The Malaysian Public Sector Accounting Standards, or also known as MPSAS is the financial reporting framework issued by the Accountant General’s Department (“AGD”) of Malaysia. In this article, we will give you the overview of MPSAS.
The governance structure of MPSAS issuance
AGD of Malaysia has established two committees – the Government Accounting Standards Advisory Committee (“GASAC”) and the Accrual Accounting Steering Committee (“ACSC”) to oversee and manage the development, issuance, and implementation of MPSAS.
GASAC is the committee responsible for the deliberation of the draft MPSAS standards. GASAC is represented by various stakeholders in the industry, being the representatives of the state treasury, ministry of finance, Auditor General’s Office, institutions of higher learning, Malaysian Institute of Accountants (“MIA”), Malaysian Accounting Standards Board (“MASB”), and accounting bodies such as Association of Chartered Certified Accountants (“ACCA”), Malaysian Institute of Certified Public Accountants (“MICPA”), and CPA Australia.
ACSC is one higher-up committee than GASAC which deliberate, approves and endorses the recommendations made by GASAC on the draft MPSAS standards. ACSC is chaired by the Accountant General of Malaysia and its members comprise senior directors of AGD and Chief Accountants of Federal Ministries.
What is the development process of MPSAS
Similar to the financial reporting frameworks issued by MASB which are based on the international financial reporting standards – International Financial Reporting Standards (“IFRS”) and IFRS for Small and Medium Enterprises (“IFRS for SMEs”) issued by the International Accounting Standards Board (“IASB”), MPSAS financial reporting framework is also developed and drawn from an international financial reporting standard. MPSAS financial reporting framework is drawn primarily from the International Public Sector Accounting Standards (“IPSAS”) issued by the International Public Sector Accounting Standards Board (“IPSASB”), an independent standard-setting body under IFAC.
GASAC will consider IPSAS standards issued by IPSASB for adoption in the Malaysian context. MPSAS standards are not exactly the same or similar to the requirements in IPSAS as certain requirements are either amended or changed for local adoption. Nevertheless, AGD takes the position to maintain, to a large extent, the accounting requirements and original text of IPSAS unless there is a significant public sector issue and local legislation which warrant a departure from IPSAS. This will only be done upon consultation with various stakeholders. Normally, the last page of each MPSAS standard will state the comparison of MPSAS standard with its IPSAS equivalent, including an explanation or reason for such departure. So, this is how and where you will be able to understand the differences.
Who are the users of MPSAS
In Accounting 101: Financial Reporting Frameworks in Malaysia, we have explained that MPSAS is used by public sector entities, other than Government Business Enterprises (“GBEs”). In fact, in that article, we have also explained that GBEs are entities with the following 5 characteristics:
- An entity with the power to contract in its own name;
- Has been assigned the financial and operational authority to carry on a business;
- Sells goods and services, in the normal course of its business, to other entities at a profit or full cost recovery;
- Is not reliant on continuing government funding to be a going concern (other than purchases of outputs at arm’s length); and
- Is controlled by a public sector entity.
These characteristics are based on the old definition of GBE issued in IPSAS. The GBE term is, however, has been deleted in IPSAS and IPSAS has instead defined the term “public sector entities”. Under IPSAS, public sector entities are defined as entities that meet all of the following criteria:
- Are responsible for the delivery of services to benefit the public and/or to redistribute income and wealth;
- Mainly finance their activities, directly or indirectly, by means of taxes and/or transfers from other levels of government, social contributions, debt or fees; and
- Do not have a primary objective to make profits.
Accordingly, entities which do not meet the above criteria shall not apply IPSAS. This amendment is, however, not yet taken up in MPSAS.
List of MPSAS standards issued to-date
At the time this article is written, there are 35 MPSAS standards issued by the AGD. Out of these 35 standards, 3 standards were superseded by the more recent MPSAS standards. Accordingly, MPSAS standards which are effective, excluding the superseded standards are as follows:
- MPSAS 1 Presentation of Financial Statements
- MPSAS 2 Cash Flow Statements
- MPSAS 3 Accounting Policies, Changes in Accounting Estimates and Errors
- MPSAS 4 The Effect of Changes in Foreign Exchange Rates
- MPSAS 5 Borrowing Costs
- MPSAS 9 Revenue from Exchange Transactions
- MPSAS 11 Construction Contracts
- MPSAS 12 Inventories
- MPSAS 13 Leases
- MPSAS 14 Events After the Reporting Date
- MPSAS 16 Investment Property
- MPSAS 17 Property, Plant and Equipment
- MPSAS 19 Provisions, Contingent Liabilities and Contingent Assets
- MPSAS 20 Related Party Disclosures
- MPSAS 21 Impairment of Non-Cash-Generating Assets
- MPSAS 22 Disclosure of Financial Information
- MPSAS 23 Revenue from Non-Exchange Transactions (Taxes & Transfers)
- MPSAS 24 Presentation of Budget Information in Financial Statements
- MPSAS 25 Employee Benefits
- MPSAS 26 Impairment of Cash-Generating Assets
- MPSAS 27 Agriculture
- MPSAS 28 Financial Instruments: Presentation
- MPSAS 29 Financial Instruments: Recognition and Measurement
- MPSAS 30 Financial Instruments: Disclosure
- MPSAS 31 Intangible Assets
- MPSAS 32 Service Concession Arrangements: Grantor
- MPSAS 33 First-Time Adoption of Accrual Basis MPSASs
- MPSAS 34 Separate Financial Statements
- MPSAS 35 Consolidated Financial Statements
- MPSAS 36 Investments in Associates and Joint Ventures
- MPSAS 37 Joint Arrangements
- MPSAS 38 Disclosure of Interest in Other Entities
MPSAS standards are available on AGD’s website – Malaysian Public Sector Accounting Standards (MPSAS) for reference. You will note that some of the standards above are public sector-specific, namely MPSAS 21, MPSAS 23, and MPSAS 24. This is because the specific nature of the public sector itself requires specific standards to address those areas, which are not applicable or available in the private sector.
List of IPSAS standards yet to be adopted
If you are wondering whether there are any other standards issued by IPSASB but yet to be adopted by AGD, the answer to this is yes. The following list is the IPSAS standards that are yet to be adopted:
- IPSAS 18 Segment Reporting
- IPSAS 39 Employee Benefits
- IPSAS 40 Public Sector Combinations
- IPSAS 41 Financial Instruments
- IPSAS 42 Social Benefits
We hope you now have a quick overview on MPSAS. In our upcoming articles, we will discuss the differences between MPSAS, MPERS, and MFRS on a high-level basis. In the meantime, please enjoy other articles in the Financial Accounting section.