Abstract

http://ssrn.com/abstract=1283648
 
 

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The Impact of an Enforceable Standard in Malaysia: Assessing the Compliance of Disclosures for Large First-Time Adopters Under FRS 136


Tyrone M. Carlin


The University of Sydney Business School

Nigel Finch


The University of Sydney Business School

Nur Hidayah Laili


Macquarie Graduate School of Management

October 13, 2008

MGSM Working Paper No. 2008-12

Abstract:     
After many years of debating the appropriate treatment for goodwill, Malaysia finally has an enforceable accounting standard on this topic. Applicable for business combinations with reporting dates commencing on or after 1 January 2006, FRS 136 - Impairment of Assets requires that goodwill acquired in a business combination is allocated to cash generating units and tested for impairment at least annually.

This new requirements is a radical departure to the existing practice of goodwill reporting in Malaysia, with financial statement prepares now having to deal with complex and rigorous techniques for assessing impairment, and the added disclosure requirements in relation to goodwill allocation and the estimate of recoverable amounts. Given the change in the reporting requirements, there exists the possibility of inconsistent compliance and varying levels of disclosure quality by companies as they transition into the new reporting regime.

Thus, the purpose of this paper is to examine the level of compliance with the provisions of FRS 136 - Impairment of Assets and assess the quality of disclosures made in accordance with this new standard. Using a sample of 36 of the largest Malaysian listed corporations as at 2006, we find significant levels of non-compliance and substantial variation in the quality of note-form disclosures pertaining to impairment testing.

Number of Pages in PDF File: 24

Keywords: Goodwill Accounting, Financial Reporting Standard, FRS 136, Impairment, Malaysia

JEL Classification: M41, M44, M45, M47, G24, G38

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Date posted: October 14, 2008  

Suggested Citation

Carlin, Tyrone M. and Finch, Nigel and Laili, Nur Hidayah, The Impact of an Enforceable Standard in Malaysia: Assessing the Compliance of Disclosures for Large First-Time Adopters Under FRS 136 (October 13, 2008). MGSM Working Paper No. 2008-12. Available at SSRN: http://ssrn.com/abstract=1283648 or http://dx.doi.org/10.2139/ssrn.1283648

Contact Information

Tyrone M. Carlin
The University of Sydney Business School ( email )
Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia
+ 61 2 9036 7230 (Phone)
+61 2 9351 7471 (Fax)
HOME PAGE: http://sydney.edu.au/business/staff/tyronec
Nigel Finch (Contact Author)
The University of Sydney Business School ( email )
Sydney
Australia
Nur Hidayah Laili
Macquarie Graduate School of Management ( email )
99 Talavera Road
Sydney, NSW 2113
Australia
HOME PAGE: http://www.mq.edu.au
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