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Financial reporting convergence a challenge for Asean
Publication Date : 26-08-2013
As economies move towards converging to a single accounting standard, Asean as an economic bloc, may feel the brunt of this due to the different levels of development existing within each individual Asean country.
Speaking to Chen Voon Hoe, partner and accounting advisory leader at PwC Singapore, said that the stages of development within the region ranges from countries that are only just starting to open up, such as Myanmar, to highly developed, in the case of Singapore.
Due to the differences, companies within each county also vary, specifically on their information systems and the availability of data.
"As a result of that, if you try to adopt the International Financial Reporting Standards (IFRS) across Asean, it will be challenging, but the benefit will be great because of the common accounting language," said Chen.
One of the biggest benefits for converging to the IFRS is the attraction of more capital inflows as a trade bloc. By having a common accounting standard, investors who visit any country within the region would be able to get a set of IFRS-compliant financial statements. "So for example, a company in Myanmar would have consistent statements as the company in Singapore and so on," he said.
However the reality, according to Chen, is that a significant portion of the companies in Asean are made up of SMEs. "As a result, a large chunk of companies within an Asean country are SMEs as well," he said, adding that in Brunei while there is a national airlines, large banks and corporations, the majority of the companies in Brunei are SMEs.
Brunei is set to adopt the standards by January 2014. Initially, full adoption of the standards will be imposed on institutions with public accountability, such as banks, financial institutions, insurance and takaful companies.
Chen said that even now, while Asean countries are starting to comply with IFRS standard, there are still different regulators which makes the uniformity in the bloc a challenge. He said that the ultimate aim would be to have companies operate seamlessly across the region with a common financial language.
"It is getting there, a number of countries in Asean are adopting the standards, and changing it as well," he said.
In 2010, on the sidelines of the Asia-Pacific Economic Cooperation (Apec), Haslina Taib, CEO of BAG Networks, explained that at present, it was not a requirement for SMEs to prepare the books because most of them are sole traders. However, as they impact the public, the IFRS was seen as a necessary initiative to set some standards and framework in place, she explained.
"For private businesses, we don't actually have any standards in preparing books. So (this is) one of the areas that we, as a whole, want to push forward, without making it too rigid," she said.
"We need to make sure that businesses are able to do it based on structured, solid foundations. So they have books and standards that are comparable to other regions," she added.
Haslina said that an international accounting standard board was then working together with the Apec Business Advisory Council working group to ensure that the IFRS would be relevant to SMEs and prevent "over-disclosure" of information in the books.