CHAPTER 5:ACCOUNTING FOR LEGAL FIRMS

QUESTION 1

Referring to Frank et. al (2001), discuss the significant findings related to accounting for legal firms.

CHAPTER 6: ACCOUNTING FOR FINANCIAL INSTITUTIONS

QUESTION 2

Azam Banking Berhad (ABB) is a local bank that offers a wide range of banking services to corporate and individual customers in Malaysia. It services include receiving deposits, paying and collecting cheques, and providing loan and hire purchase financing services. The bank operates using both conventional and Islamic banking system. With a network of almost 50 branch offices and more than 500 ATM machines, the bank continues to grow and gets stronger in its market position. In addition to its banking services, the bank also offers services in managing unit trust fund and stockbroking through its subsidiaries, Azam Trust Fund Berhad and Azam Brokers Berhad. Currently, the bank is listed in the Bursa Malaysia Stock Exchange with a total assets value of RM1.5 billion.

As one of the financial institutions in Malaysia, ABB is required to comply with regulations in the Financial Services Act 2013 (FSA) and the Islamic Financial Services Act 2013 (IFSA)which are effective from 30 June 2013, replacing the Banking and Financial Institutions Act 1989 (BAFIA) and Islamic Banking Act 1983 . For the purpose of financial reporting practices, ABB needs to comply with BNM/GP8 Guidelines on the Specimen Financial Statements for the Banking Industry and the approved accounting standard of MFRS 139 Financial Instruments: Recognition and Measurement. Both guideline and accounting standard provide a guide to produce a standardized financial report to facilitate comparison of performance and financial conditions.

Recently, a new accounting standard on the recognition and measurement of financial instrumentsMFRS 9 Financial Instrumentswas issued by the Malaysian Accounting Standard Board (MASB) effective 1 January 2018. The new standard replaced MFRS 139 Financial Instruments: Recognition and Measurement. Due to the complexity of the new standard, ABB faced many implementation challenges.

REQUIRED:

1. Explain FIVE (4) different characteristics between conventional and Islamic banking services.

1. Explain THREE (3) key changes highlighted in the new MFRS 9.

1. ABB offers loan and advances to customers and charge interest on these financing facility. Explain how the bank should recognize and measure the loan and advances and the associated interest charged. Explain what will happen if a customer failed to pay its loan and advances.