of fine of Rm2,000.00 by the disciplinary Committee of the

institute (“disciplinary Committee”); and(b) the order made by the disciplinary Committee to pay a sum of Rm2,000.00

to the institute in respect of cost and expenses of and incidental to the dis-ciplinary hearing before the disciplinary Committee and the investigation conducted by the investigation Committee of the institute

the disciplinary appeal Board in exercise of its powers under Rule 28 of the malaysian institute of accountants (disciplinary) Rules 2002 [P.u. (a) 229/2002] (“disciplinary Rules”) has made an order to confirm the said imposition of fine and the order in respect of costs and expenses.

the order of the disciplinary appeal Board took effect on 28 october 2013.the said member did not appeal against the following decision and order

of the disciplinary Committee which therefore stands:(a) the decision of the disciplinary Committee that found the said member to

have committed an act amounting to ‘unprofessional conduct’ within the meaning as provided under Rule 2 of the disciplinary Rules, in relation to the said member’s failure to purchase a policy of Professional indemnity insurance; and

(b) the order made by the disciplinary Committee for the said member to be reprimanded.



ORDER Of ThE DIScIplINaRy appEal BOaRD MalaySIaN INSTITuTE Of

accOuNTaNTS

the Council of the malaysian institute of accountants (“the institute”) hereby gives notice that after due consideration by the disciplinary appeal Board of the institute (“the disciplinary appeal Board”) in respect of an appeal by chiew yee foong (Membership No.: 2187) who appealed against:(a) the imposition of fine of Rm3,000.00

by the disciplinary Committee of the institute (“disciplinary Committee”); and

(b) the order made by the disciplinary Committee to pay a sum of Rm2,000.00 to the institute in respect of costs and expenses of and incidental to the disci-plinary hearing before the disciplinary Committee and the investigation con-ducted by the investigation Committee of the institute

the disciplinary appeal Board in exercise of its powers under Rule 28 of the malaysian institute of accountants (disciplinary) Rules 2002 [P.u. (a) 229/2002] (“disciplinary Rules”) has made an order to confirm the said imposition of fine and the order in respect of costs and expenses.

the order of the disciplinary appeal Board took effect on 30 october 2013.

the said member did not appeal against the following decision and order of the disciplinary Committee which therefore stands:(a) the decision of the disciplinary

Committee that found the said member to have committed an act amounting to ‘unprofessional conduct’ within the meaning as provided under Rule 2 of the disciplinary Rules, in relation to the said member’s failure to ensure that his firm renewed and maintained a policy of Professional indemnity insurance; and

(b) the order made by the disciplinary Committee for the said member to be reprimanded.


CPA Practice

Bridging Program

Building Your Own

Accounting Business –

based on successful business model created by Hong Kong CPAs Advantages for Joining

Weld Asia

1. Be your own boss with total

time freedom.

2. Incidental costs savings –

covering firm’s registration

fee, business registration

fee, PII, office rent,

computer system, etc.

3. Low entry cost i.e. RM500 per month, to build your

business.

4. FREE use of office in One City USJ, Mid-Valley

(self-owned), Hong Kong, Shenzhen and Shanghai,

Internet, in-house training and consultation.

5. Established billing and accounting system to manage

your client portfolio.

6. Established brand name in Asia and Top 10 accounting

firms in Malaysia.

7. Established firm with developed ISQC1 system and

shared resources.

8. Cross border business capabilities – public listing,

corporate advisory and asset protection.

9. Access to Internationally qualified partners, directors and

consultants to develop your business.

10. Wider scope of services – increasing your income

potential.

11. Wide network of Asian firms covering Malaysia, Hong

Kong, Shenzhen and Shanghai offices to do your

business.

12. iCloud Accounting solution to increase your income

potential.

13. Opportunity for developing business outsourcing

services.

ONLY for

selected MIA

Members

Weld Asia Associates (AF002026) (A PCAOB Registered Firm in USA) 13-8, The Boulevard Office, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia T: (603) 2284 5126 F: (603) 2284 7126 E: [email protected] w: www.weldasia.com

We welcome any potential opportunities for possible merger and

acquisition to create value and competitive advantages for mutual

benefits together. Please feel free to contact our Mr. CK LEE on his

Hong Kong number (852) 6491 9889 or email: [email protected]


GETTING STARTED IN STOCK INVESTING & TRADING, ILLUSTRATED EDITION There is no “quick fix” to becoming a better inves-tor or “secret formula” to gaining a trading edge. Paid services, the Internet, and financial planners may all offer you an abundance of market insights, but in the end, it comes down to each individual’s learning for what works and what does not. Getting Started in Stock Investing & Trading can help those entering the market achieve this goal.

Getting Started in Stock Investing & Trading is an easy-to-use guide to understanding and investing in stocks. It shows how to determine which invest-ing and trading ideas may work best for every individual and put them in a better position to truly identify their appropriate risk tolerance level.

Engaging and informative, Getting Started in Stock Investing & Trading, truly lives up to its name by bringing the key concepts of this topic to life through attractive illustrations, charts, and graphs. Along the way, it carefully weaves these visual components with definitions, examples, key points, and links to websites that will further expand the reader’s knowledge base.

Topics covered in this guide include invest-ment risks, value investing, market strategies, trad-ing methods such as day and swing trading, tech-nical indicators, and diversifying portfolio.

This edition also includes an entertaining but informative running narrative at the end of each chapter, in the format of a comic strip. Its format includes definitions and easy-to-follow examples that anyone can understand, making usually com-plex subject matter easy to understand for any level investor. n

INSURANCE FRAUD CASEBOOK: PAYING A PREMIUM FOR CRIMEInsurance fraud is not committed by accounting systems or computers. It’s carried out by living, breathing human beings, victimising fellow con-sumers and costing millions of dollars in the form of increased premiums and higher prices for goods and services.

Understanding the enormity of this problem is essential in fighting back. Whether you’re a fraud investigator or an insurance auditor, Insurance Fraud Casebook is a resource for optimising your fraud detection efforts and protecting against insurance fraud.

Edited by Laura Hymes, Managing Editor of the Association of Certified Fraud Examiners’ (ACFE) Research Department and Dr. Joseph T. Wells, the founder and Chairman of the ACFE, Insurance Fraud Casebook is a behind-the-scenes look at how insurance fraud takes root. Featuring contributions by fraud examiners, the book details the measures that can be taken to keep fraud from happening in the first place through real cases, all

handpicked by Laura Hymes.Insurance Fraud Casebook provides you with

special insights on every type of insurance scam, from healthcare fraud and workers’ compensation fraud to counterfeiting and online fraud, illustrated with entertaining and enlightening cases, includ-ing: “The Good Doctor and Insurance Consultant”“Extinguishing an Arson Fraud”“Everyone Gets Hurt: A Study in Workers’ Compen-sation Fraud”“Getting Rich from the Elderly”“Falling Prey to Online Charms”“Woo, Wed, Insure, Murder”“Mystery Shopping for Fraud”

If you want to learn how insurance fraud is engineered, how it is investigated and how its perpetrators are brought to justice, Insurance Fraud Casebook is a must-read. n

FINANCIAL MODELING & VALUATION: A PRACTICAL GUIDE TO INVESTMENT BANKING AND PRIVATE EqUITYThe markets are vast and complex not only in the U.S. but globally. Everyone wants to make money. Yet, throughout the past years we have faced tre-mendous market swings rendering investors (and their money) in a sea of lost hopes, and few inves-tors with a plethora of wealth.

The collective psychology of the market as a whole plays a major role, but if the everyday inves-tor was better equipped with the proper tools to understand the underlying fundamentals of a rational investment, smarter investment decisions would be made, more rational investments will be made, and the markets would be a more efficient environment.

Written for complete novices and experienced professionals alike, Financial Modeling & Valuation is a highly accessible, step-by-step guide to under-standing and performing fundamental analysis and stock valuation.

Financial Modeling & Valuation is built around a full-length case study of Walmart where author Paul Pignataro clearly and methodically shows you how to use the three analytical methods used by Wall Street analysts to determine whether a stock is overvalued, undervalued, or valued appropriately through comparable company analysis, discounted cash flow analysis, and precedent transaction analy-sis. It walks you through all the steps of developing a sophisticated financial model as done by profes-sional Wall Street analysts.

As an added bonus, the Financial Modeling & Valuation companion website features a download-able version of the Walmart model template, along with additional case studies, exercises, test ques-tions, and a practice model and solution to let you test and fine-tune your analytical skills. n

BOOK Review

ISBN: 978-1-118-39925-5Published by: Wiley

RRP: US$ 29.95

ISBN: 978-1-118-61771-7Published by: Wiley

RRP: US$ 94.95

ISBN: 978-1-118-55876-8

RRP: US$ 79.95

FINANCIAL MODELING & VALUATION: A PRACTICAL GUIDE

TO INVESTMENT BANKING AND PRIVATE EqUITY

by Paul Pignataro

INSURANCE FRAUD CASEBOOK: PAYING A PREMIUM FOR CRIME

by Laura Hymes and Dr. Joseph T. Wells

GETTING STARTED IN STOCK INVESTING & TRADING, ILLUSTRATED EDITION by Michael C. Thomsett


GLOBAL LEADERS IN ISLAMIC FINANCEWhat is Islamic finance, and how is it different from its conventional counterpart? Why is there a need for it, and how did it all start? Is it only for Muslims?

Addressing all these questions is a new book, Global Leaders in Islamic Finance: Industry Milestones and Reflections. Unlike any other textbook or tech-nical books on Islamic finance, this book is neither about the finer details of Islamic financial structures nor the intricacies of technical issues challenging the Islamic finance industry.

Taking her cue from authors Jack Schwager and John Train, Emmy Abdul Alim has brought together an elite group of leaders who have broken new ground in Islamic finance and let them express, in their own words, their views on the development, rise, and future course of the industry.

In a collection of high profile interviews with the pioneers of Islamic finance are Haj Saeed Bin Ahmed Al Lootah, His Royal Highness Prince Mohamed Al Faisal Al Saud, Sheikh Saleh Abdul-lah Kamel, and Tun Dr. Mahathir Mohamad. Join-ing these experts are a host of others from Asia, the Middle East, and the West who have had a formative influence on the global Islamic finance industry.

Global Leaders in Islamic Finance offers a rare opportunity to learn about the rise of Islamic bank-ing and finance and the crucial issues affecting it. It is for anyone interested in exploring the emerging trends of Islamic finance and its likely future. n

CORPORATE SUSTAINABILITY: INTEGRATING PERFORMANCE AND REPORTING The 2007-2008 financial crisis which resulted in an economic downturn and regulatory responses along with global competition, encouraged organ-isations of all types and sizes to pay keen attention to their sustainability programmes comprising of economic, governance, social ethics, and environ-mental (EGSEE) activities.

Organisations worldwide recognise the impor-tance of all five dimensions of EGSEE sustainability performance and accountability reporting. How to actually assess sustainability risk, implement sustainability reporting, and obtain sustainability assurance remains a major challenge as best prac-tices are evolving.

According to the authors, some of the advan-tages of applying corporate sustainability include substantial cost savings; reaching new markets and customers; prepares an organisation for envi-ronmental and social risks, as well as for seizing business opportunities; and strengthens corporate image and reputation internally and externally.

Corporate Sustainability hits on all the hottest topics around sustainability including multiple bot-tom line EGSEE performance and reporting, relat-ed financial and non-financial key performance indicators (KPIs), business social responsibility and environmental reporting. It also highlights how people, business and resources collaborate in a business sustainability and accountability model including key discussions on laws, rules, regula-tions, standards and best practices relevant to business sustainability performance, reporting and assurance. n

ISBN: 978-1-118-39925-5Published by: WileyRRP: US$ 34.95e-book: US$22.99

ISBN: 978-1-118-12236-5Published by: WileyRRP: US$ 74.95

CORPORATE SUSTAINABILITY: INTEGRATING PERFORMANCE AND REPORTINGby Ann Brockett and Zabihollah Rezaee

GLOBAL LEADERS IN ISLAMIC FINANCEby Emmy Abdul Alim

BOOK Review

MIA members are entitled to a 20% discount, kindly email your orders to [email protected]

The year that was

E [email protected] icaew.com/faculties

USE YOUR FACULTIES

In a rapidly changing business environment, the pursuit of competitive advantage is more important than ever. Become a member of one of our seven faculties – giving you a range of powerful tools that will help you stay one step ahead in your specialist area.

Contact us for more information or to join a faculty.

MIA - 21cm (w) x 27.5cm (h)

BDO Tax Services Sdn Bhd (114863-K), a Malaysian Limited Liability Company, is a member of BDO International Limited,a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.BDO is the brand name for the BDO network and for each of the BDO Member Firms.

In Budget 2014 tabled at the Parliament on 25 October 2013, the Prime Minister, who is also the Minister of Finance, announced the introduction of GST at the rate of 6% with effect from 1 April 2015. With less than 15 months to go, businesses should take immediate steps to assess the impact and mobilise resources to prepare for implementation of GST. How ready are you to meet the deadline for GST implementation? Our GST Advisory Team can assist you with:• practical GST implementation issues• effective GST mapping process• systems and infrastructure requirements• vital GST transitional considerations. Contact us today to start your GST preparation.

ARE YOU READY FOR GST?

BDO GST Resource CentreHotline : 03-2616 2964Email : [email protected]

www.malaysiagst.my

BDO12th Floor, Menara Uni.Asia 1008 Jalan Sultan Ismail, 50250 Kuala Lumpur, MalaysiaTel : +603 2616 2888 Fax : +603 2616 2970 Email : [email protected]

www.bdo.my BDO Malaysia BDO Asean

FORWARD THE WAY ACCOUNTANCY PROFESSION: - Malaysian ...

Documents