Credit Risk

Credit risk, or the risk of counterparties defaulting, is controlled by the application of credit limits and ongoing monitoring procedures. The Institute has also exercised strict control in removing members in arrears of more than six months as provided under the Malaysian Institute of Accountants (Membership and Council) Rules 2001.

Liquidity Risk

The Institute practises prudent liquidity management to minimise the mismatch of financial assets and liabilities and to maintain sufficient levels of cash or cash equivalents to meets its working capital requirements.

Fair Values

The carrying amounts of cash and cash equivalents, subscription in arrears, sundry receivables and sundry payables approximate their fair values due to the relatively short term nature of these financial instruments.

Basis Of Accounting

The financial statements of the Institute are prepared under the historical cost convention. The financial statements comply with the applicable approved MASB accounting standards in Malaysia for Entities Other Than Private Entities.

Income Recognition

Membership subscription is payable annually at the beginning of the financial year. Only subscription which is attributable to the current financial year is recognised as income. Subscription relating to periods beyond the current financial year is taken up in the Balance Sheet as Subscription in advance. Subscription is payable in full irrespective of the date of resignation of members during the financial year.

Membership admission is recognised upon approval by Council of the respective applications. Membership subscription and admission fees for applicants approved after the end of the financial year but received during the financial year is taken up as Deferred Income.

Income from Continuing Professional Education and Members Induction courses is recognised on confirmation of a participant's registration. Income received for such activities that take place after the financial year is taken up as Deferred Income.

Income from sale of Technical materials/publications is recognised upon delivery of goods. Income from advertisements placed in the Institute's journal is recognised upon confirmation of advertisement.

Income from registration of candidates eligible to sit for the Malaysian Institute of Accountants Qualifying Examination, included under Surplus from Education activities, is recognised upon approval of application. The first sitting of the said Examination was in September, 2003.

Practice review income is recognized when a billing is raised to a member firm upon completion of practice review.

Dividend income is recognized when the right to receive payment is established.

Interest income is recognized on a time proportion basis that reflects the effective yield on the asset.

Impairment Of Assets

The carrying values of assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such an indication exists, the asset's recoverable amount is estimated. The recoverable amount is the higher of an asset's net selling price and its value in use, which is measured by reference to the discounted future cash flows. Recoverable amount is estimated for individual assets or, if it is not possible, for the cash-generating unit to which the asset belongs.

An impairment loss is charged to the Income Statement immediately. Any subsequent increase in recoverable amount of an asset is treated as reversal of previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of depreciation or amortisation, if applicable) had no impairment loss been recognised. The reversal is recognised in the income statement immediately.

Property, Plant And Equipment And Depreciation

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Property, plant and equipment are written down to their recoverable amounts. Cost includes expenditure that is directly attributable to the acquisition of the items.

Property, plant and equipment costing RM500 and below are expensed off to the Income Statement upon purchase.

Freehold land is not depreciated as it has an infinite life. Buildings on freehold land and leasehold land are amortised at the rate of 2% per annum. Depreciation of other property, plant and equipment is provided on a straight-line basis calculated to write off the cost of each asset to its residual value over its estimated useful life. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

The annual rates used are as follows:
 

Office equipment	10%
Furniture and fittings	10%
Computers	33 ∕%
Renovations	10%

Subscription In Arrears

Subscription in arrears of 6 months and above due from members who were removed from the Register of Members and where, in the opinion of the Council, these debts are no longer recoverable are written off to the Income Statement. An estimate is made for doubtful debts based on a review of all subscription in arrears at the balance sheet date. Subsequent recovery is taken up on a cash basis. Members who have ongoing investigation and disciplinary proceedings instituted against them and who are in arrears of more than six months will not be removed from the Register of Members.

Investment

Non-Current Investment is stated at cost less impairment losses.

Inventories

Publications, souvenirs and merchandise items are stated at the lower of cost and net realisable value. Cost is determined on the first-in, first-out basis. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

Cash And Cash Equivalents

Cash comprises cash in hand and at banks including bank overdraft (if any) and deposits. Cash equivalents comprise highly liquid investments which are readily convertible to known amount of cash which are subject to an insignificant risk of change in value. The Institute has adopted the direct method of Cash Flow Statement presentation.

Income Taxes

Income tax on the surplus or deficit for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable surplus for the year and is measured using the tax rates that have been enacted at the balance sheet date.

Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principal, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits, to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the assets are realised or the liabilities are settled, based on the tax rates that have been enacted or substantially enacted at the balance sheet date.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred tax assets and the deferred tax liabilities relate to the income taxes levied by the same taxation authority

Government Grants

Government grants are recognised initially at their fair values in the balance sheet as deferred income where there is reasonable assurance that the grants will be received and all attaching conditions will be complied.

Grants that compensate the Institute for expenses incurred are recognized as income over the periods necessary to match the grant on a systematic basis to the cost that it is intended to compensate.

Employees’ Benefits

Short Term Benefits

Wages, salaries and bonuses are recognised as an expense in the year in which the associated services are rendered by employees of the Institute. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences and short term non-accumulated compensated absences such as sick leave are recognised when the absences occur.

Defined Contribution Plans

The Institute makes contributions to the Employees Provident Fund ('EPF'). Such contributions are recognised as an expense in the Income Statement as incurred. Once the contributions have been paid, the Institute has no further payment obligations.

The Institute provides a Retirement Benefits Scheme for confirmed employee computed based on basic salary at 16% less the Institute's statutory contribution to the Employees Provident Fund (EPF). When an employee attains five (5) years of continuous service, this amount is then remitted monthly to the employee's EPF account. An employee whose service is terminated before the completion of five (5) continuous years of service will not be entitled to this benefit. The contribution charged to the annual Income Statement relates to the contribution due to the eligible employees for the year.

Provisions

Provisions are made when the Institute has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount can be made.

Foreign Currency Transactions And Balances

Transactions in foreign currencies are translated into Ringgit Malaysia at the exchange rates prevailing at the transaction dates or, where settlement has not yet taken place at the end of the financial year, at the approximate exchange rates prevailing at that date. All exchange gains and losses are taken up in the Income Statement.

Presentation Currency

The financial statements are presented in Ringgit Malaysia.