Volkswagen VW cars to be assemble in Pahang, Malaysia

By Business Times (Francis Fernandez)

DRB-HICOM Bhd is scheduled to sign a definitive agreement on December 21 with Volkswagen AG, Europe's largest carmaker, to assemble VW cars in Malaysia.

The cars will be assembled in Pekan, Pahang, for local and Southeast Asian markets.

"Tentatively, it is scheduled for December 21 with the signing ceremony being held either in the KLCC area or at DRB-HICOM's (1619) operational headquarters in Glenmarie, Shah Alam," said the source.

It is understood that DRB-HICOM's top officials from its automotive divisions are currently abroad for the final leg of negotiations with VW.

In August, DRB-HICOM signed a memorandum of understanding with Germany's VW to assemble and manufacture Volkswagen vehicles in Malaysia.

An agreement with VW will help boost business and raise its profile among investors further. Although a big chunk of income comes from stable businesses like Islamic banking, insurance and power plant maintenance and plans to expand its property unit, its share price is still well below its net asset value of over RM2.

DRB-HICOM shares closed 9 per cent higher at RM1.80 yesterday.

In August, it was reported that minority shareholders voiced their displeasure at the company's annual general meeting over the undervalued shares.

As a result, the company said it plans to beef up investor relations (IR) activity.

"I do understand the anxiety of the shareholders and the public ... the current share price does not reflect the actual value of the company, which is actually worth more," group managing director Datuk Seri Mohd Khamil Jamil reportedly said after the AGM.

Yesterday, HwangDBS initiated coverage on DRB-HICOM with a RM3.55 target price.

The research house said DRB-HICOM is the cheapest conglomerate in the country with a net gearing of 0.3 times.

"With efforts to be more investor-friendly now, we expect a significant re-rating from its bargain basement valuation of 5.5 times 2012 financial year's earnings per share," Hwang said in the report.

The research house added that a key catalyst for DRB-HICOM is the conversion of a letter of intent from the Ministry of Defence for 257 AV 8x8 armoured wheeled vehicles, worth about RM8 billion.

Malaysian Billionaire :

* With the failure of partnership between Proton and Volkswagen VW, VW is set to get DRB-HICOM to assemble Volkswagen cars in malaysia. So izzit the right time to get some DRB-HICOM shares and a Touareg in a cheaper price tag in the near future?

Cabinet agrees to electricity price increase

By the Star

KUALA LUMPUR: The federal Cabinet has agreed in principle to a revision of electricity tariff but has not decided when it should take place.

Energy, Green Technology and Water Minister Datuk Seri Peter Chin Fah Kui said an electricty tariff revision was on the cards but the Government had not decided when.

He said there were many issues that the Government needed to address before a time could be set for the revision.

Under the Government Transformation Plan, we have to roll back the subsidies, which involves so many other things, such as fuel cost and the Government has to make a decision as to when Tenaga Nasional Bhd (TNB) is allowed to make the revision and this has not be confirmed, he said after the launch of TNB Service Charter yesterday.

The TNB Service Charter has the mission to improve TNB's services to its customers.

* I do not understand why the electricity has to be review again? The ringgit has been stronger against the greenback = purchasing power is stronger. Lower prices in all commodities, but WHY everything is increasing? Salary is not increasing. What and where went wrong? Is our dear KPI Minister about to fine tune other things instead of focus on the rising of commodities. All our dearly Malaysian wish/hope that he can contribute somehow and somewhat.

Good news is the former Selangor MG has been arrested. It's a big boost of confidences in our international business as it shows that Malaysia condone corruption and making it a safe haven for investment n business.

Is that true there will be a super bull run in 2010 or 2011 for Malaysia stock market?

By the Star

Although the economic situation now compares with that of 1993, the last push must come from local retail investors

THE recent rally in our local bourse has prompted many seasoned investors, especially those who experienced the super bull run in 1993, to wonder whether the current rally is about to turn into a real bull run. Of course, nobody can tell for sure what will happen next, but we certainly can do some homework, comparing the circumstances back in 1993 against the current situation.

In 1991, Tun Dr Mahathir Mohamad unveiled the philosophy of “Malaysia Incorporated” which was a development strategy for Malaysia to achieve a developed nation by 2020. In the early 1990s, despite slowdown in the global economy, as the third largest economy in South-East Asia, after Indonesia and Thailand, Malaysia was supported by relatively strong macroeconomic fundamentals and resilient financial system. With the real GDP growing at 9.9%, ringgit appreciation, strong export growth and the Government’s measures to hold inflation low at 3.6%, the local stock market became an attractive alternative to foreign investors.

Before 1993, foreign investment in Malaysia was mainly dominated by long-term direct investment in the manufacturing sector. However, as a result of measures taken to develop our domestic equity market, coupled with the strong economic backdrop, we saw a massive influx of foreign capital inflow, which helped fuel the super bull-run in 1993. Within the year, the market increased by 98% to reach an all-time high of 1,275.3 points and foreign investors’ participation accounted for 15% of total trading value of our local bourse. This had also driven the market into a highly speculative one, which lured many retailers into the market, thinking of making fast and easy money.

With the presence of new and unfamiliar players, the market became a huge “casino”. Retail investors bought into stocks based on rumours rather than company fundamentals. Among the hottest topics during that time were the awards of government mega projects, privatisation candidates, sector play and regular news on upward revision of corporate earnings. Examples for the highly speculative stocks were Ekran, Ayer Molek Rubber Co, Berjuntai Tin Dredging and Kramat Tin Dredging.

In 1993, with the economy booming, the Government planned several mega projects, including the KL International Airport (RM8bil), Johor-Singapore Second Link (RM1.6bil) and Kuala Lumpur Light Rail Transit (RM1.1bil). The news of contract awarding immediately sent the market into speculative mood on those potential candidates. Similarly, the news of the Government planning on privatising some of the its own corporations, such as Petronas, KTM and Pos Malaysia had also driven these counters into prime trading targets.

Besides, the ease of accessing bank credit by investors also contributed to the market rally. We noticed that a high percentage of loans was channelled to broad property sector as well as the purchase of securities.

As a result of massive inflow of foreign funds and the super bull run in stock market, Bank Negara introduced a number of selective capital controls in early 1994 to stabilise the financial system,

Recently, our Prime Minister Datuk Seri Najib Tun Razak unveiled the Economic Transformation Programme (ETP) with the aim to boost our gross national income (GNI) to US$523bil in 2020 from US$188bil in 2009. The programme is to attract investment not only from the Government, but also (more importantly) from domestic direct investment as well as foreign direct investment. In view of strong economic growth, our GDP growth is anticipated to increase by 6% this year.

In September, we notice that there was a net inflow of foreign funds again in our equity market. Over the past few weeks, the average stock market daily volume had been hovering above one billion shares per day. Almost every day, the top 10 highly traded stocks were those speculative stocks with poor fundamentals. In addition, we noticed that some retail investors had started to get excited again in the stock market.

According to Andrew Sheng in his book titled From Asian To Global Financial Crisis, there were two main indicators to irrational exuberance during the super bull run in 1993. The first was the amah (domestic maid) syndrome. We need to be careful when amahs got excited about the stock market. This was because they did not know what they were buying and would always be the last to sell. The second indicator was when businessmen began to speculate stocks in the stock market. This was because they might neglect their businesses and use some of their cash for speculation.

Comparing our current market situation with the 1993 bull run, there are certain similarities that we see, such as strong economic growth, ringgit appreciation, inflow of foreign capital and ease of credit. However, our local retailer participation is yet to get boiling, which may be the last push factor towards the bull run. Hence, once the participation of the local investors starts to get heated up, together with more inflow of foreign fund, that may be the signs of the market heading for a ‘mini’ super bull run.

* Article is by Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.

FRS 7: Are we disclosing too much?

By The Star

MUCH has been said about corporate misdeeds, which are now considered to be more worrisome than in the past. There have been concerns raised over corporate governance, questions as to the role of management, directors and shareholders in running listed companies, as well as the role of auditors and regulators.

Equally, there has been a growing list of companies missing debt repayment and companies falling into the financially-troubled category of Practice Note 17 (PN17).

Shouldn’t alarm bells sound for these corporate misdeeds or failure to repay debt before the companies fall into the PN17 category and face the risk of being delisted? Would adequate disclosures in the financial statements have provided those alarm bells?

On the Malaysian accounting scene, there has been a big wave of change, with the requirement for full convergence with the International Financial Reporting Standards (IFRS) by 2012.

While this means more difficult times for the preparers of financial statements in terms of compliance with new standards and disclosure requirements, one also wonders whether this additional information would in turn benefit the investors and shareholders.

Let’s look at the arrival of FRS 7: Financial Instruments: Disclosures that have been effective from Jan 1, 2010.

FRS 7 is based on IFRS 7, which replaces IAS 32 (the Malaysian equivalent of FRS 132) Financial Instruments: Disclosure and Presentation and IAS 30, Disclosures in Financial Statements of Banks and Similar Financial Institutions (not adopted by the MASB or Malaysian Accounting Standards Board).

It provides an overview of the entity’s use of financial instruments and the exposure to risks they create. While some of the disclosures previously required by FRS 132 have been eliminated, FRS 7 introduces a number of additional and far-reaching disclosure requirements.

FRS 7 requires qualitative and quantitative information about the exposure to risks arising from financial instruments, including specified minimum disclosures to describe management’s objectives, policies and processes for managing those risks.

The quantitative disclosures provide information about the extent to which an entity is exposed to risk, based on information provided internally to the entity’s key management personnel with the most significant additions discussed below:

i) Credit risk disclosures have been beefed up, with more detailed disclosure being required on the credit quality of financial assets that are not impaired as at the balance sheet date, and the carrying value of renegotiated assets that would have been past due or impaired as at the balance sheet;

ii) Inclusion of sensitive analysis of the financial risks inherent in financial instruments through disclosing, for each type of market risk, effect on profit or loss and equity of a change in the relevant risk variable (eg an increase/decrease in interest rates by certain basis points, or a change in foreign exchange rates by certain percentage).

An entity is required to disclose, not only the methods and assumptions used in preparing the sensitivity analysis but also any changes from the prior period and the reasons for the changes;

iii) Disclosure of the carrying amounts of financial assets and financial liabilities under each of the classifications of FRS 139, Financial Instruments: Recognition and Measurement, together with the net gains and losses of each of those categories; and

iv) Disclosure of the hedge ineffectiveness.

The diagram depicts the changes in the requirements of FRS 7:

Collating these data to comply with this standard will be challenging, as it is imperative that the accounting function becomes fully aware of all quantitative data being reported to key management personnel since such information will be reported externally.

It is imperative that both the accounting and treasury functions ensure that the nature and extent of the information that is reported internally forms an appropriate and meaningful basis on which the disclosures in the financial statements will be derived from. The quality and depth of such information will reflect the strength and operational effectiveness of this relationship.

One of the many issues to consider is to strike a balance of the disclosures – too much or too little. One needs to guard against disclosing insufficient information, as the shareholders, analysts or users of the financial statements may interpret this as a sign of poor financial management.

Similarly, one needs to ensure that internal risk and financial reporting provides an appropriate base, in terms of quantity, quality and depth of information, on which externally provided financial information can be generated.

In this regard, two questions arise. Will the internal reporting stand up to external scrutiny? How does the internal reporting benchmark against other similar entities?

Looking at the requirements under FRS 7, one would agree that such disclosure enables users to evaluate the significance of financial instruments on the financial position and performance of an entity and to provide stakeholders with greater transparency with regard to the manner in which financial risk is monitored, measured and managed.

To the preparers, the requirements under this standard would be more onerous and subject to scrutiny.

Written by Teresa Chong, an audit partner of KPMG in Malaysia.

* As i have mention on my previous post in June. Will FRS 7 stand up to be the transparency of accounting and gives investor a better and clearer picture of corporate's health check?

Source/ Rumour: A high ranking officer in one of malaysia local banking industry has de-value the bank's assets on the previous year, making it a nett lost. The next year, the officer re-value again the bank's assets and making a tremendous profit making player in the industry. Does FRS 7 will able to overcome this?

Investor moving into gold and bonds 2010?

By The Star

NEW YORK: For lack of a better option, investors are flooding into gold.

Gold prices hit a record high Wednesday, settling at $1,292.10 after a rally that started late Tuesday.

The run-up came after the Federal Reserve indicated it will leave interest rates historically low, and might be open to printing more money to stimulate a weak economy. The news sent the dollar lower, and big investment funds snapped up gold as a safe haven.

"People are questioning where to turn," said Dan Cook, an analyst with IG Markets in Chicago. "As long as there are a lot of concerns on the global economy ... gold can keep going higher."

Gold has been climbing steadily since the financial crisis of 2008, a sign that investors aren't sure where to park their money. While the stock market has been rising in recent weeks, equities are still a volatile investment. And the stalled economic recovery has added to the uncertainty, as central banks and governments consider more stimulus measures that could boost inflation.

Gold cost $718.20 in October 2008, just after the financial crisis, 80 percent below Wednesday's closing price.

The immediate factor behind gold's rise was the Federal Reserve's announcement Tuesday that the bank might again jump in to help the struggling U.S. economy, said William Rhind, strategic director of ETF securities.

The Fed's actions, coupled with more stimulus from other countries, raises the specter of inflation, Rhind said. That makes gold a natural shelter for investors who see a long stretch of weak growth and a sagging dollar.

That means current gold prices could stay around the level of $1,300 for some time to come, Rhind said.

"It's not something that can be changed in the short term. The reason is that with looser monetary policy, and with deteriorating (government) balance sheets, that will lead to inflation pressure," he said.

At the same time, investors are still suspicious of stock markets after a "flash crash" in May wiped out stock values in a matter of minutes, said Cook, the IG Markets analyst. Prices recovered that day, but the causes of the crash are still under investigation.

Other precious metals also rose. Silver December contracts gained 41.5 cents to settle at $21.055 an ounce and copper gained 8.4 cents to settle at $3.5650 a pound.

September platinum gained $20.50 to settle at $1,632.90 a pound while September palladium gained $11.85 to settle at $539.65.

Oil prices slid after the government said stockpiles of oil and gasoline grew last week, even though a major pipeline serving Midwest refineries was shut because of a leak.

Benchmark crude for November delivery lost 26 cents to settle at $74.71 a barrel on the New York Mercantile Exchange.

In other Nymex trading in October contracts, heating oil fell 1.29 cents to settle at $2.1070 a gallon and gasoline lost 1.82 cents to settle at $1.9014 a gallon. Natural gas rose 4.7 cents to settle at $3.966 per 1,000 cubic feet.

In London, Brent crude fell 47 cents to settle at $77.95 a barrel on the ICE Futures exchange. - AP

In view of the uncertainty in US, are investors moving into golds and bonds instead of the stock market in 2010? We see the highest price of gold in 2010 and its gold price going up/ reached peak?

Hugh Hefner to buy back Playboy

By The Star

CHICAGO: Playboy Enterprises Inc. said Tuesday its board of directors has formed a special committee to consider founder Hugh Hefner's proposal to buy out the rest of the company.

The committee will consist of attorney Sol Rosenthal, who will serve as its chairman, and Playboy director Shing Tao. Rosenthal is a counsel at international law firm Arnold & Porter, while Tao is chairman and chief investment officer of Pacific Star Partners, a private investment group.

Hefner offered on July 9 to buy the roughly 30 percent of Playboy's outstanding shares that he doesn't already own for $5.50 each, and take the company private in a deal valuing Playboy at $185 million. A few days later, Penthouse magazine owner FriendFinder Networks Inc. made a formal, competing bid for the Playboy empire worth $210 million, but any such deal would require Hefner to agree to sell his nearly 70 percent stake.

The company, which is headquartered in Chicago, said Tuesday that no decisions have been made about Hefner's offer, and there's no guarantee any agreement will be reached.

Playboy's stock price has tumbled since hitting a peak in 1999 of more than $32, closing Tuesday up 2 cents at $5.37.

The company's namesake magazine has struggled with competition from the Web, losing readers and advertisers. It has tried to make up for a declining print business by licensing its brand and the iconic bunny ears for consumer products.

It recently released its June edition equipped with 3-D glasses, hoping to capitalize on the popularity of 3-D movies such as "Avatar."

Hefner has said he worries about the editorial direction of the magazine and its legacy. At 84, he still serves as creative director and editor-in-chief. - AP

* I jst commented on my previous post that playboy magazines is losing readers and advertisers and now i came to know that playboy is surviving by its bunny products. Interesting!!

Newsweek magazine sold, editor to step down.

By the Star

NEW YORK: Sidney Harman, the 91-year-old founder of audio equipment maker Harman International Industries Inc., has agreed to buy Newsweek, ending a nearly half-century chapter for the magazine as part of The Washington Post Co.

Jon Meacham, the magazine's top editor since 2006, will step down.

Newsweek has been struggling to find a profitable niche amid poor economic conditions and a flood of online competition. Declines in circulation and advertising led to a nearly $30 million loss in 2009, and Newsweek expects to lose money again this year.

In an interview, Harman declined to discuss exactly how he will finance the magazine's operations. But he said he will give Newsweek some breathing room for a turnaround effort.

"My purpose is to get the magazine operating in a reasonable amount of time - and that's years, not weeks - on its own fuel," he said.

Harman has pledged to keep most of the magazine's staff, currently at about 350. He also said he doesn't envision any radical overhaul of the magazine, which was redesigned last year with a greater focus on long-form reporting and analysis to compete more directly with titles such as The New Yorker and The Economist.

"I bring intellectual curiosity and serious business experience to a place that could be done no harm from the first and a great deal of good from the second," he said.

Harman said he hasn't decided on a replacement for Meacham as editor.

Financial terms were not disclosed, although the Post Co. said it is keeping the magazine's pension liabilities and certain other, unspecified employee obligations.

With the print industry in decline, the Post Co. likely sold Newsweek at a fire-sale price.

Bloomberg LP bought BusinessWeek last year for just a few million dollars.

"In seeking a buyer for Newsweek, we wanted someone who feels as strongly as we do about the importance of quality journalism," Post Co. CEO Donald Graham said.

"We found that person in Sidney Harman." Graham added, "He has pledged not only to continue to produce a lively, compelling and first-rate news magazine, but also an equally dynamic Newsweek.com."

The Post Co., which acquired Newsweek in 1961, has been looking for a buyer since May, when it hired the investment bank Allen & Co. to help shop the magazine to potential bidders.

Despite continuing losses, Newsweek drew several offers, including ones from Newsmax Media, the publisher of the conservative monthly Newsmax; Open Gate Capital, the private equity firm that owns TV Guide magazine; and Thane Ritchie, a hedge fund manager who made an unsuccessful bid last year for the company that publishes the Chicago Sun-Times.

The winning bidder founded Harman International Industries in 1953. Today, the company brings in nearly $3 billion in annual revenue selling equipment under brands including JBL, Infinity, Harman Kardon and Mark Levinson.

Its audio products are used in such auto brands as Daimler AG's Mercedes-Benz, BMW AG and Toyota Motor Corp.'s Lexus.

Though he retired from the company in 2008, Harman still holds a number of titles at philanthropic and cultural institutions, including the Aspen Institute and Freedom House.

He is the husband of California Democratic Rep. Jane Harman, who is chairwoman of the House Homeland Security subcommittee on intelligence. - AP

* We yet see another magazine buyout. Online ads is gradually or should i put it rapidly taking over conventional ads on magazine, newspaper, flyers, etc. This makes conventional magazine company going down with less advert opportunities. A very good example would be playboy magazine, it was a hit on it heydays and when online porn come into place, the once mighty playboy yet have to go down. Btw, Harman/Kardon is a good product, but my Toshiba laptop embeded with Harman/Kardon speaker has broken on one side. SAD

BLand to launch projects worth RM500m this year

By Biz Times

BERJAYA Land Bhd (BLand) (4219) will launch new projects worth more than RM500 million this year to take advantage of pent-up demand for housing in the Klang Valley.

BLand is bullish on the property market, its senior general manager of properties and marketing, Mah Siew Wan, said.

"We are seeing a return of buying interest for high-end houses. Our properties are all unique and in prime areas so we are confident of brisk sales," she told Business Times in an interview.

BLand, 53 per cent controlled by Tan Sri Vincent Tan's Berjaya Corp Bhd, will launch Vastana25, a high-end project, at Seputeh Heights in Kuala Lumpur by end-July.

Last weekend, it relaunched The Peak at Taman TAR in Selangor.

The Peak, comprising 88 guarded and gated bungalow lots, was re-launched as it now has freehold status.

By the end of this year, BLand will launch KM1 Condominiun in Bukit Jalil and shop offices in Berjaya Park in Shah Alam, Selangor.

The group has about 10 ongoing developments worth some RM1 billion and it will launch more projects next year, Mah said.

BLand has some 400ha in the Klang Valley with the potential of generating more than RM8 billion in gross development value.

It also has projects in China, Vietnam and South Korea worth more than US$12 billion (RM 38.4 billion).

In China, BLand has a mixed-development project comprising retail, entertainment, theme park and water park in Sanhe City, Hebei Province. It has yet to launch the project.

Infrastructure work on its maiden US$3 billion (RM9.6 billion) resort-type mixed-development township project in South Korea has started.

The project featuring apartments, serviced residences, semi-detached and resort-style villas, a wellness resort, a casino and resort hotel, hotel residences, a mall and an indoor arena will be launched next year.

In Vietnam, BLand has a US$6.3 billion (RM20.7 billion) mixed-development project in Dong Nai Province.

* Bland is coming up with new property development this 2years (2010, 2011), we shall see other players joining in for the following months. "km 1 condominiums is open up for registration" caught my attention. Did a little searches and found that it is a total 300units condo (Density of the Condo is still reasonable & manageable, but i foresee they are many condo popping out like mushroom in that area) Hopefully it will not really dents up that area! hehe.. Location of km 1 condominiums is just beside Green Avenue Condominiums and opposite The Link, check it out "km 1 condominiums location". I guess Bland is offering the Golf Course View again to attract buyers, but i'm not sure.

* My 2cents of thought

Kuala Lumpur International Financial District (KLIFD)

Read an article on the star about the MRT to give high economic investment return. An interview by STARBIZ to Gamuda Bhd group MD Datuk Lin Yun Ling. It come to my attention on the Kuala Lumpur International Financial District (KLIFD), was curious about the location and information about of this KLIFD.

Come to realise that it is a proposed joint property development comprising office towers for finance and banking, residences and retail spaces between 1Malaysia Development Berhad (1MDB) and the Mubadala Development Company on a plot of land covering 34.4 hectares near Jalan Tun Razak, Kuala Lumpur. (Near Jalan Davis in Pudu, at 1st i tot it was on the Sg.Besi airport/ airfield)

Unfortunately the KLIFD groundbreaking was ceremony postponed due to unknown reason. The event was reported that, was to be inaugurated by Prime Minister Datuk Seri Najib Razak and General Sheikh Mohammed Zayed Al Nahyan, the Crown Prince of Abu Dhabi and deputy Supreme Commander of the United Arab Emirates Armed Forces.

Anywhere is the location of the Kuala Lumpur International Financial District (KLIFD)- http://wikimapia.org/#lat=3.1390485&lon=101.7160821&z=17&l=0&m=h

Hopefully it will start work and MRT will be connected to this area.

Malaysia FRS 139, are they ready for it?

By The Star

COME Jan 1, the Malaysian Accounting Standards Board’s Financial Reporting Standard 139 – Financial Instruments: Recognition and Measurement (FRS 139) will finally be implemented in Malaysia. Four years since its implementation date was set, it is still considered uncharted waters for many corporations. This is not surprising since FRS 139 is considered the “mother” of all standards by some.

Under FRS 139, many financial assets and financial liabilities are required to be carried at fair value. This will have a significant impact on loans between related parties, which generally can be interest-free or carry interest rates which are well below the market rates.

The definition of fair value under FRS 139 is “the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction”. Paragraph 48A of FRS 139 further states that “The best evidence of fair value is quoted prices in an active market ... Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available ... ”

Interestingly, it loosely echoes the Organisation for Economic Cooperation and Development’s guide for an arm’s length interest rate:

“... an arm’s length interest rate shall be an interest rate which was charged, or would have been charged, at the time the financial assistance was granted, to uncontrolled transactions with or between independent persons under similar circumstances.”

It could well imply that the measurement of related party loans initially at their respective fair values and subsequently at amortised cost using the effective interest method, may be deemed to be in line with the arm’s length principle since market interest rate is used.

Following the introduction of Section 140A of the Income Tax Act 1967 (ITA) which basically requires taxpayers to ensure that their related party transactions are carried out at arm’s length, would this then mean that an assessment of the fair value of related party loans by the auditors under FRS 139 can serve as contemporaneous documentation for transfer pricing purposes?

The corporate taxpayers do not have an option as to whether to accept the fair value accounting treatment in their financial statements – it is a requirement of FRS 139 and also the Companies Act 1965.

Further, requiring corporations to measure related-party loans initially at their respective fair value may not only affect the income statement. However, for certain, the subsequent amortisation amounts, measured at amortised costs, will represent accounting interest income or interest expense in the income statement. Book entries are generally not the actual receipts or payments, and in tax terms are not real costs or income earned.

At this point, it would be helpful to look at what other tax jurisdictions have done under similar circumstances. Hong Kong, Singapore and New Zealand tax authorities have issued departmental interpretation and practice notes on the income tax implications arising from the adoption of IAS 39 or its local equivalent.

While in general most tax authorities require the tax treatments to follow or be consistent with the accounting treatment under FRS 139 as far as possible, they also acknowledge that the revenue versus capital consideration would need to be considered in determining the tax treatment.

As an example, in Singapore, the tax adjustment is such that the discount on the interest-free loan recognised in the income statement will not be allowed as a tax deduction and the interest income recorded will not be taxed because these are merely book entries.

The auditor’s primary role is still that of expressing an opinion as to the true and fair view of the financial statements. This means that corporations would still need to provide auditors with supporting evidence of the fair value of the related-party loans to enable auditors to express an opinion.

The fair value measurement rests on the rebuttable presumption that effective interest rates used in the amortised cost method is the market interest rate and is thus, at arm’s length. While this is generally true, loan arrangements made with unrelated parties in the current business environment should be considered as arm’s length, although they may not carry the same market interest rates due to various factors such as level of credit risks, tenure, size of collaterals, etc.

So, what would corporations provide to the auditors? Section 140A of the ITA provides that the acquisition or supply of property or services with related parties be conducted at arm’s length, failing which the Director General of Inland Revenue may adjust the transfer prices.

Since 2003, transfer pricing guidelines have been issued, setting out the extent of information required in a transfer pricing report. The guidelines also stipulate that it is a pre-requisite that a comparable analysis (benchmarking) be carried out to substantiate the arm’s length pricing.

To ensure that corporations provide auditors with the correct arm’s length and market rate interest for related-party loans in the FRS 139 measurement of fair value, it is very likely that a comparable analysis would need to be carried out. This should then provide the setting not only for the auditors but for the tax authorities in support of the argument for arm’s length. Any fair value book entries put through the financial statements should then be met with minimum queries from the tax authorities.

Written by Janice Wong is tax partner and head of transfer pricing services at Ernst & Young Tax Consultants Sdn Bhd.

*What is the impact of implementing FRS 139? Rumour in the financial industry is that it will have a huge impact on the reports of collection system.

Warren Buffett in India?

By The Star

OMAHA, Nebraska: Warren Buffett said on Saturday he plans to visit India next March, and would not rule out the country for possible future investments.

Speaking at Berkshire’s annual meeting in response to a shareholder question, Buffett said he had decided only on Friday to make the trip, saying the company’s Iscar Metalworking Cos unit “is doing very well there”.

He said “we do not rule out India” as a possible locale for future Berkshire investments, whether in companies or marketable securities, though bureaucratic obstacles could complicate any plans to invest, including limitations on foreign ownership.

“We’ve looked a lot at being in the insurance business in India,” he added. Insurance and reinsurance are Berkshire’s main business lines. Demographers expect India to overtake China as the world’s most populous country within the next two decades, and Buffett predicted that “people in India will be living a lot better 20 years from now.”

Buffett does not disclose where he plans to make future investments, but occasionally travels outside the United States to seek opportunities or check on Berkshire investments.

Among Berkshire’s investments in Asia are the South Korean steelmaker Posco and Chinese car and battery maker BYD. — Reuters

Both have been profitable, giving Berkshire respective paper profits of US$1.32bil and US$1.75bil as of year-end, according to Berkshire’s annual report. — Reuters

iPhone - a temporary satisfaction with a long term slave

By The star (SOO EWE JIN)

THE thing about technology is that there is no finality to it. More so when it comes to everyday technology.

Take, for example, the smartphone. I have nothing against the iPhone, the BlackBerry or the Android. They have fantastic features and I can assure you that if I have cash to spare, I will happily buy an iPhone.

Not only will I look cool, but it will really freak out the young people who call me Uncle when I use it to play the golden oldies out loud.

But my boss will probably want me to buy the BlackBerry. After all, it has become a necessary accessory of the successful working man, like the tie.

Well, I have seen how this group of people like to hang out in Mont’ Kiara after work. They are able to remove their ties, but they are constantly interrupted by their BlackBerry. And it’s always about work.

As for me and my trusty ordinary handphone, it’s often just an SMS from my dear wife asking me to remember to buy a loaf of bread on the way home.

The problem with all these fancy gadgets is that we are thrilled initially as we try out everything and anything available. But eventually, we only use a smartphone, well, as a phone.

I read an article in The New York Times last week about a feature that is fast gaining popularity. It’s called FourSquare. Basically, it allows you to beam your location to your friends so that they know where you are.

Let’s say you promised to meet friends at Suria KLCC but forgot to tell them where exactly. By beaming your location, your friends can track you down to the exact shop that you are in.

I am sure the women reading this article will be more than happy to tell their husbands or boyfriends to get connected to FourSquare.

It will end forever the little white lies that they tell like, “Sayang, I will be a bit late, still at the office lah!”

“Oh no, you are not! You are hanging outside the spa at Mid Valley and if you don’t come home this minute, you can sleep on the sofa tonight!”

Get the idea?

Actually, it’s a marketing strategy to push us to embrace anything that is new, even though old technology works just as well.

A friend, knowing how much I love the good old days, decided to give me his old PDA last week. These days, PDAs no longer exist since all their features are embedded into the phones.

I am now collating all the information I need, including the full records of my DVD collection, my books, my friends’ email addresses, and all their birthdays, on this cute little Palm.

At the dentist the other day, I whipped out the PDA to read a book about the life of William Wilberforce which I had downloaded. It went well for a while, and then the strain got to me, so I switched it off and reached out for the Reader’s Digest. It was an old issue but it kept me occupied, and happy.

Next to me, a young man was probably happier. He was busy taking photos of his beautiful girlfriend, who was taking a nap, on his iPhone.

* I found this article pretty interesting as i saw many youngster who would indulge into such fancy phone jst for a temporary satisfaction and a long term slave to it.

Small Office/Home Office (SoHo)

By the Star

CB Richard Ellis Malaysia Sdn Bhd managing director Allan Soo says the typical SoHo buyer are mostly independent individuals rather than professionals.

“This can be advertising agencies or those within the IT industry.”

Soo says the location of the SoHo is critical.

“It definitely makes sense to work in the city within a business environment and having your business partners nearby. If it’s going to be a hassle for your clients to come to you, than it does not make sense.”

Zerin Properties chief executive officer Previndran Singhe concurs that the location of the SoHo is very important.

“You need to be around amenities. Otherwise it’s going to be tough! But ultimately, it all depends on both the product and the location of the property.”

Wong, however, reckons that a SoHo buyer would be more comfortable working outside of the city centre.

“The whole idea of living and working in the same environment is so that you can avoid the hassle of getting stuck in traffic jams when travelling to your place of work.

“People who operate out of a SoHo would most likely prefer a quiet environment rather than to be smack in the middle of the city centre and dealing with the noise. The ideal location would be the outskirts of the city, near a park or commuter train station.”

A search on iproperty.com, the country’s top property portal, reveals four SoHo developments that are currently in the pipeline.

They are the Selangor State Development Corp’s (PKNS) Kasturi Idaman in Kota Damansara, HR United Group’s SB1 and Persanda 2 in Sungai Besi and Shah Alam, respectively and Ong Chong Realty Sdn Bhd’s PJ5 SoHo in Kelana Jaya.

Previndran says there is a growing market for SoHo developments and cited YTL Land & Development Bhd’s CENTRIO at Pantai Hill Park in Bukit Kerinchi, Kuala Lumpur.

According to reports, 70% of the development (at CENTRIO) have been sold. It opened for sales in 2006.

Akashdeep Singh, a 30-something freelance film editor, says working from a SoHo provided him with great flexibility.

“Some people enjoy this lifestyle – working late and sleeping overnight. It can lead to a lot of office romances,” he says, laughing.

Akashdeep, who was going to India for a month that same day, says: “And in cases of emergencies, like if you need to take a sabbatical, you can avoid the hassle of giving notice. In a normal working environment, it’s hard to do this.”

Former lawyer Melissa Ram used to work out of her home and relished the fact that she could completely avoid traffic jams.

“There’s a lot of flexibility, plus there’s no overhead cost or rentals to worry about. With the internet, you can work from virtually anywhere.”

Melissa, however, adds that there were also drawbacks when working from home.

“Sometimes when you need to meet with clients, having them over in your house isn’t appropriate and in such situations, having an office would be better. In such situations, you would have to go out of your way to meet your client rather than to have the convenience of them coming to you.”

She adds, however, that if given a choice, she would still prefer to work from home.

“While working you could still manage the house and do the cooking. Plus, you could work till midnight and not have to worry about security issues.”

Malaysia Goods and services tax (GST) in 2011 and 2012??

By The Star

It is not a question of if but when the goods and services tax (GST) will be implemented in Malaysia, according to Taxand Malaysia Sdn Bhd managing director Veerinderjeet Singh.

The GST had been scheduled to replace the current sales and services tax (SST) by the middle of next year.

But Second Finance Minister Datuk Ahmad Husni Hanazlah recently said the government would defer tabling the GST bill for a second reading in Parliament.

Husni had said the government wanted more time to seek public feedback before proceeding with the GST.

But Veerinderjeet believes it is only a matter of time before the GST is implemented despite the deferment in tabling the GST.

“We believe that if the GST is not implemented this time next year, it would likely be implemented the following year,” he told reporters after his presentation at the GST & Other Indirect Tax Developments seminar yesterday.

The seminar was organised by Taxand Malaysia and the Malaysian International Chamber of Commerce and Industry.

Veerinderjeet said the seminar was to educate professionals on the actual mechanics of GST in preparation for the eventual implementation of the GST. “Businesses in general need to understand the detailed rules and consider how these would apply to their own business operations. “Failure to do so may result in the loss of the set-off or credit for input taxes suffered and/or being exposed to onerous penalties for non-compliance with the law,” he said. On the challenges of implementing the GST, he said there were several, including pricing and embracing appropriate technology in areas such as GST collection at each stage of the supply chain. On the proposed GST rate at 4%, Veerinderjeet noted that the current SST rate far exceeded the proposed GST rate.

So does this means that everything is goin up? Inflation would be cap high? Property prices are goin to go further up? I just think that KL property prices has gone crazy and overly priced. The real problem is there are buyers who are willing to pay that price that has been overly priced. E.g Valuer only value that piece of 2nd hand corner 2 storey terrace link house property at Cheras for 450k but the seller is asking for 600k and the buyer just blindly purchase that piece property. Nobody's fault and is there a mechanism to educate ppl? lolx.. Else KL property will gorang untill hangus :P

Malaysian property market to improve further this year

Its been a long time i leave it rot and there are many valuable business news that i missed out:

1. The new LRT (The Star) extention from Sri Petaling all the way to IOI Mall, everyone is predicting where will all the station will be location. Kinarara suddenly become a boom.
2. The internal conflicts of Ho Hup, land sold in a lower price. Can we still trust Ho hup on its new project in Bukit Jalil/Kinrara? Its a strategic piece of land though!

Let's continue with some interesting and valuable insights!

By The Star

The Malaysian property market, estimated to have registered transactions worth RM75.42 billion last year, is expected to improve further in 2010 in line with the economic recovery.

The transactions involved 337,990 properties as compared with the 340,240 valued at RM88.34 billion in 2008, said the director general of Valuation and Property Services Department, Finance Ministry, Datuk Abdullah Thalith Md Thani.

He said the challenging economic and financial environment had affected the overall performance of the Malaysian property market last year. "2010 will be a good year for all.

"The property market for this year will improve as the number of transactions involving new housing and construction activities, increases," Abdullah Thalith told reporters at the Third Malaysian Property Summit 2010, here Tuesday.

He pointed out that Malaysia is expected to steer towards a recovery path this year, driven primarily by domestic demand, with commodity prices for rubber, crude oil and palm oil also improving.

These, he said would increase the confidence level among consumers and provide a positive impact for the property sector.

"The demand for properties is returning," he added.

Abdullah Thalith said the government would continue to implement appropriate measures to restore confidence and market sentiment.

He said the liberalisation of Foreign Investment Committee (FIC) guidelines, would increase the competitiveness of Malaysia, as a preferred investment destination.

Furthermore, Abdullah Thalith said acquiring properties in Malaysia would be more attractive, as FIC approval is no longer required.

He said the review of the Real Property Gains Tax (RPGT) would also augur well for the property industry. - Bernama

Banks are getting more business with their mortgage loan pie expanding wide. NPL will also be monitor with the new Bank Negara Malaysia ruling. So the very big questiong with property investor (2010) : will bank negara malaysia will review its lowered BLR rate? hehe..