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  2. Formation of companies: • MA and AA are prepared by the companies and upon the alteration of AA under Sec 31 (1) of Companies Act AA are freely altered or added, but special resolution is also required. • Both MA and AA need to be signed by at least two persons who are to be the first directors of the proposed company • Submit both documents together with the appropriate fee (based upon the amount of authorized capital) • Lodged with registrar of companies, ROC will issued the certificate to commence business (public company) and certificate of incorporation (private company)

  3. General Reporting Requirements of Public Listed Company: • SC: Half yearly financial statements, preliminary financial statements, other interim and periodic financial reports, final audited financial statements within 14 days after AGM. • KLSE: Half yearly financial statements & preliminary financial statements, final audited financial statements.

  4. ROC: final audited financial statements • Director General of Inland Revenue: final audited financial statements • Financial Statements drawn up to show true and fair view and comply with Approved Accounting Standards

  5. Unlisted public company • Financial Statements drawn up to show true and fair view and comply with Approved Accounting Standards • ROC: final audited financial statements handed over to ROC within 6 months on financial year-end. • Director General of Inland Revenue: final audited financial statements • SC : comply with corporate disclosure policy

  6. Private company • Financial Statements drawn up to show true and fair view and comply with Approved Accounting Standards • ROC: final audited financial statements handed over to ROC within 6 months on financial year-end. • Director General of Inland Revenue: final audited financial statements

  7. INFORMATION DISCLOSURE OF COMPANIES Depends on type of company (public, private or exempt private, listed or unlisted) Revised: Requirements for each company by relevant bodies.  **For this course we will concentrate on financial information namely financial statements, without ignoring other specific information that need to be disclosed by companies.

  8. General Purpose Financial statements Objective of a general purpose financial statements: (FRS 101, para 7) • Provide information about financial position, performance and cash flows of an enterprise that is useful to a wide range of users in making economic decisions  • Show the results of management stewardship of the resources entrusted to it. • It provides information about assets, liabilities, equity, income, expenses, and cash flows.

  9. There are 2 different sets of financialstatements:prepared for… • internal users and • preparation of external users or in other words, published financial statements which are governed by Companies Act, Accounting Standards (* accounting standards refer to MASB's, adopted IAS's, Technical Release, Statement Of Principle.)

  10. FS Consists of: (FRS 101- para.8) • income statement (profit & loss account) for the financial year ended (s.169(1)) • balance sheet as at the end of financial year (s.169(3)) • cash flow statement for the year ended • changes in equity / changes in equity other than those arising from capital transactions with owners and distribution to owners; (s.169(6)(e)) • accounting policies and explanatory notes

  11. General principles of financial statements (FRS 101) • (p.13) True and fair presentation- can be achieved through compliance with accounting standards. • (p.14) Compliance or non compliance with accounting standards should be disclosed. • (p.16) Inappropriate accounting policies are not rectified either by disclosure of the accounting policies used or by notes or explanatory material.

  12. Accounting policies • should follow specific requirements in standards. • If not, develop own policy with the following characteristics; • relevant, reliable (faithful representation of result and financial position, reflect economic substance, free from bias, prudent, complete in all material respects)

  13. (P.23) Going concern - certainties of ability to continue as a going concern should be disclosed. • Financial statement should be prepared on a going concern basis unless management intends to liquidate or cease trading. (P.25) Accrual basis of accounting – Financial statement is prepared according to accrual basis except for cash flow statement. (P.27) Consistency of presentation – Presentation and classification should be retained unless significant change in nature of company's operation OR change is requirement by other accounting standards.

  14. (P.29) Materiality & aggregation - Material items should be presented separately. • Immaterial items should be aggregated with amounts of similar nature and need not shown separately. • Materiality depends on size and nature. (P.) Offsetting- is not allowed unless permitted by FRS. OR the items (gains, losses) arise from similar transactions are immaterial. (P.36) Comparative information – should not be shown unless permitted by MASB to provide better understanding of current period's financial statements. Included in narrative and descriptive information.

  15. Identification of the Financial Statements : para.44-48 • Identification of financial statements- Should be clearly identified and distinguished from other information in same published documents (i.e. annual report) • For proper presentation, the following should be disclosed; name of company, coverage for individual company / group company, balance sheet date • AND period covered by financial statements, reporting currency, level of precision used in presentation of figures

  16. para. 49-51 • Reporting period – should be one year unless other period, state reason and the fact that comparative amounts are not comparable. para. 52 • Timeliness – usefulness is impaired if not available to users within six months of balance sheet date. • Besides financial statements, directors have to disclose other information including; directors' report (s.169(5,6)), statutory declaration by a director (s.169(16)),auditors‘ report (s.174(2,6)) which are included in annual reports of companies.


  18. CAPITAL STRUCTURE • AUTHORISED/NOMINAL/REGISTERED CAPITAL • The total amount of capital with which the company is registered • Must be stated in the MA • Amount issued must not exceed the total authorised capital • May comprise of more than one class of share • PAR OR NOMINAL VALUE • Face value attached to each unit of share • The price that the company will charge for each share in its initial issue of share

  19. Continue…. • ISSUED CAPITAL • Part of nominal capital which has been issued to the public for cash or for other consideration • May either be partly or fully paid • UNISSUED CAPITAL • The different between the nominal and the issued capital • CALLED UP CAPITAL • The amount of money that the company has called up on the issued capital which the subscribers are required to pay within a specified time

  20. Continue…. • UNCALLED CAPITAL • The amount of money on the issued capital that has not been called. • PAID UP CAPITAL • The amount of called up capital that has been paid by the subscribers • UNPAID UP CAPITAL • The amount of the called up capital that the subscribers failed to pay when the money was called • Also referred to as call in arrears


  22. ORDINARY SHARES • Carries the right to vote. • Entitled to share dividends only after dividend, if any have been paid to the other classes of shares. • The rate of dividend is not fixed dependent upon the company’s level of profits and dividend policy.

  23. PREFERENCE SHARES • CUMULATIVE PREFERENCE SHARES • Receive a fixed dividend per annum. The prior year dividend can be carried forward and become payable in the future. • NON-CUMULATIVE PREFERENCE SHARES • Receive a fixed rate dividend only when the company has profit, however if dividend not declare for that year, it will be forfeited and cannot be carried forward. • PARTICIPATING PREFERENCE SHARES • In addition to fixed dividend, they entitle to receive additional dividends that expressed in the Article (in condition that all the other classes of shareholders have received their dividend)

  24. PREFERENCE SHARES • NON- PARTICIPATING PREFERENCE SHARES • These shareholders are not allowed to participate in the excess profit after all the other classes of the shareholders have been paid their dividends • REDEEMABLE PREFERENCE SHARES • Companies can repurchased shares from the shareholders at future date as pre-determined • Fixed rate of dividends • CONVERTIBLE PREFERENCE SHARES • Can convert the preferences shares to ordinary shares as express in Articles • The date and the rate of conversion will be specified.

  25. DEFERRED SHARES Also known as founder’s shares. Normally issued to founders /promoter The rights to dividend and return of capital come after right of ordinary shareholder

  26. LOAN CAPITAL (DEBENTURE/BOND) • Borrowing from public. • The document that issue for borrowings is called debenture. • Types: • Debenture stock • Bonds, • Notes • Other evidence of indebtedness of corporation for borrowed money.

  27. Fixed rate of interest on the nominal value of debentures regardless of profit made or not No voting rights Priority claim over shareholders Debenture interest is an expense Payment of dividends on ordinary shares is not compulsory Have voting rights Always the last priority Dividends are distribution of profits and shown in appropriation account Differences between Debentures (Loan capital) and Shares (Equity capital) Shares Debentures

  28. Charges over Debentures • Floating charge • Debentures are secured to a group of assets • Company may replace an asset from the group of assets charged with another asset • Fixed charge • A specific asset, such as property , is charged to the debentures • Company can use the asset in the normal course of business but will be unable to dispose of the asset