Characteristics and users of Tan Chong Motor's Financial Statements

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History and background

Tan Chong Motor Holdings Berhad (TCMH) was incorporated in Malaysia on 14 October 1972. Back in the 1950s from its humble beginning as the distributor of a small motor vehicles, TCMH Group (the Group) now has involved business activities in a myriad after it had grown into one of the largest national conglomerates; from the marketing and assembly of auto parts manufacturing and motor vehicles to property development as well as trading in various heavy machineries, industrial equipment and consumer products - both locally and abroad.

As part of a restructuring exercise to strengthen our foothold as an industry major player; in 1998 various business interests of TCMH abroad were eventually demerged and subsequently listed on The Stock Exchange of Hong Kong Limited under the Tan Chong International Limited flagship. This was followed by the demerger of its automotive parts division, non-motor division involving cosmetics, undergarments, and the distribution of heavy machinery as well as tourism-related businesses; which was subsequently listed on the Main Board of Bursa Malaysia Berhad in 1999 under APM Automotive Holdings Berhad and Warisan TC Holdings Berhad respectively. These exercises have enabled the Group to realign its focus on motor industry business.

TCMH is basically an investment holding company and the Group’s current principal activities among others are; assembly and distribution of motor vehicles, provision of after-sales services and motor related financial services such as hire purchase, an insurance agency, and leasing.

Company Profile

The Executive Deputy Chairman and Group Managing Director of Tan Chong Motor Company is Dato’ Tan Heng Chew. The Senior Independent Non-Executive Director is Dato’ Ng Mann Cheong, and below him has three subordinates Independent Non-Executive which is Dato’ Haji Kamaruddin @ Abas Nordin, Mr Seow Thiam Fatt, and Mr Siew Kah Toong. For the executive director which is included is Dato’ Khor Swee Wah @ Koh Bee Leng, Mr Ling Ou Long @ Ling Wuu Long, and Ho Wai Ming. After the Board of Directors is come to Audit Committee, the chairman is Mr Seow Thiam Fatt, and his subordinates is Dato’ Ng Mann Cheong, Dato’ Haji Kamaruddin @ Abas Nordin, and Mr Siew Kah Toong. Furthermore, the chairman for the Nominating Committee is Dato’ Ng Mann Cheong, with Dato’ Haji Kamaruddin @ Abas Nordin, Mr Seow Thiam Fatt, Mr Siew Kah Toong. The Board Risk Management Committee’s chairman is Mr Siew Kah Toong, come with Dato’ Ng Mann Cheong, Dato’ Haji Kamaruddin @ Abas Nordin, Mr Seow Thiam Fatt, Dato’ Tan Heng Chew (Alternate: Mr Ling Ou Long @ Ling Wuu Long).

Business Type and Product

Role and Status in the Car Industry

Financial Statement

Characteristics of Tan Chong Motor Financial Statement

For having financial statements and accounts to provide useful financial information to the account users, company should satisfy following criteria in preparing its accounts: Reliability, Accuracy, Relevance, Timeliness, Completeness, Understandability, and Comparability.


A financial account should present the reliable information to the user for decision making. The financial account information is reliable if it reflects the substance of transaction and it presents faithfully and truly what has already happen. The financial account must free from bias and neutral and also free from error. It is complete of required account information, the whole information completed inside. And it is prudent and realistic when there is any uncertainty. If the above stated points are not fulfilled, the financial account information is not reliable for the decision making of user.


The financial accounts should provide accurate financial information to the users for decision making because the inaccurate account information will lead to inaccurate decision made by the user.


The financial account prepared based on accounting concepts and policies should present relevant financial information which is capable of influencing the economic decision of the users. Therefore, the information presented by the financial accounts should be relevance to the decision making of the users.


Whether the financial account information is relevant or not to the decision making of users, it depends on whether the financial account are made to present information on time or not when it is needed for decision making. If the accounts are prepared to provide required information on time without delay, it is relevant to the decision making of the user. If the accounts are not prepared to provide information on time because of delay, it is not relevant to the decision making of the user.


Checking the completeness of a financial statement is to analyze whether the financial statement are correctly included all the transactions that are already been given. The auditors prove with the help of sufficient evidence that all the recorded transactions deserve to be included in order to abide by the completeness assertion. This is further supported with an external document so as to provide evidence regarding the occurrence of the transaction.


The financial account prepared based on the accounting concept should be capable of being understood by the users who have reasonable knowledge of business, economic activities, and accounting.


The financial account made based on accounting concept should be comparable with the previous year account and comparable with the account of the other organizations.

Implication or Effect of These Characteristics

Accounting Concept and Report standards of the International Financial Reporting Standards (IFRS)

Basic accounting concepts are the broad assumptions which underline and govern the periodic financial statement and accounts of business enterprises. Therefore, financial accounts of business are prepared based on nine accounting concept. Such as, entity concept, money measurement concept, separate valuation concept, going concern concept, accruals concept, prudence concept, consistency concept, materiality concept, and historical concept.

Business Entity

Entity concept states that business is a separate entity and separate body from the business owner where the assets in business are separated from the personal assets of the business owner when preparing financial accounts. Therefore, any personal assets of the business owner are brought into the firm for business use recorded as capital in business financial accounts whereas any business money and trading goods are taking out from firm for personal use are recorded as drawing in business financial accounts.

Going Concern

This concept states that business will continue to operate in the foreseeable future and it is no intention to put company into liquidation or bankruptcy, no intention to stop or to cut down the business operation. Therefore, business financial account should be prepared based on going concept assumption that business will continue in operation and will not stop so that the business assets are valued on their original coast and not on their ‘break-up’ value or sales value at which the assets can be sold.


This concept states that the similar item should be dealt with in the similar accounting treatment consistently, continuously without change from time to time reflecting a consistent and similar trend of the business financial account records. Therefore, once a certain method of depreciation, a certain method of stock valuation or method of accounting treatment has been adopted in the business financial accounts, the similar method and similar item should be consistently and continuously used without change from time to time in future. If any changes have to be made to show out a more realistic picture, the changes made must be supported by an acceptable reason.


This concept states that under the condition of uncertainty, prudent and cautious judgments should be applied on the estimation and valuation of the assets, liabilities, revenues and expenses so that the assets and revenue income will not be overstates or overvalued whereas the liabilities and expenses will not be understand or undervalued for reporting a realistic profit which is not understated in business financial accounts. Due to the prudence concept, stock or inventory should be value at lower value, cost or net realizable value which one lower than the stock value and profit will not be overstated. Allowance for doubtful debts should be provided for those debtors that may not be receivable by business in future so that the debtor balance will not be overstated in balance sheet.


This concept states that all the transaction and events taken place are recognized and taken into account at the time when they occur and not at the time when cash is received or paid. So that they are recorded and reported in financial account for the period to which they relate. Therefore, the revenues and expenses are recognized, reported and matched to each another in the financial accounts for deriving profit for the period to which they relate when they occurred even though they are still accrued, not yet received money or not yet paid money. Due to the accrual concept, there are adjustments of accrual and prepayment made on revenues and expenses in business financial accounts.


This concept states that only those material items which are of relative large money value and important to business should appear as assets in financial statement whereas the not material item’s which are of relatively small money value and unimportant to business should not appear as asset in financial statement but they should be full amount written off against profit during the period in which they occur. It is very subjective in determining the items to be material or not material. Usually, the items are material if their omission or their misstatement would influence the economic decision of users. Conversely, the items are not material if their omission or their misstatements are no influence on the economic decision of users.

Historical Cost

This concept states that all the transactions are stated at their original value when they occurred. Therefore, all assets should be recorded at their original or historical cost which is the cost price of the asset that was paid money by the business for acquiring it. The historical cost concept is applied to value the assets on its original coast because of the going concern concept to assume that business will continue to operate and will not cease in future.

Money Measurement

This concept states that business financial accounts only record those items that are measureable in monetary value are not recorded in business financial accounts like product quality and labour efficiency.

Separate Valuation

This concept states that each item of the expenses and revenues, each part of the assets and liabilities in the financial accounts must be valued separately.

Dual Concept

This concept states that an accounting principle that had recognizes the dual impact in business transactions on the ledger balance sheet or the cash flow. For instance, the debt used to acquire the asset is added to the liability side while an acquired asset is added to the asset side of the balance sheet.

Task 2 Internal and External

Following are internal users that people within the organization and external users that people who outside the organization who use account to derive financial information for their needs.

Director and Management

These people appointed by the company’s owners to supervise the day-to-day activities of the company. The need accounting information about the company’s financial situation as it is currently and as it is expected to be in the future to enable them to manage the business efficiently and to take effective control and planning decisions.


There are people employed by the company to carry out business activities. They need accounting information about the company’s financial situation because their future careers and the size of their wages and salaries depend on it.


They need accounting information about the business activities of enterprises for the allocation of resources and national statistics.


These are business proprietors or the owners of company. They need accounting information to assess how effectively the management of company is performing its stewardship function, how profitable management is running company’ s operations and how much profit they can withdraw from the business for their dividend payment.


They provide loan and overdraft for the company to finance business activities. They need accounting information about the company’s financial status to ensure that the company is able to keep up with interest payments and eventually to repay the principal amount of loan advanced.


These are people who provide trading goods or service to the company on credit. They need accounting information about the company’s ability to pay its debts for ensuring their collection from the company.


These are people who purchase goods or services provided by the company. They need accounting information about the company’s financial stability to ensure that the company is a secure source of supply and no longer of having to close down.