Saturday, September 24

Still early to determine IAS 23’s real impact on developers’ earnings

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KUCHING: It is still early to determine the impact of IAS 23 on Malaysian developers, analysts opine, following a meeting organised by the Securities Commission (SC) which addressed the matter.

The IFRS Interpretations Committee (IFRIC) had in March 2019 issued an Agenda Decision on IAS 23 Borrowing Costs relating to over time transfer of constructed good.

According to the Malaysian Accounting Standards Board (MASB), in ensuring consistent application of the Malaysian Financial Reporting Standards, which are word-for-word the IFRS Standards, the MASB has decided that an entity shall apply the change in accounting policy as a result of the Agenda Decision on IAS 23 Borrowing Costs to financial statements of annual periods beginning on or after July 1, 2020.

“Developers are still assessing the effect on the change in accounting policy, therefore it is still early to determine the real impact to earnings,” AmInvestment Bank Bhd (AmInvestment Bank) said.

“Although initial rough estimates suggested the new approach will reduce the financial year 2020 to 2021 (FY20-FY21) bottom line by between 10 per cent and 20 per cent, we are not making changes to our earnings forecasts at this juncture pending further information from the developers.”

AmInvestment Bank noted that the new implementation is only a timing difference in recognising the borrowing costs and shall have no impact on cash flows.

“Hence, we are keeping our valuations unchanged no matter how much revision to be made into our earnings forecasts in the future.”