Academic journal article International Journal of Business

A Broad Analysis of United States Generally Accepted Accounting Principles and the Malaysian Accounting Standards Board Approved Accounting Standards

Academic journal article International Journal of Business

A Broad Analysis of United States Generally Accepted Accounting Principles and the Malaysian Accounting Standards Board Approved Accounting Standards

Article excerpt


In response to rapid development in the economy, the Malaysian Accounting Standards Board (MASB) was established in 1997. The board is responsible for developing accounting standards and continually improving the quality of external reporting in Malaysia. In the development process, constant reference is made to the work of national standard setters of other countries and the International Accounting Standards Committee. This paper highlights major similarities and differences between United States Generally Accepted Accounting Principles (GAAP) and Malaysia approved accounting standards, and offer some suggestions as to how Malaysia might effectively continue with the further development and restatement of its accounting standards. This study finds no significant difference in the basic accounting principles, assumptions and reporting format between U.S. GAAP and MASB standards. However, some differences in rules regarding specific accounting elements have been identified. Hence, further research is needed in order to understand differences and similarities between accounting standards of the two countries in greater detail.

JEL: M41

Keywords: GAAP, Malaysian Accounting Standards


Since gaining independence in 1957, there has been a significant growth in the Malaysian economy. This growth has created the need for efficient and effective accounting standards and practices. The development of the accounting profession in Malaysia started in 1958, with the formation of the Malaysian Association of Certified Public Accountants (MACPA). The early development of the accounting profession was under the influence of the British. Accounting practices in Malaysia are governed by the 1965 Companies Act, which was based on the United Kingdom (UK) Companies Act of 1948.

In 1967, the Malaysian government enacted the Accountants Act and subsequently formed the Malaysian Institute of Accountants (MIA). It is empowered with the statutory authority to regulate the accounting practices in the country. However, the MIA did not contribute to the development of the accounting profession as extensively as was originally expected until the MIA was reactivated in 1987. The reactivation has brought changes to the accounting profession, which had followed the UK model for a long time. (1) In order to meet the increasing need for accounting standards and practices, the MIA adopted International Accounting Standards (IASs) issued by the International Accounting Standards Committee (IASC). The MIA reviews the IASs in terms of their relevance and conformance with Malaysian legal and regulatory requirements. In addition, the MIA issues Malaysian Accounting Standards (MASs) to satisfy the specific needs of industries.

The Financial Reporting Act of 1997 established MASB. The MASB has now taken over the standard setting function of the MIA. Their primary responsibility is to continually improve the quality of external financial reporting in Malaysia and to contribute directly to the international development of financial reporting. Initially, twenty-four IASs and MASs were adopted and given the status of approved accounting standards, and will remain in force until they are amended, rescinded or replaced by a new MASB standard.

In Malaysia, the government regulates accounting and reporting practices through statutory regulations including the 1965 Companies Act, the 1964 Accountants Act, the 1993 Securities Commission Act and the 1997 Financial Reporting Act. For example, all companies incorporated under the Companies Act are required to provide information according to minimal disclosure requirements prescribed in the Ninth Schedule of the Act for profit and loss accounts and balance sheets. The Securities Commission Act empowers the Securities Commission to streamline the operation of the securities and financial futures markets while the MASB is given the responsibility to issue accounting standards. …

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