What’s next for Private Entities – MPERS or MFRS?
September 2016
Specialised
activities
Agenda
Accounting for specialised activities

Agriculture

Property development

Service concession
arrangements

Extractive activities
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
© 2016 KPMG, a partnership established under
Malaysian law and a member firm of the KPMG
network of independent member firms affiliated with
KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
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What’s next for Private Entities – MPERS or MFRS?
September 2016
Biological assets
Common accounting practices for the plantation industry
A living animal or plant
(other than harvesting unmanaged sources such as ocean fishing and deforestation)
Measurement of biological assets
(a) Capital maintenance method
New planting costs are capitalised and not
amortised. Replanting costs are charged to profit
or loss when incurred.
(b)Cost amortisation method
Initial and subsequent costs are capitalised and
amortised.
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independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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2
Accounting for biological assets
Initial and subsequent measurements
 At fair value less costs to sell.
 Unless fair value cannot be readily
determinable without undue cost or
effort, then measure at cost less
accumulated depreciation and
impairment loss.
 Gain or loss on initial recognition
is recognised in profit or
loss (or retained earnings
for first-time adopter).
 Subsequent changes in fair value less
costs to sell are recognised in profit or
loss.
© 2015 KPMG, a partnership established under Malaysian law and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
3
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network of independent member firms affiliated with
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What’s next for Private Entities – MPERS or MFRS?
September 2016
Case Study 1
Readily determinable without undue cost or effort
 Company A cultivates slow-growing hardwood timber trees.
 Company A maintains detailed management records and costing.
 Based on historical records that have been adjusted for recent trends,
management forecasts expected future income and expenses by
species of tree harvested.
 The forecasts help management to determine which species should
propagate and manage for harvest in the future.
 Active market does not exist.
Cost

Fair value
Historical records are available - fair value can be readily determinable
without undue cost or effort.
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independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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4
Case Study 2
Readily determinable without undue cost or effort
 Same facts as per Case Study 1.
 Company A has recently begun cultivating plantation timber in a new
jurisdiction where it operates.
 The environment conditions in the jurisdiction are different from those
in other areas.
 Management has not forecasted the future income and expenses by
species of tree harvested.
 Active market does not exist.
Cost

Fair value
Significant unknown factors – fair value is not readily determinable
without undue cost or effort.
© 2015 KPMG, a partnership established under Malaysian law and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
5
© 2016 KPMG, a partnership established under
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network of independent member firms affiliated with
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What’s next for Private Entities – MPERS or MFRS?
September 2016
Accounting for agricultural produce
MPERS Section 34
PERS
 Measure at the lower of cost
and net realisable value.
 Initial measurement
Measure at fair value less costs to
sell at the point of harvest. This
becomes the cost of the inventories
at that date for application of
Section 13, Inventories.
 Subsequent measurement
Lower of cost and estimated selling
price less costs to complete and
sell, in accordance with Section 13,
Inventories.
Input cost of
other inventories
may be affected
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independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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6
Hierarchy for determining fair value
• Use quoted price in the active market.
Active
market
• Note: If an entity has access to different active
markets, the entity uses the price existing in the
market it expects to use.
• Use most recent market transaction price, provided no
significant change in economic circumstances
between the date of that transaction and the end of
the reporting period.
No active
market • Use market prices for similar assets with adjustment
to reflect differences.
• Use sector benchmarks.
© 2015 KPMG, a partnership established under Malaysian law and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
7
© 2016 KPMG, a partnership established under
Malaysian law and a member firm of the KPMG
network of independent member firms affiliated with
KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
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What’s next for Private Entities – MPERS or MFRS?
September 2016
Disclosures under MPERS
Description of each class of biological assets
Cost
method
Fair value
model
√
√
Method and significant assumptions applied in
determining fair value
√
Reconciliation of changes in the carrying amount
between the beginning and the end of current
period
√
Explanation of why fair value cannot be
measured reliably
√
Depreciation method used
√
Useful lives or the depreciation rates used
√
Gross carrying amount and accumulated
depreciation at the beginning and end of the
period
√
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independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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8
Transition to MPERS
Cost model
Removal of cost
that cannot be
capitalised, e.g.
borrowing cost
Fair value
model
Perform fair
valuation
Cost
amortisation
model
Capital
maintenance
model
Cost model
Determine the
cost of the
biological asset
Opening
balance of
carrying
amount
Amortise the
cost until the
date of
transition
Other issues to consider:
• What if the plantation was bought from a third party?
• How is the cost of the biological assets going to be reconstructed?
© 2015 KPMG, a partnership established under Malaysian law and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. Printed in Malaysia.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
9
© 2016 KPMG, a partnership established under
Malaysian law and a member firm of the KPMG
network of independent member firms affiliated with
KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
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What’s next for Private Entities – MPERS or MFRS?
September 2016
Transition to MPERS
Significant impact expected on biological assets
Retrospective adjustments
 No transition exemption provided for first-time adopter.
 Apply requirements retrospectively at the date of
transition.
 Significant impact on earnings reporting.
 If applying fair value model, need to fair value biological
assets for the opening balances at the date of transition
and closing balances for comparative period.
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independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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10
Key differences with MFRS
Biological assets
Bearer
biological
assets
Plants
MFRS 116 apply,
except for
produce
growing thereon
Cost
– depreciation
model
Consumable
biological
assets
Others
Agricultural produce
Revaluation
– depreciation
model
Continue to
apply MFRS
141
Fair value
unless clearly
unreliable
Produce of
the bearer
plant will still
need to be fair
valued
© 2015 KPMG, a partnership established under Malaysian law and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. Printed in Malaysia.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
11
© 2016 KPMG, a partnership established under
Malaysian law and a member firm of the KPMG
network of independent member firms affiliated with
KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
Printed in Malaysia.
What’s next for Private Entities – MPERS or MFRS?
September 2016
Agenda
Accounting for specialised activities

Agriculture

Property development

Service concession
arrangements

Extractive activities
Revenue recognition by property developers in Malaysia
PERS
MASB 32
=
MPERS
Section 34
Except
borrowing
cost
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independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. Printed in Malaysia.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
13
© 2016 KPMG, a partnership established under
Malaysian law and a member firm of the KPMG
network of independent member firms affiliated with
KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
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What’s next for Private Entities – MPERS or MFRS?
September 2016
Property development activities under MFRS
NOW
1 Jan 2017
Revenue
recognition
IC 15, Agreements for the
Construction of Real Estate
New revenue standard, MFRS 15,
Revenue from Contracts with
Customers
Inventories
MFRS 102, Inventories
MFRS 15, Revenue from Contracts
with Customers and MFRS 102,
Inventories
Property, plant and equipment OR
Investment property OR Inventory
Property, plant and equipment OR
Investment property OR Inventory
Land held for
development
KPMG Malaysia
publication
A new era without
FRS 201
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14
Property development
Key differences between MPERS and MFRS
MPERS
Subsequent
measurement
 Borrowing costs
cannot be
capitalised.
MFRS
 Borrowing costs
that are directly
attributed to
construction are
capitalised.
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independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. Printed in Malaysia.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
15
© 2016 KPMG, a partnership established under
Malaysian law and a member firm of the KPMG
network of independent member firms affiliated with
KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
Printed in Malaysia.
What’s next for Private Entities – MPERS or MFRS?
September 2016
Agenda
Accounting for specialised activities

Agriculture

Property development

Service concession
arrangements

Extractive activities
Recognition and measurement
MPERS
• Financial asset model
• Intangible asset model
© 2015 KPMG, a partnership established under Malaysian law and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. Printed in Malaysia.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
17
© 2016 KPMG, a partnership established under
Malaysian law and a member firm of the KPMG
network of independent member firms affiliated with
KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
Printed in Malaysia.
What’s next for Private Entities – MPERS or MFRS?
September 2016
What are service concession arrangements?
Government
or public
sector
Private
sector
Public infrastructure
• Develop or upgrade
• Operate and maintain
Common features:
The grantor controls or regulates what
services the operator must provide using the
assets, to whom, and at what price, and also
controls any significant residual interest in
the assets at the end of the term of the
arrangement
Does not provide
guidance on
accounting by grantor
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18
Example
Construction
phase
0
Operation
phase
Year 5
Year 30
Service
Construct a road
Operate and maintain a road
Cash inflow
None
Road tolls
Cash outflow
Construction costs
Operating costs
What kind of asset should the
operator recognise?
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independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
19
© 2016 KPMG, a partnership established under
Malaysian law and a member firm of the KPMG
network of independent member firms affiliated with
KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
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What’s next for Private Entities – MPERS or MFRS?
September 2016
Construction phase
Operator does not recognise concession infrastructure as its
property, plant and equipment (“PPE”)

Operator does not control the infrastructure
Dr ???
Cr Revenue for the construction
Financial asset
 to the extent that it has an
unconditional right to receive
cash irrespective of usage of
the infrastructure
 initially measured at fair value
XXX
XXX
Intangible asset
AND/
OR
 to the extent it receives a right
to charge users
 initially measured at fair value
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independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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20
Financial asset vs. Intangible asset
Test your knowledge
What asset should the operator recognise in these cases?
Grantor pays operator a fixed amount that does not
depend on usage of infrastructure
Financial asset
Users pay operator for use of infrastructure
Intangible asset
Grantor pays operator according to the use of the
infrastructure (“shadow tolls”)
Intangible asset
Users pay operator for the use of infrastructure, and
Grantor pays short between actual revenue and
predetermined level (“shortfall guarantee”)
Financial asset
or
Both FA & IA
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independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
21
© 2016 KPMG, a partnership established under
Malaysian law and a member firm of the KPMG
network of independent member firms affiliated with
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What’s next for Private Entities – MPERS or MFRS?
September 2016
Operation phase
Operation revenue is accounted for in accordance with Section 23,
Revenue
Financial asset
Intangible asset
payments received are
allocated between pay
down of the financial asset
and compensation for
operation services.
charge users charges for
use of the infrastructure are
recognised in revenue as
earned.
Construction Phase
Operation Phase
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22
Transition to MPERS
Date of transition
e.g. 1 January 2015
New arrangements
 Apply prospectively
Service concession arrangement
 entered before the date of transition
and ends after the date of transition
Continue to use its existing accounting
treatment
 entered after the date of transition
and ends after the date of transition
Apply prospectively to
service concession
arrangement
Apply the financial asset
model and/or intangible
asset model
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independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. Printed in Malaysia.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
23
© 2016 KPMG, a partnership established under
Malaysian law and a member firm of the KPMG
network of independent member firms affiliated with
KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
Printed in Malaysia.
What’s next for Private Entities – MPERS or MFRS?
September 2016
Agenda
Accounting for specialised activities

Agriculture

Property development

Service concession
arrangements

Extractive activities
Recognition and measurement
Expenditure incurred on
acquisition or
development of tangible
or intangible assets used
in extractive activities
Obligation to dismantle
or remove an item, or to
restore the site
Apply MPERS Section
17, Property, Plant
and Equipment and
Section 18, Intangible
Assets
Apply MPERS
Section 17, Property,
Plant and Equipment
and Section 20,
Provisions and
Contingencies
© 2015 KPMG, a partnership established under Malaysian law and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. Printed in Malaysia.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
25
© 2016 KPMG, a partnership established under
Malaysian law and a member firm of the KPMG
network of independent member firms affiliated with
KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
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What’s next for Private Entities – MPERS or MFRS?
September 2016
Transition to MPERS
Transition exemption
 May elect to measure oil and gas assets at the amount
determined under the PERS at the date of transition,
provided the first-time adopter used full cost accounting
under PERS.
 Shall test those assets for impairment at the date of
transition.
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independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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26
MFRS standards related to extractive activities
MFRS contains the following
industry specific standard and
interpretation:
 IFRS 6, Exploration for and Evaluation of Mineral
 IFRIC 20, Stripping Costs in the Production
Phase of a Surface Mine
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independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
27
© 2016 KPMG, a partnership established under
Malaysian law and a member firm of the KPMG
network of independent member firms affiliated with
KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
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What’s next for Private Entities – MPERS or MFRS?
September 2016
End of
Specialised
activities
© 2016 KPMG, a partnership established under Malaysian law and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed
in Malaysia.
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon
such information without appropriate professional advice after a thorough examination of the particular situation.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as
of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
© 2016 KPMG, a partnership established under
Malaysian law and a member firm of the KPMG
network of independent member firms affiliated with
KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
Printed in Malaysia.