Accounting Standards

The Malaysian Accounting Standards Board (MASB) defines fair value reporting in its published Financial Reporting Standards (FRS) No. 132, Financial Instruments: Disclosure and Presentation, which requires disclosure of information about fair value of financial assets and liabilities. If for any reason fair value disclosure is not practicable, this needs to be disclosed along with information about the principal characteristics of the specific financial instrument. FRS 132 is in line with International Accounting Standard No. 32 of the International Accounting Standards Board.

Malaysian investors classify investments in bonds as either "Dealing securities" or "Investment securities." Dealing securities are marketable securities held with the intention of trading in the short term. Investment securities are securities held to maturity. Dealing securities are stated at the lower of cost and market value. Investment securities are stated at cost adjusted for amortization of premium and accretion of discount. As required under FRS 132, fair value or mark-to-market values of investments are disclosed and usually reported in “Management’s Discussion & Analysis of Financial Performance” section.

Exposure Draft 35 (revised), issued in December 2004 by MASB, is similar to International Accounting Standard No. 139, which deals with mark-to-market for financial instruments.

In October 2004, Bank Negara Malaysia (BNM) revised its disclosure requirements for banks to align them with international accounting standards. Effective 2005, BNM’s Guidelines on Financial Reporting for Licensed Institutions requires licensed institutions to classify debt securities investments as held-to-maturity, available-for-sale, and held-for-trading. Available-for-sale and held-for-trading securities are measured at fair value (mark-to-market), while held-to-maturity securities are measured at amortized accreted cost using the effective interest rate method.

Investment Funds

The Securities Commission published its Guidelines on Unit Trust Funds to govern operation and administration of Malaysian unit trust funds. They require daily valuations of selling and repurchase prices of unit trust funds.
Schedule D of the Guidelines on Unit Trust Funds require NAV calculation to be based on market price, and if not available, based on fair value. Fair value methods should be verified by a fund auditor, approved by the trustee, and disclosed in the fund prospectus.

Capital Adequacy Regulations

Since 2004, mark-to-market is used by financial institutions in determining capital adequacy ratios. For selling and repurchase prices, Malaysia is adopting a two-phased approach for implementing Basel II beginning January 2008.