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Accounting for government grants

Accounting for government grants
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MPERS vs MFRS : Government Grants

In this article, we share the main differences in the accounting requirements for associates under MFRS 120 and Section 24 of MPERS.

Government Grants

Government grants are assistance by the government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity.

They exclude those forms of government assistance which cannot reasonably have a value placed upon them and transactions with the government which cannot be distinguished from the normal trading transactions of the entity.

Section 24 of MPERS - Government Grants

Use income approach as all government grants are income transactions.

If there is no specified future performance condition imposed, the grant is recognized upon receivable.

If there is a specified future performance condition imposed, the grant is recognized when the condition is met.

Government grants are measured at the fair value of the assets received or receivable.

MFRS 120 Government Grants

Use income approach as all government grants.

Conditions :

1. The entity will comply with the conditions imposed.

2. The grants will be received.

Recognise grants in P/L on a systematic basis over periods in which the entity recognise the related costs.

Non-monetary grants is measured by

  1. The fair value of assets received.

  2. Nominal amount paid

 

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Accounting for intangible assets

Accounting for intangible assets
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MPERS vs MFRS : Intangible Assets

In this article, we share the main differences in the accounting requirements for associates under MFRS 138 and Section 18 of MPERS.

Intangible Assets

An item meets the definition of intangible asset if it poses the three criteria:

  • Identifiability.

  • Control over resources.

  • Existence of future economic benefits (or service potential).

An intangible asset is an identifiable non-monetary asset without physical substance. Such an asset is identifiable when it is separable, or when it arises from contractual or other legal rights. Separable assets can be sold, transferred, licensed, etc.

Examples of intangible assets include computer software, licences, trademarks, patents, films, copyrights and import quotas.

Section 18 of MPERS - Intangible Assets

Research and development expenditures should be recognized as expenses.

All internally generated intellectual property should be recognized as an expense.

MFRS 138 - Intangible Assets

Development expenditure of R&D activities that meet the recognition criteria must be capitalize.

All research and other development expenditure are recognized as an expense.

Internally generated intellectual property should not be recognized as an asset.

An entity is to recognise an intangible asset only if the two criteria are met:

1. It is probable that the expected future economic benefits (or service potential) will flow to the entity; and

2. It can measure the cost or fair value of the asset reliably.

MFRS 138 allow an entity to capitalise expenditure from the development phase if it can demonstrate all of the following conditions:

  • The technical feasibility of completing the intangible asset so that it will be available for use or sale.

  • Its intention to complete the asset and use or sell it.

  • Its ability to use or sell the intangible asset.

  • How the intangible asset will generate probable future economic benefits or service potential.

  • The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.

  • Its ability to measure reliably the expenditure attributable to the intangible asset during its development.

MFRS 138 provide an accounting policy choice to subsequently measure an intangible asset either using the cost model or the revaluation model.

MFRS 138 states that intangible assets may have a finite or indefinite useful life. This requires an entity to assess and determine useful life. An intangible asset with indefinite useful life is not amortised but must be tested for impairment annually.

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Accounting in Associates

Accounting in Associates
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MPERS vs MFRS : Associates

In this article, we share the main differences in the accounting requirements for associates under MFRS 128 and Section 14 of MPERS.

Associates

Investment in associate refers to the investment in an entity in which the investor has significant influence but does not have full control like a parent and a subsidiary relationship. Usually, the investor has a significant impact when it has 20% to 50% of shares of another entity.

Section 14 of MPERS - Associates

Measure investment in associates

  • The cost model

    Investment is measured at cost less impairment. The quoted associate must be measured at fair value.

  • The equity method

    No exception for temporary investment and for conditions of severe restriction.

  • The fair value model

    Investment is measured at fair value through profit and loss. Any investment which is impracticable to measure fair value must be measured using the cost model.

When an associate becomes a subsidiary or joint venture, a remeasurement is required with gain or loss recognized in P/L account

MFRS 128 - Associates

Measure investment in associates under the equity method in the consolidated financial statements.

No exception for temporary investment and for conditions of severe restriction.

When an associate becomes a subsidiary (not joint venture), a remeasurement is required.

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Accounting in Associates

Accounting in Associates
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MPERS vs MFRS : Associates

In this article, we share the main differences in the accounting requirements for associates under MFRS 128 and Section 14 of MPERS.

Associates

Investment in associate refers to the investment in an entity in which the investor has significant influence but does not have full control like a parent and a subsidiary relationship. Usually, the investor has a significant impact when it has 20% to 50% of shares of another entity.

Section 14 of MPERS - Associates

Measure investment in associates

  • The cost model

    Investment is measured at cost less impairment. The quoted associate must be measured at fair value.

  • The equity method

    No exception for temporary investment and for conditions of severe restriction.

  • The fair value model

    Investment is measured at fair value through profit and loss. Any investment which is impracticable to measure fair value must be measured using the cost model.

When an associate becomes a subsidiary or joint venture, a remeasurement is required with gain or loss recognized in P/L account

MFRS 128 - Associates

Measure investment in associates under the equity method in the consolidated financial statements.

No exception for temporary investment and for conditions of severe restriction.

When an associate becomes a subsidiary (not joint venture), a remeasurement is required.

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Accounting for Investment Properties in Malaysia

Accounting for Investment Properties in Malaysia
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MPERS vs MFRS : Investment Properties

In this article, we share the main differences in the accounting requirements for investment properties under MFRS 140 and Section 16 of MPERS.

Investment Properties

Investment property is property (land or a building – or part of a building – or both) held by the owner or by the lessee under a finance lease to earn rentals or for capital appreciation, or both, rather than for:

  • Use in the production or supply of goods or services, or for administrative purposes; or

  • Sale in the ordinary course of operations.

What is the accounting treatment for investment properties?

Section 16 of MPERS - Investment Properties

If the fair value can be measured reliably without undue cost or effort on an ongoing basis, the IP must be measured at the fair value model.

All other IP must be accounted for as property, plant and equipment using the depreciated cost model in Section 17 Property, Plant and Equipment.

MFRS 140 - Investment Properties

Measured at fair value or depreciated cost model

 

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Accounting for borrowing cost Malaysia

Accounting for borrowing cost Malaysia
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MPERS vs MFRS : Borrowing Cost

In this article, we share the main differences in the accounting requirements for borrowing costs under MFRS 123 and Section 25 of MPERS.

Borrowing Cost :

Borrowing costs are interest and other expenses incurred by an entity concerning the funds borrowed. Borrowing cost includes the following type of costs:

  • Interest on bank borrowings (both short-term and long-term) as well as bank overdrafts.

  • Amortisation of discounts or premiums relating to borrowings.

  • Amortisation of ancillary costs incurred in connection with the arrangement of borrowings.

  • Finance charges in relation to finance leases and service concession arrangements.

  • Exchange differences from foreign currency borrowings, to the extent that they are regarded as an adjustment to interest costs.

  •  

What is the accounting treatment for borrowing costs?

Section 25 of MPERS - Borrowing Cost

Recognise all borrowing costs as an expense in profit or loss in the period they are incurred. The option of capitalising borrowing costs on qualifying

assets are not allowed.

MFRS 123 - Borrowing cost

Borrowing costs that are directly related to a qualifying asset shall be capitalised as part of the cost of that asset.

Borrowing costs directly attributable to the acquisition, construction or production of a 'qualifying asset' (one that necessarily takes a substantial period of time to get ready for its intended use or sale) are included in the cost of the asset.

An entity shall cease capitalising borrowing costs when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete

 

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MPERS vs MFRS Malaysia

MPERS vs MFRS Malaysia
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MPERS vs MFRS : An overview of Accounting Standards in Malaysia

There are 2 types of accounting standards in Malaysia

  1. MPERS : Malaysian Private Entities Reporting Standard

  2. MFRS : Malaysian Financial Reporting Standards

Private Entities

Private entities shall comply with either:

1. Malaysian Private Entities Reporting Standard (MPERS) in their entirety for financial statements. or

2. Malaysian Financial Reporting Standards (MFRS) in their entirety.

A private entity is a private company as defined in section 2 of the Companies Act 2016 that –

  1. is not itself required to prepare or lodge any financial statements under any law administered by the Securities Commission Malaysia or Bank Negara Malaysia; and

  2. is not a subsidiary or associate of, or jointly controlled by, an entity which is required to prepare or lodge any financial statements under any law administered by the Securities Commission Malaysia or Bank Negara Malaysia.

Notwithstanding the above, a private company that is itself, or is a subsidiary or associate of, or jointly controlled by, an entity that is a management company as defined in section 2 of the Interest Schemes Act 2016 is not a private entity.

MPERS vs MFRS

More to come in coming days the comparison MPERS and MFRS

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Overview of The Malaysian Financial Reporting Standards (MFRS)

Overview of The Malaysian Financial Reporting Standards (MFRS)
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The Malaysian Financial Reporting Standards (MFRS)

Accounting Standards Malaysia

There are three types of approved accounting standards here in Malaysia:

  • The Malaysian Financial Reporting Standards (MFRS) – This is the MASB approved accounting standards for entities, but this does not include private entities

  • Private Entity Reporting Standards (PERS) – This is the MASB approved accounting standards for all private entities. However, this has been withdrawn effective 1 January 2016.

  • Malaysian Private Entities Reporting Standards (MPERS) – This replaces the previous PERS and is in effect from 1 January 2016.

MFRS

Entities Other Than Private Entities shall apply the MFRS framework for annual periods beginning on or after 1 January 2012, with the exception of entities that are permitted in the alternative to apply the Financial Reporting Standards (FRS) framework.

The Malaysian Financial Reporting Standards (MFRS) framework was introduced by the Malaysian Accounting Standards Board (MASB) and came into effect on 1 January 2012.

It is fully compliant with the International Financial Reporting Standards (IFRS) framework, which enhances the credibility and transparency of financial reporting in Malaysia.

The numbering of the MFRS corresponds with the equivalent IFRS Standard issued by the IASB. MFRS prefix with “1xx” corresponds with the equivalent IAS.

 

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Accounting for lease under MPERS Section 20

Accounting for lease under MPERS Section 20
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Finance lease vs Operating lease under MPERS Section 20

What is Lease?

An agreement stated the transfer of an asset with the right of use by a lessor to a lessee.

There are two types of leases which are

- Finance lease

- Operating lease

Differences between a finance lease and an operating lease?

Classification of Finance lease:

- Ownership of the asset will be transferred to the lessee by the end of the lease term.

- Lease term is for the major part of the useful life of the asset even if the title is not transferred.

- Lessee has the option to purchase the asset at a lower price compared to the fair value.

- Present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset.

- Leased assets have specialised nature that only the lessee can use without major modifications.

Classification of Operating lease:

- Lease does not transfer substantially all risks and rewards incidental to ownership.

Recognition and measurement for a lessee - Finance lease

Statement of Financial Position – Assets and Liabilities

- Recognise as assets and liabilities at amounts equal to:-

o the fair value of the assets; or

o if lower, the present value of the minimum lease payments

- Initial direct costs of the lessee are added to the amount recognised as an asset

- Using the effective interest method to reduce the outstanding liability

Statement of Comprehensive Income - Expenses

- Depreciate the asset according to lease term or useful life

- Finance charges of each period during the lease term

Operating lease

- Recognise lease payments as an expense over the lease term on a straight-line basis

Disclosure for lessee

Finance lease

- Carrying amount of the asset

- Amount of future minimum lease payment.

i) Not later than one year

ii) Later than one year and not later than five years

iii) Later than five years

Operating lease

- Amount of future minimum lease payment under non-cancellable operating leases ：

i) Not later than one year

ii) Later than one year and not later than five years

iii) Later than five years

- Lease payment is recognised as an expense.

Source:

MPERS 20 Leases

https://bit.ly/3wEJJXO

 

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How are joint ventures accounted for?

How are joint ventures accounted for?
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How are joint ventures accounted for?

i. What is an investment in a joint venture?

- A contractual agreement involved two or more parties.

- The parties involved have joint control over the business activity.

ii. Types of Joint venture

- Jointly controlled operations

- Jointly controlled assets

- Jointly controlled entities

iii. Recognition and measurement

1. Jointly controlled operations

Definition:

- Two or more venturers use their resources or expertise to produce a product.

- Each venture bears its expenses and liabilities and raises its finance.

- The revenue from the sale of the joint product and any expenses incurred in common are shared among the venturers.

Recognition in venturer's financial statements:

- Assets and liabilities incurred

- Expenses incurred and share of income

2. Jointly controlled assets

Definition:

- The joint control, and often the joint ownership, of assets dedicated to the joint venture.

Recognition in venturer's financial statements:

- share of the jointly controlled assets

- share of any liabilities incurred jointly or incurred by the venturer

- share of income

- share of expenses incurred.

3. Jointly controlled entities

Definition:

- A corporation, partnership, or other entity in which each venturer has an interest.

Recognition in venture’s financial statements:

(i) Cost model

- Cost less accumulated impairment losses

- Recognise distributions received from the investment as income

(ii) Equity model

- Recognise at the transaction price (including transactions costs)

- Subsequently adjusted to reflect the investor’s share of the profit or loss

(iii) Fair value model

- Initially, measured at transaction price (exclude transaction cost).

- Subsequently, measured at fair value, any changes recognized in profit or loss

4. What differentiates an interest in the joint venture from an investment in an associate?

Investment in associate = The investor has significant influence over the investee, by possessing the power to participate in their financial and operating decisions.

Joint venture = The parties involved have the power to joint control over the arrangement.

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Difference Between GAAP vs IFRS

Difference Between GAAP vs IFRS
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Difference Between US GAAP vs IFRS

US GAAP vs IFRS are the two most dominant systems of accounting. The International Financial Reporting Standards (IFRS) are used by international companies while companies use GAAP in the U.S.

Summarised are the key difference on these US GAAP vs IFRS

  1. International Accounting Standard Board vs Financial Accounting Standard Board

  2. USA vs The rest of world

  3. Rule based vs Principal based with flexibility

  4. General interpretation for the entity vs Specific procedure for the entity

  5. LIFO as preferred method for inventory valuation vs LIFO is not preferred for inventory valuation

  6. Cost model on PPE vs Cost & Revaluation model can be used on PPE

  7. Fair value on intangible assets vs Future economic benefits on the intangible assets

  8. R&D is expensed off vs Some development cost can be capitalized and amortised

  9. Extraordinary & unusual items are show below net profit vs Not allowed

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Investment in Associates MPERS

Investment in Associates MPERS
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Investment in Associates MPERS

Commonly asked question on investment in associates :

* How do you account for investment in associates?

* Is investment in associates a current asset?

* How do you record investment in accounting?

What is an investment in associates?

An investor has a significant influence on the investee’s decision of its

- Financial policy; and

- Operating policy

What is a significant influence?

- Power to participate in the financial and operating decisions of the investee

- Investor holds directly or indirectly ≥ 20% voting power of the investee

- For shareholdings < 20%, the significant influence must be clearly demonstrated to classify the investment as associate

What is the document showing the significant influence of an investor?

- Representation on the board of directors

- Participation in the investee’s policy-making processes, including participation in decisions about dividends or other distributions

- Material transactions between the investor and the investee

- Interchange of managerial personnel

- Provision of essential technical information

Recognition and measurement of investment of associates

(i) Cost model

- Cost less accumulated impairment losses.

- Recognise dividends and other distributions received from the investment as income.

(ii) Equity method

- Recognised at the transaction price (include transaction costs)

- Share of post-acquisition profits or losses

- Dividends received from an associate merely reduce the carrying amount of the investment.

(iii) Fair Value model

- Measured at the transaction price (exclude transaction cost)

How to Present

- classify investments in associates as non-current assets

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What costs are included in fixed assets?

What costs are included in fixed assets?
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What costs are included in fixed assets?

When acquiring a factory, except for the cost of land and building, we have to incur many other costs, such as:-

i)                 dismantling the items left by the previous owner,

ii)                renovation cost,

iii)               legal fees for the loan agreement, and

iv) Other administration costs.

Can we capitalize all of the cost as “assets”?

Dismantling and renovation costs as i & ii above, can be capitalised,

Legal fees and other administrative costs as iii & iv above need to be expense off.

Generally, we should capitalize all of the costs as long as there are incurred directly attributable to bringing the asset to the condition necessary for it to be capable of operating in the manner intended by management.

Expensed off cost

However, there are some costs specifically mentioned in the standards which we should NOT capitalized:

-        Cost of opening a new facility

-        Cost of advertising and promotional activities

-        Cost of staff training

-        Administration and other general overhead costs

-        Borrowing costs

Source

Section 17 Property, plant and equipment -

https://www.cas.net.my/wp-content/uploads/2013/02/MPERS-Framework.pdf

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How is an intangible asset accounted for?

How is an intangible asset accounted for?
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How is an intangible asset accounted for?


The accounting for an intangible asset is to record the asset as a long-term asset and amortize the asset over its useful life, along with regular impairment reviews. The accounting is essentially the same as for other types of fixed assets.

What is Intangible assets?

It is an asset which is identifiable, non-monetary without physical substance.

  •  Identifiable - can be separated when acquired

  •  Non-monetary - cannot convertible to cash easily

  •  Without physical substance - unable to touch

Example of intangible assets

  •  Patent

  •  Copyright

  •  Trademark

  •  Brand

  •  Software

  •  Franchise agreements

Recognition and measurement of Intangible Assets

1. Separate acquisition

Measured at cost at the acquisition date

Costs included:-

  •  Purchase price

  •  Import duties, non-refundable taxes, discount or rebate

  •  Any directly attributable cost of preparing the asset for its intended use

2. Acquired as part of a business combination

 Measured at fair value at the acquisition date

Measurement after Recognition

Cost model

Cost

Less: accumulated amortisation

Less: accumulated impairment losses

Amortisation Period

  •  Systematic basis over its useful life

  •  Amortisation begins when the intangible asset is available for use

  •  The amortisation charge shall be recognised as an expense

Amortisation Method

  • Straight-line method or

  • Amortisation method that reflects the pattern in which it expects to consume the asset’s future economic benefits

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What is the difference between Investment property & PPE?

What is the difference between Investment property & PPE?
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What is the difference between Investment property & PPE?

Investment Property (IP)

Land or building (or a part of it), or both, held for the following specific purposes:

  • To earn rentals;

  • For capital appreciation; or

  • Both

Accounting for IP

IP shall be measured at fair value at each reporting date.

The IP shall use the cost model if the fair value cannot be measured reliably without undue cost or effort

Undue costs or effort means the costs and benefits from obtaining or determining the information necessary to comply with a requirement

Property, plant and equipment (PPE)

  • For use in production or supply of goods or services

  • For administrative purposes

  • It is expected to be used during more than one period.

Accounting for PPE

1.Cost model

Cost less depreciation less accumulated & impairment losses

2.Revaluation model

Revalued amount less accumulated depreciation & accumulated impairment losses.

Complication

What is the treatment of property that is partly investment and partly owner occupied?

Mixed use property shall be separated between IP and PPE.

However, the entire property shall be accounted for as PPE if the fair value of the IP component cannot be measured reliably without undue costs or effort.

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An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

THK (Secretarial, Account, Payroll, Advisory)

A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsource booking, accounting and payroll services to clients

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Impairment of assets due to floodings

Impairment of assets due to floodings
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Impairment of assets due to floodings

Overview of Impairment-Assets Accounting

An asset impairment arises when there is a sudden drop in the fair value of an asset below its recorded cost. The accounting for asset impairment is to write off the difference between the fair value and the recorded cost.

Flooding continues across Malaysia! Do you know how to account for impairment of assets due to flood?

Here are some tips for you.

Key takeaways:

I. What is an impairment loss

II. What is an impairment test in accounting?

III. How do you treat the impairment of assets in accounting?

IV. How do you record an impairment of an asset?

V. Is an impairment an expense?

VI. Which accounting standard is applicable for impairment of assets?

VII. Indicators of impairment

Summary of learnings:

I. What is impairment loss?

An impaired asset is an asset valued at less than book value or net carrying value. In other words, an impaired asset has a current market value that is less than the value listed on the balance sheet. To account for the loss, the company's balance sheet must be updated to reflect the asset's new diminished value.

Floods can cause damage to the appliances on your premises. including the heating, ventilation and air conditioning system, water heaters or refrigerators. As a result, we can no longer recover any value through the use or sale of damaged assets.

We will need to provide impairment when the recoverable amount of an asset is less than the book value of an asset.

II. What is an impairment test in accounting?

An impairment test is an accounting procedure carried out to find out if an asset is impaired, i.e. whether the economic benefits that the asset embodies have dropped drastically. In general, if the carrying value of an asset exceeds the sum of undiscounted expected cash flows of an asset, the asset is impaired.

III. How do you treat the impairment of assets in accounting?

If the recoverable amount of the asset is more than the carrying amount, then the impairment loss has to be reversed and it has to be treated as income in the books of accounts. The reversal of impairment loss previously recognized for a cash-generating unit has to be allocated first to the assets, then goodwill.

IV. How do you record an impairment of an asset?

The total dollar value of impairment is the difference between the asset's carrying cost and the lower market value of the item. The journal entry to record an impairment is a debit to a loss, or expense, account and a credit to the related asset.

V. Is an impairment an expense?

Impairment is a non-cash expense that is reported under the operating expenses section of the income statement.

VI. Which accounting standard is applicable for impairment of assets?

The core principle in Malaysian Private Entities Reporting Standard (MPERS) – Section 27.5 to 27.9is that an asset must not be carried in the financial statements at more than the highest amount to be recovered through its use or sale. If the carrying amount exceeds the recoverable amount, the asset is described as impaired.

VII. Indicators of impairment

What are the other indicators except for flooding? Such as:-

External factors:

- Market value declines

- Negative changes in technology, markets, economy, or laws

- Increases in market interest rates

- Carrying amounts of assets higher than market value

Internal factors:

- obsolescence or physical damage

- asset is idle, part of a restructuring or held for disposal

- economic performance if an assets worse than expected

Source:

Malaysian Private Entities Reporting Standard (MPERS) – Section 27.5 to 27.9

https://www.cas.net.my/wp-content/uploads/2013/02/MPERS-Framework.pdf

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An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

THK (Secretarial, Account, Payroll, Advisory)

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Why auditor ask any impairment on inventory

Why auditor ask any impairment on inventory
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Why auditor ask any impairment on inventory

MPERS section 13 Inventories

When performing an inventory audit, some of the most common challenges faced by the auditor include: Damaged inventory whose value must be adjusted to reflect its actual value to the company. ... Errors in shipping and receiving of goods can lead to an incorrect end-of-year cutoff total in inventory records

How should we value inventories?

Generally, inventories are valued at cost!

However, if the net realizable value (NRV) of the inventory is less than the cost, the NRV will usually need to be reported on the balance sheet instead of the cost.

What is the cost?

Cost consists of the cost of purchase, conversion, production overheads, joint products and by-products, and other relevant cost.

What is the net realizable value (NRV)?

Net realizable value (NRV) is defined as the expected selling price minus cost of completion.

In what situation we use NRV?

It requires the valuation of inventories at the lower of its historical cost or market value, but if market value cannot be calculated, then the net realizable value of the inventory should be used.

In practice, these are the scenarios where NRV come to the picture: -

1) Oversupply

2) Obsolescence

3) Price decline

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THK (Secretarial, Account, Payroll, Advisory)

A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsource booking, accounting and payroll services to clients

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Is expenses capital or revenue?

Is expenses capital or revenue?
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Is expenses capital or revenue?

Capital expenditures are for fixed assets, which are expected to be productive assets for a long period of time.

Revenue expenditures are for costs that are related to specific revenue transactions or operating periods, such as the cost of goods sold or repairs and maintenance expense

What is Capitalized?

A capitalized item is recognized as an asset on the Balance Sheet.

Normally It has the economic future benefit, able to generate revenues and the useful life is at least one year.

What is Expensed?

The expensed item is recognized as an expense/cost of goods sold on the Income Statement.

It is the money spent and the cost incurred by a company in running a business and generating profit.

Example of Capitalized Expenses

ABC Sdn Bhd is required to construct a new building as an office. For the construction, the company pays the cost of labour at RM15,000.00 and the cost of construction material at RM 50,000.00.

The total cost of RM 65,000.00 will be capitalized because the useful life of the building is more than one year, and it has the economic future benefit and the ability to generate revenues for the company.

Example of Expense-Off Expense

ABC Sdn Bhd has constructed a new building as an office on 2 years ago. During the year, the company pays RM 10,000.00 to repair the roof of the building.

In this case, the cost of repairs being expensed. This is because the cost occurs once, and it is to fix the damage part in order the company able to use the building to run the business.

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KTP (Audit, Tax, Advisory)

An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

THK (Secretarial, Account, Payroll, Advisory)

A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsource booking, accounting and payroll services to clients

KTP Lifestyle

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Xero Bronze Partner

Xero Bronze Partner
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THK Management Advisory Sdn Bhd (Partner account) is now a Xero, an online accounting software, bronze partner.
𝐕𝐢𝐬𝐢𝐭 𝐮𝐬
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Accounting for bitcoin (cryptocurrency)

Accounting for bitcoin (cryptocurrency)
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Accounting for bitcoin (cryptocurrency)

No accounting standard currently exists to explain how cryptocurrency should be accounted for, accountants have no alternative but to refer to existing accounting standards.

What is cryptocurrency?

Cryptocurrency is an intangible digital token that is recorded using a distributed ledger infrastructure, often referred to as a blockchain.

These tokens provide various rights of use. For example, cryptocurrency is designed as a medium of exchange. Other digital tokens provide rights to the use other assets or services, or can represent ownership interests.

These tokens are owned by an entity that owns the key that lets it create a new entry in the ledger. Access to the ledger allows the re-assignment of the ownership of the token. These tokens are not stored on an entity’s IT system as the entity only stores the keys to the Blockchain (as opposed to the token itself).

They represent specific amounts of digital resources which the entity has the right to control, and whose control can be reassigned to third parties

What accounting standards

Cash & cash equivalents

Bitcoin is too volatile! Cash is readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Financial assets

It does not represent cash, an equity interest in an entity, or a contract establishing a right or obligation to deliver or receive cash or another financial instrument.

Moreover, bitcoins do not provide the holders with a residual interest in the assets of an entity after deducting all its liabilities.

Property, Plant & Equipment

Bitcoin is not a tangible asset so it does not fall into the scope of PPE.

Inventory

Inventory accounting may be appropriate if an entity holds bitcoins for sale in the ordinary course of business.

However if an entity holds bitcoins for investment purposes over a period of time, inventory accounting is not appropriate.

Intangible assets

It appears to meet the definition of an intangible asset which define as an identifiable non-monetary asset without physical substance.

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KTP (Audit, Tax, Advisory)

An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

THK (Secretarial, Account, Payroll, Advisory)

A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsource booking, accounting and payroll services to clients

KTP Lifestyle

An internal community for our colleagues on work and leisure.

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THK Group of Companies THK Management Advisory Sdn Bhd 200401000220 (638723­X) THK Secretarial PLT 202304003367 (LLP0037327-LGN)

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+6012-771 7903 (Secretary Department)
+6012-771 7803 (Account Department)
+607-361 3443

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