Malaysian Financial Reporting Standards (“MFRS”) updates effective from 1 January 2024

MFRS 7 Financial Instruments:

SFA refers to an arrangement in which one or more finance providers offer to pay amounts an entity owes its suppliers. The entity agrees to pay according to the terms and conditions of the arrangement at the same date as, or a date later than, suppliers are paid. These arrangements often provide the entity with extended payment terms or provide early payment terms to the entity's suppliers compared to the related invoice payment due date.
New Disclosure Requirements: Terms and conditions of SFA, Carrying amount of Financial Liabilities, Payments already Received, Payment due dates and Non-cash changes.
These amendments are introduced due to an increased demand in transparency with regards to SFA.

Amendments are to satisfy the requirements in MFRS 15 to recognize the sales and leaseback as a sale. Without the new amendments, seller-lessee would recognize the gain on the right of use.
Under the initial recognition, seller-lessee determines “lease payments” or “revised lease payments” where there would be no gain or loss relating to the right of use which the asset is still retained by seller-lessee. Lease liability would have to be applied retrospectively in accordance with MFRS 108 to sale and leaseback transactions.

Presentation of current and non-current assets, and current and non-current liabilities is in accordance with 66-76B of the standard, except when liquidity based presentation provides a more reliable and relevant information.
Current liabilities that are held primarily for the purpose of trading and that are not due to be settled within twelve months are non-current liabilities subject to an entity’s right to defer settlement for at least twelve months after the date of reporting period. However, if the right to defer the liability is subject to the entity complying with covenants, where failure to comply would turn the liability to become repayable within twelve months after reporting period, would then result in the liability to be classified as a current liability instead of a non-current liability unless special circumstances are given.
Additional Disclosure Requirements: Information about the covenants including the nature and period the entity is required to comply, the carrying amount of related liabilities, and any other facts and circumstances.

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Cherryl Lim

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