One economic region, one accounting framework

By Josephine Adrienne A. Abarca
Business World (02/10/2014 – p.S1/6)

BUSINESS is at the forefront of globalization with markets becoming more interconnected, investors gaining a more sophisticated worldview, and foreign investments becoming more expansive. The nature of competition is also changing, with companies increasingly doing cross-border offerings. Domestic companies now find themselves competing with both local counterparts and international companies — underscoring the need for reliable and comparable financial information. This necessity becomes even more pressing with the Association of Southeast Asian Nations (ASEAN) Economic Community (AEC) on the horizon.

Adopting a high-quality and consistent set of accounting standards is vital for companies in the ASEAN member states if they wish to remain competitive. A look at the accounting standards adopted by the various member states shows a single theme: that these standards are based (for the most part) on the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Some were based on the old International Accounting Standards (IAS), the forerunner of the current IFRS.

The IASB is actively pushing for the global adoption of the IFRS. Based on surveys conducted by the IASB, more than 100 countries have either already adopted or committed to adopt IFRS as the single set of global accounting standards.

With the push towards global IFRS adoption and the need to have a single set of accounting standards in the ASEAN, how are the ASEAN member states faring in terms of the adoption of and compliance with the IFRS?


Brunei announced that it would fully adopt IFRS as issued by the IASB by Jan. 1, 2014. Initially, full IFRS adoption will only be required for entities with public accountability such as banks, financial institutions, insurance companies and takaful companies (those that are similar to mutual insurance companies).

Cambodia’s accounting standards, the Cambodian Financial Reporting Standards (CIFRS), are aligned with IFRS with no modifications. CIFRS is required for listed entities; however, mandatory adoption for banks, insurance companies and microfinance institutions has been deferred to Jan. 1, 2016.

Indonesia’s Indonesian Financial Accounting Standards (IFAS) are based on the IFRS that were effective Jan. 1, 2009, with some modifications. Indonesia’s approach is to gradually converge the IFAS with the IFRS.

Laos plans to fully adopt IFRS this year. This will cover listed companies or companies that are in the process of being listed.

Malaysia has already fully converged its Malaysian Financial Reporting Standards with the IFRS. With the exception of Transitioning Entities (TEs), all non-private entities were mandated to adopt these standards for annual periods beginning on or after Jan. 1, 2012. TEs are the entities that are subject to the application of MFRS 141, Agriculture, and/or the Malaysian Interpretation 15, Agreements for Construction of Real Estate.

Myanmar uses the Myanmar Financial Reporting Standards (MFRS) and Myanmar Accounting Standards (MAS), which are identical to the IFRS issued as of end-2010. Myanmar plans to update these standards to capture subsequent issuances of the IASB.

Singapore uses the Singapore Financial Reporting Standards (SFRS). To date, Singapore has adopted most of the IFRS (as SFRS). Singapore has yet to adopt the amendments to IFRS 10, Consolidated Financial Statements, and IFRS 12, Disclosure of Interests in Other Entities, on investment entities and IFRS 9, Financial Instruments.

Thailand’s Thai Accounting Standards (TAS) are based on the 2009 version of IFRS. TAS excludes industry-specific IFRS such as IFRS 4, Insurance Contracts, and IAS 41, Agriculture, and the standards on financial instruments — IAS 32, Financial Instruments: Presentation; IAS 39, Financial Instruments: Recognition;IFRS 7, Financial Instruments: Disclosures; and IFRS 9. Thailand plans to complete adoption of IFRS by 2016.

Vietnamese listed companies are required to use the Vietnamese Accounting Standards, which are based on the IAS issued up to 2003. However, IFRS is required for state-owned banks and permitted for commercial banks.

In the Philippines, the convergence with IFRS has been progressing well since 1997, when the country began to move towards IFRS. By 2005, we had fully adopted IFRS, which were renamed Philippine Financial Reporting Standards (PFRS). New and amended IFRS issued by the IASB thereafter were also adopted. The only exception to this is the deferral of IFRIC 15, Agreement for Construction of Real Estate. Except for small- and medium-sized entities and micro-entities (as defined by the Philippine Securities and Exchange Commission), all companies are required to comply with PFRS.


Based on the above, it would seem that some ASEAN member states are ready or almost ready for full IFRS adoption in time for, or shortly after, the 2015 ASEAN integration. On the other hand, it cannot be denied that other member states still have a long way to go in this aspect. However, it is very encouraging to see how we and our close neighbors are working to standardize accounting standards across the region.

Ultimately, implementing IFRS fully across the region will increase transparency and credibility for firms in the ASEAN. It will also increase global competitiveness as financial results become more acceptable and comparable, resulting in more consistent information made available to capital markets and decision makers.

We should also consider how important adopting IFRS will be to Philippine accounting professionals. By gaining mastery of IFRS, practitioners can elevate themselves to regional-level (and even global-level) competence and can expand their services to other countries. We have always believed that the Filipino accountant is of world-class caliber. With the upcoming ASEAN economic integration, we will soon have even more opportunities to prove this claim.

Josephine Adrienne A. Abarca is the head of the accounting standards group of SGV & Co.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.