full report tap

8/8/2019 Full Report Tap

1/46

ACCOUNTING THEORY & PRACTICE

1.0 INTRODUCTION

COMPANYS BACKGROUND

Sunway was incorporated on 26 January 1978 as an investment operations arm of one of

Malaysias most prominent and well-diversified conglomerate, the Sunway Group. Listed on the

Main Market of Bursa Malaysia Securities Berhad since 1984, Sunway started humbly as a local

tin-mining and quarrying company. Today, Sunways core businesses include construction,

property development, quarrying, trading and manufacturing, and building materials with

growing presence in various countries around the world (Figure 1). Each of Sunways

subsidiaries has synergistic alliances within the Group, strengthening its operations and

providing a strong platform upon which the Group can expand its presence over a multitude of

geographical areas. With this, Sunway is well positioned for long-term growth on the

international business arena. Be it transforming wasteland into thriving townships, pioneering

innovative construction methods or realising the aspirations of a fast developing nation and

establishing its connection with the rest of the world, Sunway is all about : Turning Vision into

Reality.

Since 1984, Sunway started humbly as a local tin-mining and quarrying company. Today,

Sunways core businesses include construction, property development, quarrying, trading and

manufacturing, and building materials with growing presence in various countries around the

world. Each of Sunways subsidiaries has synergistic alliances within the Group, strengthening

its operations and providing a strong platform upon which the Group can expand its presence

over a multitude of geographical areas. With this, Sunway is well positioned for long-term

growth on the international business arena. Be it transforming wasteland into thriving townships,

pioneering innovative construction methods or realising the aspirations of a fast developing

nation and establishing its connection with the rest of the world, Sunway is all about : Turning

Vision into Reality.

1


2/46


2

Figure 1: Sunways Core Business


3/46


2.0 ACCOUNTING THEORY

2.1 CORPORATE SOCIAL RESPONSIBILITY

Corporate social responsibility (CSR) also know as corporate responsibility, corporate

citizenship, sustainable responsible business (SRB), or corporate social performance is a form of

corporate self-regulation integrated into abusiness model. Ideally, CSR policy would function as

a built-in, self-regulating mechanism whereby business would monitor and ensure its support to

law, ethical standards, and international norms. Consequently, business would embrace

responsibility for the impact of its activities on the environment, consumers, employees,

communities, stakeholders and all other members of the public sphere. Furthermore, CSR

focused businesses would proactively promote the public interest by encouraging community

growth and development, and voluntarily eliminating practices that harm the public sphere,

regardless of legality.

Corporate responsibility (CR) is both a fundamental obligation and a full-time

commitment and the Group accords it the same goals and accountabilities as their other business.

The Sunway Group has taken this corporate philosophy a step further by infusing the best

practices into its CR programs. The main focal areas of Bursa Malaysias CSR Framework areMarketplace, Workplace, Environment and Community. These areas are the foundation pillars

that support the Groups CR program.

3
http://en.wikipedia.org/wiki/Corporate_citizenshiphttp://en.wikipedia.org/wiki/Corporate_citizenshiphttp://en.wikipedia.org/wiki/Corporatehttp://en.wikipedia.org/wiki/Self-regulationhttp://en.wikipedia.org/wiki/Business_modelhttp://en.wikipedia.org/wiki/Norm_(sociology)http://en.wikipedia.org/wiki/Stakeholder_(corporate)http://en.wikipedia.org/wiki/Public_spherehttp://en.wikipedia.org/wiki/Proactivehttp://en.wikipedia.org/wiki/Public_interesthttp://en.wikipedia.org/wiki/Corporate_citizenshiphttp://en.wikipedia.org/wiki/Corporate_citizenshiphttp://en.wikipedia.org/wiki/Corporatehttp://en.wikipedia.org/wiki/Self-regulationhttp://en.wikipedia.org/wiki/Business_modelhttp://en.wikipedia.org/wiki/Norm_(sociology)http://en.wikipedia.org/wiki/Stakeholder_(corporate)http://en.wikipedia.org/wiki/Public_spherehttp://en.wikipedia.org/wiki/Proactivehttp://en.wikipedia.org/wiki/Public_interest


4/46


A. Marketpalce

The first CSR Framework area is Marketplace, which divided by five issues:

1. Corporate Governance

Sunway commits to abide by the Malaysian Code on Corporate Governance released by

the Securities Commission of Malaysia. The group further strengthens its Corporate

Governance framework with the Enterprise Risk Management structure in place. This

structure is viewed as a process established by the Board of Directors and senior

management for planning, organizing, leading and controlling the activities of the

4

Figure 2: Sunways CSR Framework


5/46


Sunway. The board committees are also guided by clear terms of reference which lays the

foundation for operational excellence.

2. Stakeholder Engagement

Sunway endeavors to maintain its transparent culture through many channels of

communication with stakeholders which are:

i. Customers

Sunway construction division carries out annual customer satisfaction surveys. This

survey provides an avenue for clients and consultants to provide feedbacks on products and services. During the last survey 2008-2009, 86% of clients and

consultants responded with 92% of the respondents acknowledging that they were

satisfied with products and services provide by the division. Targets such as

customer satisfaction, zero defects, superior quality, competitive prices and timely

delivery are being reviewed regularly through customer feedback to gauge and

continuously improve the companys quality performance.

ii. Suppliers

Sunways construction division in Malaysia conducts annual supplier feedback

survey to gain a better understanding of supplier needs and concerns. As an

organization, proper supplier engagement is crucial for ensuring harmonious business

relationship. In the 2008-2009 survey, 93% of suppliers responded with an overall

score of 85% satisfaction. Through constant feedback and communication with

suppliers, best practices and processes can be implemented to sustain the supply

chain management for win-win results.

5


6/46


iii. Investors

Sunway ensures regular investor management is in place through its proactive

Investor Relations unit and its all rounded Investor Relations program. The Investor

Relations representatives of the Group strives to provide updated information of the

Groups activities and happenings in a timely manner through the various

communication channels with analysts, investors and shareholder such as group

meetings, one to one updates, road shows as well as conferences with analysts,

investors and shareholders.

3. Procurement Policy

The Groups procurement process is efficiently managed to ensure materials or services

purchased meet the requirements of clients and specifications of the established contracts.

The process is facilitated by the Groups in-house procurement function, which was

established to support and to meet the groups long term profitability objectives,

synergising expertise from various functions of the business units. With the strong

management of supplier base enabled by the Groups e-procurement system, the Group is

able to obtain materials or services from the most reliable sources in terms of quality,

pricing and timeliness of delivery. Best practices in sourcing are adopted to improve

supplier management, build knowledge and improve savings. This is accomplished

through the implementation of formal procedures, solicitation of quotations and

negotiation of agreements. The globalization of the Group's businesses against an

increasingly competitive operating environment necessitates the continuous reassessment

and redefinition of procurement's role within the Group.

4. Quality Certification

It can divide by two which is the certification and culture. The certification is when Total

Quality Management (TQM) is adopted Group wide. With constant focus on total

customer satisfaction, solutions are continually developed to meet and exceed clients

needs. The Group's construction division was one of the first construction groups in

6


7/46


Malaysia to receive the accreditation for MS ISO 9002:1994 quality standards by SIRIM

back in the year 1997. This certification has since been upgraded to adhere to the new

requirements adopted in the ISO 9001:2008. To date, the following companies within the

construction division have been certified with ISO 9001:

a) Sunway Construction Sdn Bhd

b) Sunway Engineering Sdn Bhd

c) Sunway Builders Sdn Bhd

d) Sunway Innopave Sdn Bhd

e) Sunway Concrete Products (S) Pte. Ltd

f) Sunway Geotechnics Sdn Bhd is in the process of obtaining certification.

While, for culture the Group's construction division was the first Malaysian construction

conglomerate to implement the Japanese concept of "kaizen" enterprise wide. Continuous

quality improvement initiatives implemented has resulted in waste reduction and

significant workforce productivity enhancement. These initiatives include Kaizen

Initiative:

a. Kaizen Site Walk

This activity is led by the senior management to carry out scheduled visit to

project sites to monitor the status of quality implementation of selected trades.

The participation of senior management as a role model leading by example has

accelerated knowledge sharing in continual improvement. Through this effective

sharing platform, participants would exchange views and share respective

experiences in handling quality and project management issues.

7


8/46


b. Small Group Activity

Small Group Activity is formed with the objectives to improve customer

satisfaction, reduce client complaints as well as reduce time and material wastage.

Members from cross-functional areas are grouped to study, analyze and

brainstorm the root causes of quality problems of the relevant trades and propose

preventive actions to prevent occurrences. Small Group Activity is guided and

carried out by the application of the plan-do-check-act approach.

5. Green Products

Three of the products supplied by the Group's building materials division which are

interlocking concrete pavers, compressed concrete paving slabs and cavite light weight

concrete panel was conferred the Green Label Certification by The Singapore

Environment Council in 2009. This recognises the division's efforts in producing

environmentally friendly products with a minimum usage of 20% recycled content.

8


9/46


B. Workplace

Secondly, CSR Framework area is Workplace, which divided by three issues:

1. Health and Safety

Sunway places paramount emphasis on the health and safety in its workplace. Its 4 level

Occupational Health and Safety Management System (OHSAS) which is of

comprehensive coverage and implementation applies to all employees of the Group. In

2001, the construction division obtained the OHSAS 18001:1999 accreditation in 2001

which was subsequently upgraded to OHSAS 18001:2007.Specific to the Groupsconstruction division in Malaysia, 3 Occupational Safety and Health (OSH) company-

wide objectives have been set up, guided by the Quality Environment Safety and Health

policy which includes:

To achieve 2.5 million man-hours without loss time accident company wide

To achieve a monthly inspection score of 70% and above

To strive towards a zero life loss at all work sites

Sunways construction division in Malaysia during the period under review has

successfully recorded a total of 8.6 million man-hours without loss time accidents and an

average inspection score of 86%. Initiatives to promote Environment, Safety and Health

(ESH) awareness include:

i. ESH training and awareness

ESH training and development programmes are constantly carried out to raise the

level of ESH awareness and knowledge of employees and subcontractors. This forms

the foundation of creating a ESH culture in the Group. Examples of programmes are

the Site Safety Supervisors (SSS) Training, Scaffold Awareness Training, First Aid

Training and Environmental Awareness Training.

9


10/46


ii. Standardisation of Safety Features

One of the key investments to continuously improve current practices is the

standardisation of jobsite safety features at all of the construction project sites.

Among the standardised safety features that were implemented include edge

protection, climbing safety enclosures, canopy walkways and safety signboards.

These are efforts at hazard controls to prevent falls and falling objects at jobsites.

2. Human Capital Development

The Group has implemented a holistic human capital development approach which

encompasses the identification (external and internal), development and retention of its

competent human capital. Strong leadership in the organisation is pivotal to drive the

human capital development approach. This approach is delivered through the Groups of:

i. Recruitment Strategy

The Sunways recruitment strategy is two-fold such as by external recruitment andsimultaneously by providing career opportunities to existing employees via internal

sourcing i.e. promotions, transfers, etc. The Groups participation in career fairs,

internship programmes and job shadowing initiatives are amongst the various

avenues to promote the brand externally. From within, rigorous process of

identifying and developing potential existing employees creates the pool of internal

candidates to fill vacancies across the Group. The Group adopts a more focused

effort to bring in young talents through its Institute of Chartered Accountants in

England & Wales (ICAEW) and Association of Chartered Certified Accountants

(ACCA) trainee programmes. The Group's management/graduate trainee

programmes i.e. Sunway Managerial Advancement for Recruited Talents (SMART)

recruits, trains and retains young graduates of excellent academic results and track

record of leadership capabilities into the organisation. The Group was appointed as

10


11/46


an Approved Training Organisation and accorded the Authorised Training Employer

(ATE) status by ICAEW. With this, the Group offers a rewarding career to aspiring

accountants and finance professionals.

ii. Managing for Excellence (MFE)

One of the Group's core values is "excellence". The MFE process i.e. a homegrown

performance management process sets the platform for driving excellence in

performance of all employees. Using MFE, performance expectations are agreed and

the managers are responsible to move the performance bar continuously, thereby

ensuring standards are raised to move the Group forward. Managers are trained to

provide coaching and feedback to engage employees to deliver their best. The

performance management derives performance rating that is used for reward and

recognition, promotion, talent development, succession planning, etc.

iii.Talent Management and Succession Planning

By reviewing employees' leadership and performance contribution, the Group has a

more focused approach in managing the different types of talent in the organisation.

The Annual Talent Review assists the Group to have a better perspective of its bench

strength by individual business units, functional areas, etc. There is a structured

process in place for succession planning across the Group which is conducted along

with the annual talent review.

iv.Learning and Development

Sizeable investments are put in to develop employees in areas of technical, soft and

leadership skills. Development of human capital is not done just through training but

through a blended learning approach which include learning by doing, reading,

11


12/46


coaching, mentoring, etc. In line with the nation call to cultivate a reading habit, the

Group Human Resource (GHR) Resource Center aims to do the same by offering

books, CDs, DVDs and magazines of various subjects to employees. A total of

23,008 training hours was invested from July 2008 to Dec 2009. Every employee has

an average of 16 training hours per year. One new initiative during the period was to

partner with Sunway University College and its highly reputable partner, Lancaster

University Management School, to design and deliver locally a high-class

management programme to managers to hone their management skills. The

Mentoring Programme is targeted at high potential and identified successors to

develop them further through transfer of tacit knowledge and experience by more

experienced senior management team members.

v. Coaching Culture and Communication

Sunway espouses strongly the importance of coaching to communicate and engage

with our workforce. All Sunway managers are required to coach and engage with

their employees be it to give direction, feedback of good and bad or to praise andrecognise. Managers and executives with direct reports are trained with coaching

skills to embrace a coaching leadership style with their direct reports. Whilst

coaching takes on a more direct engagement and communication with employees,

other means of communication are also essential to feed the information channel

within the Group. The Group's array of established and proven communication

platforms and tools include Town-hall meetings, Managers' Conferences, e-bulletins,

Sunway Portal, plasma insertions, short messaging services (SMS), Hang Loose

Nites, etc.

3. Work Life Balance

12


13/46


Sunway believes that sports and social activities foster closer ties amongst employees

thus enabling better rapport and work quality. This led to the formation of the Group's

sports club, "Kelab Sukan Sunway".Activities made possible through Kelab Sukan

Sunway include informative events like lunch talks featuring health and social topics,

recreational programmes that allows employees to let their hair down such as sports

tournaments, local and overseas vacation trips, car treasure hunts, informal get togethers

through the company's Family Day, Annual Dinner and Dance nights and festive charity

events.

C. Environment

Thirdly is Environment area when the Group is committed to being a sustainable organisation,

balancing economic, social and environmental goals while also protecting the needs of future

generations. It can divide by four issues which are:

i. Environmental Management System

Sunways construction division has documented an Environmental Management System

which provides foundation elements for effective management and implementation of

environmental practices. Trainings for various levels of staff and subcontractors were

carried out throughout the year to educate and create further awareness on environmental

responsibilities. A key milestone in 2009 is the achievement of ISO 14001 Environmental

Management System for Sunway Construction Sdn Bhd. This is an internationally

recognised standard for the establishment of an organisation's environmental management

system. This accreditation further emphasises its commitment to environment in itsbusiness. Since then, the construction division has also become the pioneer builder in

Malaysia to have the Building and Construction Authority of Singapore (BCA) Green

Mark Managers and Leadership in Energy and Environment Design (LEED) accredited

professionals as part of its team. LEED is the internationally accepted benchmark for

13


14/46


construction companies to use in the design, construction and operation of high

performance green buildings.

ii. Environment and Waste Management

Initiatives were identified and embarked on to achieve 3 core objectives towards better

environmental management under the construction division.

14


15/46


15


16/46


iii. Green IT

As the world's accelerating concerns over climate change and the sustainability of Planet

Earth has placed a spotlight on businesses and social circles to reduce carbon footprints,

the Group aims to make all IT aspects (operational, services and systems configurations)

support low energy consumption and a paper-less environment. In mid 2008, Sunway

undertook an exercise to identify and streamline current practices and energy usage to

embark upon a green savvy journey with objectives stated below:

iv. Recycling Programme

Sunway is dedicated in promoting a sustainable green environment for our future

generations of human capital. Its recycling programme have been a big hit with both

Sunway staff and various community stakeholders since it started in 2003. Temporaryrecycling facilities and centres are set up on a monthly basis, which now collects up to

350,000 kg of recyclable waste a year, a sizeable achievement to date, relative to the

collection of 56,056 kg in its first year of operation.

D. Community

16


17/46


Lastly is Community area, it has always been the Sunway's philosophy to continuously support

the local communities wherever it operates. Sunway has since the early days of its operations

been giving back to the society by reaching out to the needy. Sunway Group's unwavering

endeavour to contribute its profits to benefit the community as a whole was further

acknowledged when the Brand Laureate Societe Award for Philanthropy and Humanitarian

efforts was awarded to the Group in 2009. It can divide by four issues which are:

1. Education

The Sunway Education Trust Fund has been converted into the Jeffrey Cheah Foundation

for Education in March 2010. The ownership and equity rights of four of its learning

institutions are Sunway University College, Monash University Sunway Campus, JeffreyCheah School of Medicine and Sunway International School has been officially and

legally transferred to the Foundation for future safe governance by a Board of Trustees. It

will deploy funds solely for the benefit of students through reinvestment into expansion

of facilities, enhancement of research capabilities, and most notably, fund scholarship to

deserving and needy students. Furthermore, Sunway has contributed RM11 million to

public schools adaptation programme. Notable restorations and donations in 2009

include:

i.Sekolah Kebangsaan Convent Klang

SK Convent Klang underwent major restoration and repair works thanks to

resources sponsored by the Sunway. The project, costing RM1 million, was

implemented to ensure that the convent, which was built in 1924, remains a safe

and conducive studying environment for resent and future students.

ii. Sekolah Menengah Kebangsaan Bandar Sunway

The Sunway has been continuously assisting the school since 1995. In 2009, the

Group undertook upgrading and restoration work for the school hall, compound,

etc.

17


18/46


The Sunway also runs a Job Placement Programme endorsed by the Ministry of

Education, Malaysia to recognising that every person deserves a chance to feel a sense of

belonging and purpose in society. Special needs students from the Sunway-sponsored

SMK Bandar Sunway are trained on basic work-related skills and ethics. Upon

graduation, these students are presented with certificates of accomplishment to seek

employment, where they are able to progress as independent members of the societys

workforce.

2. External environment

Sunway launched the first Selangor Tourist Police Service Centre at Sunway Pyramid as

one of its continuous efforts to step up crime prevention in the city. This serves as a one-

stop centre to provide quick advice and solutions for tourists visiting Bandar Sunway.

Furthermore, the Police Service Centre also ensures that all tourists are safeguarded at all

times. The centre is opened from 10 am to 2 am and is equipped with the latest Police

Reporting System (PRS) to enable swift response to reports of crime as well as providing

assistance when required.

3. HealthcareOrganised in collaboration with Sunway Medical Centre and Pfizer, the Sunway Medical

Camp benefited 500 Bandar Sunway residents. The Medical Camp provided basic

healthcare checks and medical advice, free of charge. The event was fully manned by

volunteers, ranging from medical officers, nurses, lab technologists, Sunway employees

to students from SMK Bandar Sunway. Free basic medical services such as blood

pressure checks, cholesterol and diabetes examinations, as well as general counsel from

volunteer doctors and dieticians were provided.

18


19/46


4. Charity events

Sunway organises charity events annually to reach out to the underprivileged and

unfortunate ones. In 2009, Sunway held a charity event in conjunction with Malaysia's

Merdeka Celebration at the Lost World of Tambun, Perak that benefited 200 children

from 5 orphanages within the region of Perak and 3 rural schools in Penang. 200

volunteers from the Sunway Group up north, central to down south made the event

possible. All the children were treated to fun games and facilities within the theme park

plus a special goodie bag.

19


20/46


3.0 The conceptual framework and standard setting process

3.1 Conceptual framework

An accounting conceptual framework can be defined as:

a coherent system of inter-related objectives and fundamentals that should lead to consistent

standards that prescribe the nature, function and limits of financial accounting and financial

statements.

(AT Foulks Lynch)

However, it is easier to state what a conceptual framework should be, than to actually precisely

define it. There have been several attempts made to devise such a framework, most recently

(March 1999) the revised Exposure Draft Statement of Principles for Financial Reporting,

which is examined later in this article.

The main reasons for developing an agreed conceptual framework are that it provides:

a framework for setting accounting standards;

a basis for resolving accounting disputes;

Fundamental principles which then do not have to be repeated in accounting standards.

However, the main draw-back of a conceptual framework is that it can be too general in nature

and the principles may, therefore, not help when actually producing the financial statements. In

addition, there may be further disagreement as to the content of the framework and the contents

of standards.

20


21/46


What is included in the Conceptual framework?

The FASB has issued six Statements of Financial Accounting Concepts (SFAC) for business

enterprises. There are:

SFAC No. 1

Objectives of Financial Reporting by Business Enterprises" presents the goals and

purposes of accounting.

SFAC No. 2.

Qualitative Characteristics of Accounting Information" examines the characteristics that

make accounting information useful.

SFAC No. 6.

Elements of Financial Statements," defines the broad classifications of items found in

financial statements and replaces SFAC No. 3, expanding its scope to include not for

profit organizations.

SFAC No. 4.

Objectives of Financial Reporting for Non business Organizations" provides guidelines

for not-for-profit and governmental entities.

SFAC No. 5.

Recognition and Measurement in Financial Statements of Business Enterprises" giving

guidance on what information should be formally incorporated into financial statements

and when.

21


22/46


SFAC No. 1-Objectives of Financial Reporting by Business Enterprises"

The objectives of financial reporting by business enterprise are including the users of accounting

information and the objectives of financial reporting.

For the use of accounting information, the objective is it will show the present and potential

investors and creditor. It also defines the user as the average prudent user with a reasonable

understanding of economic and business situations.

For the objectives of financial reporting, it objectives is to provide information that is useful in

making rational investment, credit and similar decisions, to help users assess the timing and

uncertainty of cash flows and to provide information on economic resources, claims and changes

in them.

Based on Sunway Holding Bhd, the users of accounting information for Sunway Holding Bhd

can divided into two groups which are external user and internal user. The external users for the

Sunway Holding Bhd are shareholder, investor, customers, vendor, and supplier.

The Shareholder (investors) is the owners of a corporation. They use accounting

information in deciding whether to buy, hold or sell shares.

The customer for Sunway Holding Bhd is based on the geographical location of its

customers a large customer base spread over several majorcities.

The supplier for Sunway Holding Bhd As is crucial for ensuring harmonious business

relationship.

The internal users for the Sunway Holding Bhd are directors, managers, officers, audit

committees, controllers and also employees.

The director for the Sunway Holding Bhd are responsible in the preparation of the

Annual Audited Financial Statements to give a true and fair view of the state of affairs,

results and cash flows of the Company and of the Group at the end of the financial

period. In preparing the financial statements, the Directors will ensure that suitable

accounting policies have been applied consistently, and that reasonable and prudent

judgments and estimates have been made.

22


23/46


The objective of the Audit Committee is to assist the Board of Directors in fulfilling its

fiduciary responsibilities relating to internal controls, financial and accounting records

and policies as well as financial reporting practices of the Company and its subsidiaries.

Meanwhile, the objective of financial reporting in presenting the annual report and quarterly

announcement of results to shareholders, the Board aims to provide a balanced and

understandable assessment of the Groups financial position, performance and prospects. The

Board is assisted by the Audit Committee to oversee the Groups financial reporting processes

and the quality of its financial reporting. Financial reporting will provide information about

financial performance during a period and managements discharge of its stewardship

responsibility to owners.

SFAC No. 2. "Qualitative Characteristics of Accounting Information"

23


24/46


Concepts Statement identifies primary and secondary qualitative characteristics of accounting

information that distinguish better (more useful) information from inferior (less useful)

information for decision-making purposes. Its divided into two which are:

1. Primary Qualities

The primary qualities that make accounting information useful for decision making are relevance

and reliability.

Relevance.

Accounting information is relevant if it is capable of making a difference in a decision.

For information to be relevant it should have predictive or feedback value and it must be

presented on a timely basis. Based on Sunway Holdings Bhd estimates and judgments

used in preparing the financial statements are continually evaluated by the directors and

are based on historical experience and other factors, including expectations of future

events that are believed to be reasonable under the circumstances. The Group makes

estimates and assumptions concerning the future. The resulting accounting estimates will,

by definition, rarely equal the related actual results. The estimates and assumptions that

have a significant effect on the carrying amounts of assets and liabilities are outlined

below.

Reliability

Accounting information is reliable to the extent that it is verifiable, is a faithful

representation and is reasonably free of error and bias. To be reliable, accounting

information must include verifiability, representational faithfulness, and neutrality.

24


25/46


2. Secondary Qualities

The secondary qualities identified are comparability and consistency.

Comparability. Accounting information that has been measured and reported in a similar

manner for different enterprises is considered comparable.

Consistency. Accounting information is consistent when an entity applies the same

accounting treatment to similar events from period to period. Based on Sunway Holding

Bhd the depreciation of other property, plant and equipment is provided for on a straight-

line basis to write off the cost of each asset to its residual value over the estimated useful

life

25


26/46


SFAC No. 6. Elements of Financial Statements

Basic Elements Concepts Statement No. 6 defines ten interrelated elements that relate to

measuring the performance and financial status of a business enterprise.

i. Assets.

Probable future economic benefit obtained or controlled by particular entity as the result

of past transactions or events.

ii. Liabilities.

Probable future sacrifices of economic benefits arising from present obligations of a

particular entity to transfer assets or provide services to other entities in the future as a

result of past transactions or events.

iii. Equity.

Residual interest in the assets of an entity that remains after deducting its liabilities. In a

business enterprise, the equity is the ownership interest.

iv. Investment by owners.

Increases in net assets of a particular enterprise resulting from transfers to it from other

entities of something of value to obtain or increase ownership interests (or equity) in it.

Assets are most commonly received as investments by owners, but that which is received

may include services or satisfaction or conversion of liabilities of the enterprise.

v. Distribution to Owners.

Decreases in net assets of a particular enterprise that result from transferring assets,

rendering services, or incurring liabilities by the enterprise to owners. Distributions to

owners decrease ownership interests (or equity) in an enterprise.

vi. Comprehensive Income.

26


27/46


Change in equity (net assets) of an entity during a period from transactions and other

events and circumstances from non-owner sources. It includes all

changes in equity during a period, except those resulting from investments by owners and

distributions to owners.

vii. Revenues.

Inflows or other enhancements of assets of an entity or settlement of its liabilities (or a

combination of both) during a period from delivering or producing goods, rendering

services, or other activities that constitute the entity's ongoing major or central

operations.

viii. Expenses.

Outflows or other using up of assets or incurrences of liabilities (or a combination of

both) during a period from delivering or producing goods, rendering services, or carrying

out other activities that constitute the entity's ongoing major or central operations.

ix. Gains.

Increases in equity (net assets) from peripheral or incidental transactions of an entity and

from all other transactions and other events and circumstances affecting the entity during

a period except those that result from revenues or investments by owners.

x. Losses.

Decreases in equity (net assets) from peripheral or incidental transactions of an entity

from all other transactions and other events and circumstances affecting the entity during

a period except those that result from expenses or distributions to owners.

27


28/46


SFAC No. 5 Recognition and Measurement in Financial Statements of Business

Enterprises

a) Basic Assumptions

Economic Entity Assumption.

The economic activities of an entity can be accumulated and reported in a manner that

assumes the entity is separate and distinct from its owners or other business units.

Going-Concern Assumption.

In the absence of contrary information, a business entity is assumed to remain in

existence for an indeterminate period of time. The current relevance of the historical cost

principle is dependent on the going-concern assumption.

Monetary Unit Assumption.

In the United States, economic activities of an entity are measured and reported in

dollars. These dollars are assumed to remain relatively stable over the years in terms of

purchasing power. In essence, this assumption disregards any inflation or deflation in the

economy in which the entity operates.

Periodicity Assumption.

The life of an economic entity can be divided into artificial time periods for the purpose

of providing periodic reports on the economic activities of the entity.

28


29/46


b) Basic Principles

Historical Cost Principle.

Acquisition cost is the most objective and verifiable basis upon which to account for

assets and liabilities of a business enterprise. Cost has been found to be more definite and

determinable than other suggested valuation methods.

Revenue Recognition Principle.

Revenue is recognized when the earning process is virtually complete and an exchange

transaction has occurred. Generally, this takes place when a sale to another individual or

independent entity has been confirmed. Confirmation is usually accomplished by a

transfer of ownership in an exchange transaction.

Matching Principle.

Accountants attempt to match expenses incurred while earning revenues with the related

revenues. Use of accrual accounting procedures assists the accountant in allocating

revenues and expenses properly among the fiscal periods that compose the life of a

business enterprise.

Full Disclosure Principle.In the preparation of financial statements, the accountant should include sufficient

information to permit the knowledgeable reader to make an informed judgment about the

financial condition of the enterprise in question.

29


30/46


c) Constraints

Cost-Benefit Relationship.

This constraint relates to the notion that the benefits to be derived from providing certain

accounting information should exceed the costs of providing that information. The

difficulty in cost-benefit analysis is that the costs and especially the benefits are not

always evident or measurable.

Materiality.

In the application of basic accounting theory, an amount may be considered less

important because of its size in comparison with revenues and expenses, assets and

liabilities, or net income. Deciding when an amount is material in relation to other

amounts is a matter of judgment and professional expertise.

Industry Practices.

Basic accounting theory may not apply with equal relevance to every industry that

accounting must serve. The fair presentation of financial position and results of

operations for a particular industry may require a departure from basic accounting theory

because of the peculiar nature of an event or practice common only to that industry.

Conservatism.

When in doubt, an accountant should choose a solution that will be least likely to

overstate assets and income. The conservatism constraint should be applied only when

doubt exists.

30


31/46


The Framework is comprised of three levels. There are:

a) First Level = Basic Objectives

b) Second Level = Qualitative Characteristics and Basic Elements

c) Third Level = Recognition and Measurement Concepts.

a) First Level: Basic Objectives

31


32/46


Financial reporting should provide information that is useful to present and potential investors

and creditors and other users in making rational investment, credit, and similar decisions. Its

helps present and potential investors, creditors and other users in assessing the amounts, timing,

and uncertainty of prospective cash receipts. Its also portrays the economic resources of an

enterprise, the claims to those resources, and the effects of transactions, events, and

circumstances that change its resources and claims to those resources.

b) Second Level: Fundamental Concepts

By determining which alternative provides the most useful information for decision-making

purposes (decision usefulness), it should consider all the factors, which are:

Qualitative Characteristics

The FASB identified the Qualitative Characteristics of accounting information that

distinguish better (more useful) information from inferior (less useful) information for

decision-making purposes.

Understandability

A company may present highly relevant and reliable information, however it was useless

to those who do not understand it.

In Sunway Holding, the information that very useful to all the users to make any decision wasapplied in Sunway Holdings. For example in Annual Report 2009, the information that was used

by Sunway Holding is highly relevant and also can be reliable. Besides that, the users can

understand all the information that was used by Sunway Holdings.

32


33/46


a) Primary Qualities:

The primary qualities that make accounting information useful for decision making are relevance

and reliability.

Relevance.

33


34/46


Accounting information is relevant if it is capable of making a difference in a

decision. For information to be relevant, it should have:

Predictive value

Feedback value

Timeliness.

It must be presented on a timely basis

Reliability.

Accounting information is reliable to the extent that it is verifiable, is a faithful

representation and is reasonably free of error and bias. To be reliable, accountinginformation must include:

Verifiable

Representational faithfulness

Neutral

b) Secondary Qualities:

The secondary qualities identified are comparability and consistency.

Comparability.

Accounting information that has been measured and reported in a similar manner for

different enterprises is considered comparable..

Consistency.

Accounting information is consistent when an entity applies the same accounting

treatment to similar events from period to period.

34


35/46


35


36/46


(c) Third Level: Recognition and Measurement

The third level of the framework consists of concepts that implement the basic objectives

of level one. These concepts explain which, when, and how financial elements and events

should be recognized, measured, and reported by the accounting system.

Most of them are set forth in FASB Statement of Financial Accounting Concepts No. 5,

Recognition and Measurement in Financial Statements of Business Enterprises.

According to SFAC No. 5, to be recognized, an item (event or transaction) must meet the

definition of an element of financial statements as defined in SFAC No. 6and must be

measurable. Most aspects of current practice are consistent with this recognition andmeasurementconcept.

There are:

d) Basic Assumptions

Economic Entity Assumption.

Going-Concern Assumption.

Monetary Unit Assumption.

Periodicity Assumption.

e) Basic Principles

Historical Cost Principle.

Revenue Recognition Principle.

Matching Principle.

Full Disclosure Principle.

36


37/46


f) Constraints

Cost-Benefit Relationship.

Materiality.

Industry Practices.

Conservatism.

37


38/46


4.0 ACCOUNTING MODEL

4.1 Historical Cost

The historical costs means transaction (assets or services acquired) are to be recorded at cost.

When assets are purchased, they are recorded at cost, and the accounting records of the assets are

maintained at cost. Cost is measured on a cash or equal-to-cash basis. This means if cash is

given for a service, its cost is measure as the amount of cash paid. If something besides cash is

exchanged, cost is measured as the cash value of what is given up or received. The historical cost

principle emphasizes reliability, and information based on cost is considered objective.

The financial statements of the Sunway Holdings Berhad have been prepared on a

historical basis, unless otherwise indicated in the summary of significant accounting policies. In

preparing the financial statements of the individual entities, transactions in currencies other than

the entitys functional currency (foreign currencies) are recorded in the functional currencies

using the exchange rates prevailing at the dates of the transactions .

At each balance sheet date, monetary items denominated in foreign currencies are

translated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair

value that are denominated in foreign currencies are translated at the rates prevailing on the date

when the fair value was determined. Non-monetary items that are measured in terms of historical

cost in a foreign currency are not translated.

38


39/46


4.2 Revenue Recognition

The revenue recognition principle provides guidance on when a company must recognize

revenue. To recognize means to record it. If revenue is recognized too early, a company would

look more profitable than it is. If revenue is recognized too late, a company would look less

profitable than it is. Generally, revenue is recognized when it is earned and not before. Revenue

is recorded in the period it is earned, that is when (1) the ownership has been transferred from

the seller to the buyer which is sales of goods; (2) the services has been completely provided to

the customer called rendering of services; (3) percentage of completion method based on

construction project and (4) cash is received from the customer that is installment method.

Based on the annual report of Sunway Holdings Berhad, the revenue is recognised to the

extent that it is probable that the economic benefits will flow to the Group and the revenue can

be reliably measured. The following specific recognition criteria must also be met before the

revenue is recognised:

(a) Sales of properties under development, land and property inventories

Revenue from sale of properties is accounted for by the stage of completion method. When

the financial outcome of a development activity can be reliably estimated, property

development revenue and expenses are recognised in the income statement by using the stage

of completion method. The stage of completion is determined by the proportion that property

development costs incurred for work performed to date bear to the estimated total property

development costs.

Revenue from sale of land and property inventories is recognised net of discount and

upon transfer of significant risks and rewards of ownership to the purchasers. Revenue is not

recognised to the extent where there are significant uncertainties regarding recovery of the

consideration due, associated costs or possible return of property inventories.

(b) Rental Income

39


40/46


Rental income including those from investment properties is recognised on the accrual basis

unless recoverability is in doubt, in which case, it is recognised on receipt basis.

40


41/46


(b) Investment Income

Dividend income is recognised when the Groups right to receive payment is established.

Interest income from short term deposits and advances is recognised on the accrual basis,

using the effective interest method, unless recoverability is in doubt, in which case, it is

recognised on receipt basis.

(c) Construction contracts

Revenue from construction contracts is accounted for by the stage of completion method.

Where the outcome of a construction contract can be reliably estimated, contract revenue

and contract costs are recognised as revenue and expenses respectively by using the stage

of completion method. The stage of completion is measured by reference to the

proportion of contract costs incurred for work performed to date to the estimated total

contract costs or by reference to the physical completion of the contract.

Where the outcome of a construction contract cannot be reliably estimated, contract

revenue is recognized to the extent of contract costs incurred that it is probable will be

recoverable. Contract costs are recognized as expenses in the period in which they areincurred. When it is probable that total contract costs will exceed total contract revenue, the

expected loss is recognised as an expense immediately.

(d) Sale of goods

Revenue is recognised net of sales taxes and upon transfer of significant risks and rewards of

ownership to the buyer. Revenue is not recognised to the extent where there are significant

uncertainties regarding recovery of the consideration due, associated costs or the possible

return of goods.

(e) Management fees

41


42/46


Management fees are recognised when services are rendered.

42


43/46


(f) Revenue from services

Revenue from services recognised is net of service taxes and discounts as and when the

services are performed.

(g) Interest on lease and hire purchase

Interest on lease and hire purchase are recognised as income on the Rule of 78 basis.

4.3 Full Disclosure

The full disclosure principle requires that a companys financial statements report enough

information for users to make knowledgeable decisions about the company. In order to satisfy

the disclosure principle, companies add to the financial statements notes that disclose significant

accounting policies, probable losses, and accounting changes.

Sunway has kept its investors, analysts and fund managers informed through timely

announcements and disclosures made to Bursa Malaysia Securities Berhad, inclusive of the

quarterly announcements of financial results.

4.4 Going concern

The business is assumed to continue to operate in the future. This concept enables accountants

to assume that a business will continue long enough to recover the cost of its assets. Financial

statements should be prepared on a going concern basis unless management either intends to

liquidate the enterprise or to cease trading, or has no realistic alternative but to do so.

From the audit committee report of Sunway Holdings Berhad, we can see that thequarterly results and year end financial statements prior to the approval by the Board is focusing

particularly on the going concern assumption.

43


44/46


4.5 Time period

The economic life of business can be divided into artificial time period for the purpose of

financial reporting. For example are in monthly, quarterly, half-yearly and yearly reports. Thisassumption provides that financial information be reported at regular intervals so that decision

makers can compare business operations over time to assess the success or failure of the

business. This concept is the basis for accruals and adjusting entries prepared at the end of an

accounting period.

The directors of Sunway Holdings Berhad have pleasure in presenting their report

together with the audited financial statements of the Group and of the Company for the financial

period ended 31 December 2009. The Company also noted that they have changed its financialyear end from 30 June to 31 December. The current period under review is from 1 July 2008 to

31 December 2009.

From the auditor report, its shown that they have audited the financial statements of

Sunway Holdings Berhad, which comprise the balance sheets as at 31 December 2009 of the

Group and of the Company, and the income statements, statements of changes in equity and cash

flow statements of the Group and of the Company for the period then ended, and a summary of

significant accounting policies and other explanatory notes for users to make their own

assumptions and decision making about companys performance.

4.6 Monetary Unit

Only transaction data that can be expressed in terms of money can be included in accounting

records. Money is the common denominator in business. Examples of monetary units are the

dollar in United States, Canada, Australia and Singapore.

The individual financial statements of each entity in the Group are measured using the

currency of the primary economic environment in which the entity operates (the functional

currency). The consolidated financial statements are presented in Ringgit Malaysia (RM),

which is also the Companys functional currency.

44


45/46


5.0 CONCLUSION

From our observation, we can state that Sunway Holdings Berhad not only focusing to reach

their profit from it seven business segments, but Sunway also involves in Corporate Social

Responsibilities (CSR). According to Bursa Malaysias CSR Framework, Sunway have divided

into four main focal areas to support the Groups CSR program which are Marketplace,

Workplace, Environment and Community.

The conceptual framework are divided into 3 level which are basic objectives(first level),

qualitative characteristics and basic elements(second level) and last level is recognition and

measurement concepts.

Sunway Holdings Berhad also representing a clear picture of what really happened within their

company by following the Generally Accepted Accounting Principle (GAAP). Besides, it will

ensure that all companies playing in the same field and that the information presented was

consistent, relevant, reliable, and comparable.

So as a conclusion, we conclude that Sunway Holding was followed all the accounting rules and

standards and also applied all the standards when preparing Financial Statement that will be used

by all the users of Sunway Holdings.

45


46/46


6.0 REFERENES

Belkaoui A.R., (2009).Accounting Theory, 6th ed., Business Press, U.K. (ARB)

Deegan, C. & Unerman, J., (2007). Financial Accounting Theory, 2nd ed., McGraw Hill,

Australia

Godfrey, J., Hodgson, A., Holme, S., & Tarca, A., (2006). Accounting Theory, 6th ed.,

John Wiley & Sons, Australia (GHHT)

Scott, W.R., (2009). Financial Accounting Theory, 5th ed., Pearson Prentice Hall

International Inc., Toronto (SWR

http://www.science.org.au/nova/034/034glo.htm

http://wps.prenhall.com/wps/media/objects/213/218150/glossary.html

http://www.fasb.org/cs/BlobServer?

blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175818764152

&blobheader=application%2Fpdf

http://media.wiley.com/product_data/excerpt/87/04710720/0471072087-1.pdf

http://www.businessdictionary.com/definition/conceptual-framework.html

http://accounting-master.blogspot.com/2009/03/conceptual-framework-of-accounting.html
http://www.science.org.au/nova/034/034glo.htmhttp://wps.prenhall.com/wps/media/objects/213/218150/glossary.htmlhttp://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175818764152&blobheader=application%2Fpdfhttp://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175818764152&blobheader=application%2Fpdfhttp://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175818764152&blobheader=application%2Fpdfhttp://media.wiley.com/product_data/excerpt/87/04710720/0471072087-1.pdfhttp://www.businessdictionary.com/definition/conceptual-framework.htmlhttp://accounting-master.blogspot.com/2009/03/conceptual-framework-of-accounting.htmlhttp://www.science.org.au/nova/034/034glo.htmhttp://wps.prenhall.com/wps/media/objects/213/218150/glossary.htmlhttp://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175818764152&blobheader=application%2Fpdfhttp://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175818764152&blobheader=application%2Fpdfhttp://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175818764152&blobheader=application%2Fpdfhttp://media.wiley.com/product_data/excerpt/87/04710720/0471072087-1.pdfhttp://www.businessdictionary.com/definition/conceptual-framework.htmlhttp://accounting-master.blogspot.com/2009/03/conceptual-framework-of-accounting.html

full report tap

Documents