An insight into Malaysians companies towards Global Convergence

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According to Barry and Jamie (2004), Accountancy is the art of communication of financial information on a business entity to users such as shareholders and managers. Today, accounting plays a major role on everyday business, because it is the main drive for reporting financial information about a business entity, to the shareholders, creditors, financial analyst, economies, government and also other users in the need of financial information. In order to satisfy each user, the presentations of the financial statements are in fact very important.

How could anyone forget the year 2001, where the world was shook, with what seems like re-run episodes of financial information frauds, with the infamous Enron together with one of the five largest accounting firm Arthur Andersen. This followed by WorldCom, Qwest, Sunbeam just to name a few. These highly publicity event has resulted on revamping on the auditing regulations, corporate governance principles and also the effectiveness of accounting standard. According to Astrid and Giancarlo (2006), The Enron scandal has resulted on the construction of new regulations to enhance the reliability of financial reporting, and to increase transparency in presenting financial statements.

Due to these factors, The International accounting standards boards (IASB) was born. The IASB is based on London, England and was found on April 1, 200 and was responsible for developing International Financial Reporting Standards (IFRS) otherwise known as International Accounting Standards (IAS). Today, more than 100 countries are already on IFRS. Countries such as India, Korea and Canada are planning to converge by 2011.

Malaysia Accounting Standard Board announced their plan to fully convergence with IFRS by 1 January 2012. The plan to fully converge was announced on 1 August 2008. Thong Foo Vung, Technical partner of KPMG Malaysia, commented, "The full convergence would conclude that all public listed company in Malaysia will be standing at the same level compared to other international companies in terms of the financial statements reporting." The idea towards converging into IFRS would allow investors to have a deeper, thorough, a comprehensive awareness of financial statements prepared by the companies here, in Malaysia and allowing them to make a wiser choice of investment.

This move is able to bring more benefits to multinational companies and those who wish to raise funds from the international market. Furthermore other advantages would be enhanced transparency and comparability, also a more inclusive, better - quality in financial information for shareholders and other users of financial statements. The establishment of the IFRS framework is crucial to conform that Malaysia is not left out from the globalization by putting Malaysia on the map. (Thong Foo Vung, Technical partner, KPMG, 2008)


The main aim of this project is to investigate on the process of implementation of IFRS on Malaysian companies towards the global convergence by 2012. The process of implementation would able to provide estimations on where currently the companies stand in achieving global harmonization.

This study is specifically undertaken to:

Determine whether the companies are either on the way of convergence or fully converged

Determine the perception of the companies on the application of the IFRS as the basis of financial reporting system.

Indicate on the degree of awareness as how well equipped is the company while moving towards the fair value framework.

Research Methodology

Methodology is used to mean the ways in which techniques are chosen to address a particular problem, the ways in which problems are chosen, methods of techniques, the modelling process and also the chronological planning of events (Lehaney & Vinten, 1994)

According to Janes (1999) the main purpose of sending out a survey in a form of questionnaires, is to find out on the actual situation, perception of peoples, and to compare on the changes that occurs. It is the only way to get a clearer idea on the state of a group, a community, an organization, a set of corporations and even a profession. In many cases, these surveys can be compared to pictures taken at a certain period of time.

A variety of methods is planned to be used to collect and generate data. The data collected will be analyzed using qualitative and quantitative methods.

Research design

To determine the perceptions of the Malaysian companies towards Global convergence, a research in the form of questionnaires survey will take place. The sample size would be of 300-400 of all companies listed on the main board and second board of Bursa Malaysia. The questionnaires will be sent through e-mail, to the Head of the Accountant department or to any personnel who would be involved with the adoption process in their companies.

The Questionnaires

Questionnaire survey will be sent through e-mail to receive responses from the respondents. It is believed that sending the questionnaires through e-mail is cost and time saving. It is predicted that hundreds of questionnaires can be sent within a few days, and responses are expected to be received quickly. The e-mail address can be found in Bursa Malaysia website, and also the respective company's official websites.

The questionnaires are expected to be divided into a few sections. It will most probably divide into questions using a five point Likert rating scale. The range of answers will be from 1 = strongly agree to 5= strongly disagree. An analysis of the Likert Scale data would enable to determine the perceptions of the Malaysian companies in implementing the IFRS towards Global Convergence.

The Sample

The population selected is from the companies listed in Bursa Malaysia. The companies will be chosen from both the Main Board and the Second Board. The sample size will be of 300-400 from all the companies listed. The questionnaires will be sent to the Head of the accountant department or any personnel who are familiar with the convergence process in the companies.

Limitations of the research

Several limitations might occur in the process of carrying this research paper. It is assumed the following factors listed below might influence on the accuracy and validity of the research paper.


The second part of executing the research would be approximately twelve weeks duration. Which is will be taking place from the month of May 2010 until July 2010. It will be hard to ensure all questionnaires that have been emailed to respective companies would be received within the particular time period. This is however, although the method of receiving feedback is a fast one which is by e-mail, the assumptions that some feedback might require a longer time period should be made. Therefore, such a time constraint may led to a research paper lacking detail as sufficient data would not have been obtained within a short time span or the analysis of data may require a longer time period.

Lack of information of resources

It will be hard to collect sufficient information which is related to the research topic or analyze previous literature due to the lack of resources in the UCSI University library and database. Furthermore, digital library that could be accessed, are limited and do not allow further access to necessary literature. This limitation proves to be a difficult as could lead to study to be less than accurate and lack of needful information.

Financial constraints

Another limitation that could occur will be due to financial constraints that could prevent from purchasing relevant journals, reference materials and also books associated with the research study.

Literature Review

Financial statement is the main aspect of business reporting. It gives a clear picture on the financial situation of a company over a period of time. That being said, the presentation of financial statement should be of quality financial reporting, and provide with useful information, to allow a wide perspective for the users of financial statement to make an accurate decision.

Therefore, it is very important and also very significant to have standardized financial statements that can help companies to improve the understand ability of their financial statements within emerging economies.

Definition of standardization

Standardisation is a process by which all members agree to follow the same or very similar accounting practices. (L.L. Tay, 2007). The benefit of standardization can be due to financial, economic and political. It has been suggested that companies, creditors, investors would prefer a convergence of accounting standards with international accounting standard to create a quality financial reporting framework (A.Sawani, n.d.). British Prime minister, Gordon Brown (2008) has addressed his opinion on this to the Unites Nations, stating that;

"Transparency and improved accounting standards adapted by all nations, will be critical to ending a culture of irresponsibility"

Definition of Harmonization

Harmonization is a process of increasing the compatibility of accounting practices by setting bounds on the degree of variation (L.L.Tan, 2007).

The convergence plan

Entities are required to prepare a statement of financial position, a statement of comprehensive income, a statement of changes in equity, statements of cash flows along with notes to accounts to explain the significance of the accounting policies that have been used. These steps are taken place in order to notify users of financial statements about the entity financial position, performances throughout the accounting year, and also their financial position (Veets, n.d.)

The requirement for global accounting standard makes a great impact when there a lack of equality that could be present among numerous countries in accounting for such items such as fixed assets, pensions, leases, inventory, depreciation, financial statement consolidations, and financial disclosure requirements (Jacob and Madu, 2004). Therefore the harmonization of accounting standards will persuade investors to invest in foreign stocks and to also engage in other forms of foreign direct investments (J.J. Asongu, 2008)

Project Planning



Mid January

Start thinking of research ideas

End January

Going through collection of research ideas

Seeking appropriate literature related to ideas

Early February

Discussing with lecturer on research idea

Choosing research title

Submitting outline submission

Early April

Notification on the approval of supervisors

Mid April

Collection of suitable literature and other appropriate material

End April

Final writing of proposal report

Printing and binding of proposal report

Early May

Discussion with supervisor on Proposal

Mid May

Compiling questions for questionnaires

Revise Questionnaires

End May

Collection of companies e-mail and person in charge

Early June

Sending out questionnaires

Administer questionnaires

Mid June

Final collection of questionnaires and analysis of data

Sending out request/e-mail to companies with no feedback

End June

Completion of first draft of research project

Early July

Final writing of project report

Editing information

Mid July

Completion of last draft of research project

End July

Submission of research project