QUOTE(dasecret @ Feb 9 2016, 11:50 PM)
I don't think the statement above is correct. Held for trading financial assets would go through profit or loss. But tabung haji designate the securities as available for sale
Fair value changes on AFS assets are recognised directly in equity, through the statement of changes in equity, except for interest on AFS assets (which is recognised in income on an effective yield basis), impairment losses and (for interest-bearing AFS debt instruments) foreign exchange gains or losses. The cumulative gain or loss that was recognised in equity is recognised in profit or loss when an available-for-sale financial asset is derecognised. [IAS 39.55(b)]
http://www.iasplus.com/en/standards/ias/ias39But it is factually correct that the AFS reserves in the 2014 financial statements is negative and therefore I can understand central bank's concern. so it boils down to whether or not tabung haji can deliver such dividends solely based on the distributable reserves without considering the negative AFS reserves.
Having said that, we r just speculating as the 2015 financial statement is not yet published
In Malaysia, section 365 of the CA 1965 allows dividends to be paid from current profits. Hence to ensure a high dividend payout classifying its financial investments as AFS allows for current profits to be unaffected by unrealised losses as they pass through reserves. This leads us to the possible scenario of negative reserves but high dividend payout. Hence depositors will not get paid in full theoretically if they withdraw enmasse. I see 2 weaknesses in our system here:
1. The possible loophole of reclassification of financial assets to AFS whenever there are significant unrealised losses in order to ensure depositors are happy with the bonus
2. Our CA 365 on dividends is inadequate and needs to be reviewed as IFRS developments has now created a situation where key stakeholders are not adequately protected
What do you think?
Feb 9 2016, 06:20 PM
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