Category: Blog

Blog

Things You Need to Know About SPACs

Post author By admin
Post date October 6, 2022

Things You Need to Know About SPACs: A Malaysian Guide

Thinking of going public but unsure if a traditional IPO is the right path?

Special Purpose Acquisition Companies (SPACs) have emerged as a faster, more flexible alternative to IPOs—especially for businesses looking to list globally.

A special purpose acquisition company (SPAC) is also known as a “blank check company.” It is an entity that has no commercial operations and is meant to complete the initial public offering (IPO) procedures.

For companies and investors, there are several important aspects of SPACs that they should know about to ensure they are fully familiar with this important concept.

In this regard, professional accounting firms in Malaysia are also instrumental in helping companies form a SPAC.

Keep reading to learn all about SPACs.

What is a SPAC?

A SPAC (Special Purpose Acquisition Company) is a company with no commercial operations that raises capital through an initial public offering (IPO) for the purpose of acquiring an existing company.

Also known as “blank check companies,” SPACs exist solely to merge with or acquire a private company, taking it public without the traditional IPO process.

How Do SPACs Work?

1. Formation and IPO:

Formation

A SPAC is created by a group of investors, often with expertise in a particular industry or sector.

IPO

The SPAC goes public, raising funds from investors. The money raised is placed in a trust account until a target company is found.

2. Searching for a Target

The SPAC has a set timeframe, usually 18-24 months, to identify and merge with a target company. If no acquisition is made, the SPAC is liquidated, and funds are returned to investors.

3. Acquisition and Merger

Once a target is identified, the SPAC and the target company negotiate terms. Upon agreement, the target company merges with the SPAC and becomes a publicly traded entity.

SPAC Growth Over Years

Data Source: HBR Article

Special purpose acquisition companies (SPACs) have seen a dramatic increase in activity over the past few years. This growth is reflected in both the number of SPACs created and the amount of capital invested.

2019: In 2019, the SPAC market was relatively modest, with 59 SPACs created and $13 billion invested. This year marked the beginning of an upward trend in SPAC activity.
2020: The year 2020 witnessed an explosion in the SPAC market. The number of SPACs created surged to 247, with a total investment of $80 billion. This significant increase can be attributed to a growing interest in alternative investment vehicles and a favorable economic environment for raising capital.
2021 Q1: The momentum continued into the first quarter of 2021. In just the first three months, 295 SPACs were created, raising $96 billion. This rapid growth indicates that SPACs have become a mainstream method for companies to go public, driven by the speed and flexibility they offer compared to traditional IPOs.

SPACs vs Traditional IPOs: What’s the Difference?

Higher Valuations

SPACs often offer target companies higher valuations than they might receive through a traditional IPO.

Speed to Market

The process of going public via a SPAC is generally faster, sometimes taking just a few months compared to the lengthy and complex traditional IPO process.

Lower Costs

SPACs typically involve lower underwriting fees and fewer regulatory requirements, making them a more cost-effective option for companies.

Feature	SPAC	Traditional IPO
Timeline	6–12 months	12–24 months
Regulatory Process	Faster, less complex	Heavily scrutinized
Valuation	Negotiated with sponsor	Market-driven
Cost	Lower advisory costs	Higher underwriting and legal fees
Risk	Uncertainty in target identification	Market timing & volatility

Goals of SPACs

The primary purpose of a SPAC is to bring a private company into the public market. Implementation of SPAC strategies can be quite difficult, but they take less time than traditional IPO listing.

Moreover, taking a company public via SPAC is cheaper compared with a traditional IPO because it involves lower advisory charges. Organizations that are in their early stages can easily fulfill the requirements to merge with a SPAC and complete the IPO process.

Benefits of SPACs

Faster Process

The timeline for taking a company public via a SPAC is often shorter than a traditional IPO.

Reduced Costs

SPACs can offer a more cost-effective route to going public.

Experienced Sponsors

SPACs are typically led by seasoned executives and industry experts, which can provide credibility and strategic advantages.

Risks and Considerations of SPACs

Uncertain Outcome

Investors in a SPAC are essentially betting on the ability of the SPAC’s management to find and acquire a successful target.

Dilution

SPAC founders typically receive a substantial percentage of shares, which can dilute the value for other investors.

Market Conditions

The success of a SPAC can be heavily influenced by market conditions at the time of the acquisition.

What Happens in a SPAC Merger?

The process of forming a SPAC starts by raising capital on a stock exchange. Generally, the common stock is priced at $10, and warrants are offered to purchase additional shares to attract investors.

A trust account is used to hold the initial sale of stock until a suitable merger partner is found to complete the IPO process.

The team behind the SPAC is responsible for identifying and negotiating a suitable business structure with a private entity to get the desired results. This process can become smooth and easy with the help of an accounting firm in Malaysia.

Once the investors are familiar with the target company, the initial share price of $10 changes, and the deal terms are decided accordingly. The share price can keep adjusting according to the developing situation.

Generally, SPAC share prices will see huge growth after the announcement of the acquisition target. However, if the sentiment toward going public turns negative, the SPAC’s share price can decline as well.

The announcement of the merger is followed by a “de-SPAC” transition period. There is typically a certain time period between the formal merger announcement and the close of the deal when investors decide the overall terms and handle legal matters.

Once a deal is announced, the de-SPAC transition begins. There is usually a time between a formal merger announcement and the close of a deal (when investors vote on the deal), and other legal matters are resolved.

Once a SPAC has raised money, it has about 18 to 24 months to identify and find a suitable merger partner. Companies that encounter difficulty in finding the best partner can rely on experts like a professional accounting firm in Malaysia for the best recommendation and outcome.

Why Would Someone Invest in a SPAC?

It is common for investors to buy into SPAC before the announcement of a merger solely because of the trust they have for the SPAC’s management team and its ability to find a suitable target.

Therefore, it is important to note that many SPACs are backed by large-scale investors, celebrities, and popular athletes.

The share prices of SPACs were stable before the merger. The ideal practice is that SPAC invests all of the money it raises into government bonds or other safe forms of investments.

It is useful for investors as they get to make a modest return and minimize the risks of financial loss while they look for the perfect merger partner.

Buying shares in an emerging SPAC can be a leap of faith, but the profits can be massive in both the short and long term. It is possible for the share price to change immediately after the deal announcement. In such a situation, investors can greatly benefit from rapid price increases.

Recent Trends of SPACs

SPACs have gained popularity in recent years, with a significant increase in both the number of SPACs formed and the amount of capital raised. High-profile mergers and successful public listings have driven interest and investment in this vehicle.

SPACs: Global and Malaysian Perspectives

Regulatory Revisions in Malaysia

Malaysia has revised its SPAC framework to enhance the attractiveness and flexibility of this investment vehicle. The Securities Commission Malaysia (SC) implemented key changes effective from January 1, 2022, reducing the minimum capital requirement for a SPAC IPO from RM150 million to RM100 million.

Additionally, the minimum issue price per share was increased from RM0.50 to RM2.00 to attract more sophisticated investors who can manage the unique risks of SPACs. Another notable revision is the flexibility in financing qualifying acquisitions, where SPACs can now use securities in addition to cash, providing more options for structuring deals (Securities Commission Malaysia, 2021).

These changes aim to create a more dynamic SPAC ecosystem and encourage companies in Malaysia to consider this route for public listing (SC Malaysia, 2021).

Global Trends and Market Developments

The global SPAC market has undergone fluctuations in recent years, but there has been a resurgence in activity. In 2024, approximately 55 new SPACs were issued, signaling renewed interest among investors and sponsors. This revival is attributed to improved market confidence and refined regulatory measures that ensure greater transparency (Financial News London, 2024).

In response to concerns over disclosure and investor protection, the U.S. Securities and Exchange Commission (SEC) implemented new rules effective July 1, 2024, aligning SPAC regulations more closely with traditional IPOs.

These regulations emphasize enhanced disclosures regarding sponsor compensation, potential conflicts of interest, and dilution risks, ensuring that investors have clearer insights before making commitments. Such regulatory refinements reflect the global push for stronger governance within the SPAC market.

Evolving SPAC Structures and Investor Preferences

Are SPACs Allowed in Malaysia?

Currently, Malaysia does not allow SPAC listings on Bursa Malaysia. However, Malaysian companies can pursue SPAC mergers via foreign exchanges like:

Hong Kong Stock Exchange (HKEX)
Singapore Exchange (SGX)
NASDAQ or NYSE (USA)

This route is often supported by cross-border advisory firms such as ShineWing, who understand both domestic regulations and international listing standards.

ShineWing’s Role in SPAC Advisory

At ShineWing TY TEOH, we support Malaysian and regional businesses in navigating SPAC transactions, from pre-deal preparation to post-listing compliance.

Our SPAC advisory services include:

Feasibility assessment & go-public strategy
Legal, tax, and financial structuring
Investor presentation support & sponsor alignment
Cross-border regulatory compliance
Post-merger integration and financial reporting

With our international network and regional experience, we ensure your SPAC journey is efficient, compliant, and aligned with long-term growth goals.

Should You Consider a SPAC?

SPACs are ideal for:

High-growth Malaysian companies seeking international exposure
Tech, healthcare, and consumer brands looking to scale fast
Private equity-backed firms planning exit strategies
Founders seeking quicker, controlled access to public capital

Conclusion

SPAC is not the traditional method of taking a company public and making money. However, it is a popular alternative to the conventionally lengthy and difficult IPO process. Moreover, it can give great financial benefits to investors and acquisition targets when the best SPAC merger practices are implemented.

In order to make this process smooth and successful, it is highly recommended that companies rely on a professional accounting firm in Malaysia to ensure the experts are there to handle such important matters in the best way possible.

Tags SPAC, Special Purpose Acquisition Company

Blog

What Are The Risks Of SPAC And How To Avoid Them?

Post author By admin
Post date September 1, 2022

What Are The Risks Of SPAC And How To Avoid Them?

Due to the extra funds private equity and venture capital companies need to invest, the emergence of Special purpose acquisition company (SPAC) vehicles has increased over the last year.

An SPAC is a shell organization created for the express aim of obtaining money via an initial public offering (IPO) in order to subsequently buy a target company. It has no track record of success and generates no income.

These firms often need to make major balance sheet adjustments within their first few months as public companies and must disclose publicly if their external auditors find severe flaws in their internal controls over financial reporting.

Many different factors can go wrong while establishing and managing an SPAC. However, professional pre-IPO advisory and accounting services in Malaysia allow you to avoid most of these issues by implementing suitable strategies.

The purpose of this article is to discuss the major risks of SPAC and what steps you can take to avoid them.

Warrants

Warrants are substitutes for the mother’s shares and are traded for less money. Warrant prices often fluctuate in sync with mother share prices.

If the transaction is successful, the warrants may continue to be traded on the market and have the opportunity to be converted into mother shares. If an agreement cannot be made, there is a possibility that the warrants will expire worthlessly.

A set of warrants is offered to early investors in an IPO. The price of the warrant and shares will rise as time goes on and news of transactions reaches investors. At this moment, there will be a strong urge to join the group.

You run the danger of being caught in the speculative surge if you enter the warrant at a high price on speculation. You will be left with a costly warrant if the sale goes through. Your only remaining choice at this stage may be to cut and accept a loss.

Merger Quality

Deals are not always good just because they are completed. An SPAC may become a full-fledged public listed company if a transaction is completed. The most frequent complaint about SPAC is that the sponsors prioritize the deal’s chances while disregarding its quality.

Due to their post-merger share vesting, sponsors often walk away with a windfall. The goal of mergers should be to benefit all parties, but in reality, there is always room for doubt.

Moreover, keep in mind that the failure of SPAC can affect investors unequally. This does not imply that the SPAC teams driving unsuccessful agreements lacked thoroughness.

However, because of how SPACs are set up, their team members—known as sponsors—are unlikely to suffer if that occurs. Their tiny investors are often disproportionately impacted.

Goodwill

The amount that appears on the balance sheet after a business’s book value is deducted from the higher purchase price is referred to as goodwill in accounting. Some De-SPAC deals show astronomically large goodwill allocations.

For public firms, different goodwill accounting standards (ASC 350) apply. Companies may choose to amortize goodwill under private company GAAP, and they may also consider a future goodwill impairment test to be a triggering event.

Lease Accounting

The standard makes a substantial shift by requiring that the entire extent of a company’s long-term lease commitments be stated on balance sheets. The main issues for businesses are twofold: the new standard will be adopted more quickly and sooner than anticipated, and private organizations will no longer have access to certain policy alternatives.

Keeping Up with the Innovations

Companies must be able to swiftly and accurately prepare financial reports that can withstand intense SEC inspection as well as public scrutiny.

Many of the target companies may not necessarily be sophisticated enough to keep up with the speed of a public corporation. There will be a lot of demands on people, processes, and technology.

There will be changes to procedures. Most likely, you’ll need to increase the number of your personnel.

If the organizations rely on professional accounting services in Malaysia, they will be in a very good position to avoid these SPAC risks and rely on experts for pre-IPO advisory services.

Conclusion

In the last two years, SPACs have emerged as one of the most intriguing investment vehicles. Nevertheless, it is highly important to understand everything about SPAC and its risks before you jump into it. Try to avoid the hype and be aware of what you are getting into.

Don’t take chances to get rash, rapid returns. If you want to enjoy sustainable growth and profits, you should rely on professional accounting services in Malaysia to benefit from pre-IPO advisory and make smart decisions through the process of establishing and managing SPAC.

Tags SPAC, Special Purpose Acquisition Company

Blog

Staffing vs. Placement: What is the Difference?

Post author By admin
Post date September 1, 2022

Staffing vs. Placement: What is the Difference?

When the time is right, it could be essential to increase the number of temporary and permanent personnel in your workforce to meet the needs of your company. However, finding qualified and capable people requires time and effort.

Recruitment and employment of temporary and permanent personnel are handled by staffing and placement services. While both services help organizations find qualified workers, placement services provide long-term employment solutions, while staffing services often offer temporary assistance.

If you are not familiar with the differences between staffing and placement, you are in the perfect place. In this article, we will discuss these differences in detail.

What is Staffing?

A corporation may increase its sustainable human resources by hiring new employees. This implies that it covers every step involved in recruiting and keeping the organization’s staff. The employment landscape is competitive right now, making it exceedingly challenging for businesses to choose the best individuals.

The act of employing qualified applicants who have independently submitted an application for a position is referred to as staffing. It often entails a number of processes, including figuring out how many workers are needed to fill the available positions and enticing outside candidates to apply.

Organizations can rely on professional staff management services to ensure they can hire the best staff that will enhance the efficiency and productivity of the business.

What is Placement?

Placement services, as opposed to staffing services, focus on filling positions for long-term employment within certain areas, including healthcare or IT. These consist of headhunters, recruitment agencies, internal or corporate recruiters, and consultancy businesses.

Most hiring companies or candidates pay placement agencies a commission or a portion of the employee’s first year’s wages.

Staff placement services are used by businesses to screen, interview, and propose competent individuals for permanent employment. If a company is looking for a skillful person or team for a particular department, it is possible to contact specialized companies as well.

For example, they can acquire accounting services in Malaysia to hire professional accountants. Initial interviews are conducted by the placement agency to choose the top prospects from a large pool of applications. However, a company may conduct its own interviews after that.

Major Differences between Placement and Staffing

Staffing

Staffing, or the hiring of your future employees, is a function of placement. While staffing is a management task that entails a number of tasks.

Placement

Placement is a short-term objective to hire candidates for one position. Staffing, on the other hand, is a constant activity. Within a corporation, new possibilities often arise that need hiring new personnel. As a result of retirement or job loss, there may be ongoing employment openings. The hiring procedure is continually repeated.

In the early phases of placement for a position, potential applicants are sought after, and applications are welcomed. The role of staffing, on the other hand, is performed at all organizational levels and spans the period from when personnel is hired to when they depart the company.

Hiring the Best Candidate

Ask a staff placement service how qualified applicants are located and vetted before employing them. Local newspapers, online job boards, social media sites, and job fairs are often used by staffing and placement firms to find qualified individuals for both temporary and permanent roles.

Additionally, staffers network with other staffing and placement experts and small companies, often requesting recommendations from customers who have been hired for both temporary and permanent employment.

Employment companies also create applicant databases in order to match job vacancies with candidates with certain talents.

In addition to computer processing examinations, applicants may take aptitude tests in reading, writing, and fundamental arithmetic. The credentials of candidates may also be determined through additional examinations tailored to certain areas.

In addition to doing credit and criminal background checks, staffing and placement firms often examine references, resumes, and references.

In Closing

Experienced, qualified, and devoted personnel are valuable assets to a company. They are essential to your company’s productivity and profitability.

It’s crucial to continually hire new, skilled people while maintaining your current workforce. Recruiting and hiring are essential to ensure the best candidates are chosen for your company.

Generally, when you rely on professional recruitment and staff placement services, you do not have to worry about the details. Companies and services like the accounting services in Malaysia make sure that they are facilitating organizations in hiring the best person for the job.

Blog

What Type Of Company Is Required To Make The Sustainability Report?

Post author By admin
Post date September 1, 2022

What Type Of Company Is Required To Make The Sustainability Report?

A corporation or organization must publish its social, environmental, and governance performance in a sustainability report. It is important to note that sustainability reporting is also known as triple bottom line reporting, ESG reporting, and corporate social responsibility (CSR) reporting.

Ultimately, this report shares information about an organization’s non-financial performance metrics. It can also be a component of integrated reporting, which combines the analysis of financial and non-financial performance.

Conducting comprehensive sustainability reporting and producing such reports with the help of professional accounting firms in Malaysia is recommended for businesses of all sizes and industries so that they may become aware of their own influence and allow investors and other stakeholders to make choices that would help, not hurt, a sustainable future.

The Debate on Mandatory Sustainability Reporting

The issue of mandatory sustainability reporting has been the subject of contentious arguments over the last ten years, and each nation appears to have its own approach.

Such debates weaken the impact of sustainability reporting on a worldwide scale and are a significant problem for businesses with international operations, which should be aware of the sustainability reporting standards imposed in the countries where they operate.

Sustainability Reporting in Malaysia

Companies and ACE Market listed issuers have been obliged by Bursa Malaysia to annually disclose their corporate social responsibility (CSR) activities.

The whole social elements of the company and its workers are significantly impacted by this need. It is crucial to remember that it does not simply apply to organizations that pursue altruistic endeavors.

For various business types, the word “sustainability reporting” has varied meanings. Because more companies increasingly recognize the relevance of sustainability in many fields, the concept of sustainability has significantly changed throughout time. Stakeholders are placing more importance on maintaining the sustainability targets’ compliance.

Organizations that set ambitious sustainability targets and work to accomplish them are likely to gain a considerable advantage over their competitors, according to the current trend and industry experts.

Nowadays, company management is seen as using a comprehensive approach to sustainable growth with the help of accounting services in Malaysia. Similarly, accounting firms in Malaysia also facilitate different types of organizations to conduct sustainability reporting.

Barriers to Mandatory Sustainability Reporting

Studies have proven the fact that adopting sustainability reporting is a highly useful and reliable method of promoting sustainable practices among companies. However, there are still some significant challenges to implementing sustainability reporting in all types of organizations.

1. Lack of Coverage for SMEs

The majority of mandated reporting tools only apply to big or publicly traded corporations. One of the reasons for its rarity may be that certain regulators do not pay enough attention to the practice of ESG reporting among SMEs: although SMEs make up 90% of companies, only 10% of reports are included in the GRI Sustainability Disclosure Database originate from these companies.

2. Lack of Industry Standards

The voluntary reporting standards that are now available should be easily adopted by any organization if they are to become required. It is difficult to create such standards for all sectors, and there are currently no established or commonly used industry-specific standards.

3. Incompatibility with Country’s Rules and Regulations

It is challenging to determine if the nations give the authenticity of the reports the same amount of attention. Additionally, the levels of corruption in underdeveloped nations have the potential to erode public confidence in environmental impact reports made to national and international audiences.

There is a great need to standardize sustainability reporting practices on a global level and encourage countries to align their rules and regulations with these standards. It will allow all types of companies to easily go through the critical process of sustainability reporting.

4. Lack of Consensus

Whether or not reporting on sustainability should be required is still a hot topic of discussion. The most common responses are that voluntary reporting is driven by the market and offers reporting companies a competitive edge.

On the other hand, mandatory ESG reporting equalizes all businesses, restricts sustainability efforts to the desire to comply, and places excessive pressure on small businesses that have just begun their sustainability journey.

All in All

There is no doubt that setting and pursuing sustainable objectives has a lot of benefits. It enables businesses to increase production and maximize the efficiency of their operations.

Additionally, it raises brand value in the marketplace, which enables businesses to draw in more customers and grow.

Even if you think that sustainability reporting is too complicated, you can always rely on accounting firms in Malaysia to get expert advice about navigating this important process.

Blog

How to comply with the US GAAP?

Post author By admin
Post date September 1, 2022

How to comply with the US GAAP?

Accounting procedures and functions are highly important for companies and institutes. It is important to follow the global accounting standards to ensure these important procedures are completed with maximum quality and efficiency.

Professional audit firms in Malaysia assist businesses to get the benefit of efficient accounting and audit services by complying with international standards.

Many company owners are familiar with the accounting phrase “GAAP” but may not fully comprehend what it implies for their particular industry. However, certain businesses must disclose their financial information following GAAP.

The term “generally accepted accounting principles,” or GAAP, refers to a set of norms, practices, and guiding principles that the American accounting profession uses when reporting financial data. The American Institute of CPAs determines the criteria that constitute GAAP regulations.

This article discusses various aspects of US GAAP in detail to ensure compliance.

What is US GAAP?

The ten standards that make up the Generally Applied Accounting Principles are designed to keep financial statements from different organizations fairly consistent.

Financial reports are significantly simpler to assess inside a single organization or to compare across companies when accounting systems are similar across sectors. Investors and banks now have a much simpler, more dependable approach to evaluating a company’s health and getting the data they want.

The ten standards that make up the Generally Applied Accounting Principles are intended to provide a reasonable level of consistency across financial statements from various businesses.

When accounting systems are consistent across industries, it makes it much easier to evaluate financial data inside a single company or to compare them across businesses.

Banks and investors now have a much easier, more reliable way to assess a company’s health and get the information they want.

The popularity of GAAP makes it popular all over the world, not only in the USA. Companies operating in various parts of the world can rely on GAAP for standardized accounting procedures.

Professional accounting services in Malaysia follow and implement such standardized functions to ensure consistency and quality of accounting and auditing procedures.

The Team Behind GAAP

The federal government of the USA does not originate or manage the set of principles, but it does compel public corporations to abide by them.

Instead, the creation, dissemination, and ongoing updating of the accounting principles is the responsibility of a small number of independent bodies and organizations.

The Financial Accounting Standards Board (FASB) is the primary regulator; it issues frequent reports, maintains thorough records, and provides companies and accountants with useful tools for converting to GAAP.

Despite being private and non-governmental, the board serves the interests of the general public. It has seven full-time members who are overseen by the Financial Accounting Standards Advisory Council, which has thirty members (FASAC).

Compliance with GAAP

Hiring an accounting services or audit firm in Malaysia is the simplest method to guarantee that your financial statements adhere to GAAP, or “U.S. GAAP,” as it is commonly known. Your accounting system may be set up with the aid of a CPA to categorize assets, liabilities, income, and costs correctly.

In most cases, GAAP compliance cannot be achieved simply by producing an income statement or balance sheet from your accounting software program. However, if you provide your accountant with a decent set of internally created records, he or she may make the required adjustments to bring them into compliance with GAAP.

At the conclusion of your fiscal or calendar year, lenders and other stakeholders often want GAAP-formatted financial statements, although it is typically not essential to pay for audited financial statements.

The AICPA recognizes three different types of financial statements, each of which has greater assurance from your CPA. Compilations and reviewed financial statements are often structured according to GAAP when created by a CPA or an accountant who is familiar with GAAP, but they do not offer the same guarantees as audited financial statements.

Audited financial statements guarantee the greatest level of data accuracy and GAAP compliance. When your company reaches a certain size, lenders and governmental organizations with which your company may do business often want these declarations.

Because the CPA company performing the audit must take several steps to conclude that all information is true and in line with GAAP, they may be highly costly.

While audited financial statements are pricey, they do guarantee that there are no accounting surprises for a prospective purchaser of your company.

Three years of audited financial statements are necessary if your business plans to go public in the future. Your borrowing rate may be reduced if you provide prospective lenders with audited financial accounts.

In a Nutshell

Complying with US GAAP is one of the best ways for organizations all over the world to standardize their accounting functions. The guiding principles are continuously adjusted and reviewed in order to meet the demands of both investors and company owners.

This demonstrates that GAAP is a dynamic agreement rather than a strict set of regulations trapped in the past. But there’s still an opportunity for development and improvement in US GAAP that will happen with the wide-scale adoption of these accounting principles.

Tags us gaap

Blog

What Are the 5 Main Financial Instruments?

Post author By admin
Post date August 2, 2022

What Are the 5 Main Financial Instruments?

Financial instrument valuation and business valuation in Malaysia have become complicated with the passage of time as many different factors now affect these processes.

Limited financial instruments like stocks and bonds were previously mainly used by investors. However, investing options have greatly evolved over time.

Nowadays, a lot of different financial instrument options exist in the market. Therefore, it is important to pick the right investment instrument to build a strong and well-balanced portfolio. Keep reading to learn about the top five financial instruments.

1. Exchange-Traded Funds (ETFs)

An ETF, or exchange-traded fund, is a crucial investing instrument to help your financial strategy succeed. ETFs are collections of securities traded on reputable exchanges. ETFs often include investments in stocks, bonds, commodities, currencies, or a mixture of them all.

When you invest in an ETF, you buy a portfolio of assets rather than focusing on individual securities. Your stake in the total assets is proportionate to the number of shares you possess in this respect. ETFs closely resemble mutual funds, but they also vary in a number of ways.

ETFs make investing simple. ETFs also provide diversified index fund management and minimal administrative expenses. ETFs provide you low-cost access and much-needed diversification into a certain sector of the market.

Over time, ETFs have become more popular as investments. If you have another ten or more years till retirement, this sort of market instrument is ideal for you, taking all things into account.

2. Mutual Funds

Mutual funds are a terrific investment product that you may consider to increase your financial results. Bonds, equities, and other assets are purchased by mutual funds using a collective amount of money from several individuals.

To diversify among financial vehicles and insure against possible market volatility, you may employ mutual fund investments.

If you have a pricey long-term objective or retirement plan in mind, they are excellent for you. You may also think about investing in index mutual funds as a safer alternative to mutual funds.

Stocks in an index fund, such as the S&P 500 or Dow Jones Industrial Average, are held. These investments provide returns comparable to the performance of the related index.

Index funds are less volatile and more cost-effective than mutual funds. They are advantageous for novice or intermediate investors.

3. Stocks

An equity stake in a corporation is represented by the stock. Stocks have one of the greatest possible returns on your investment but also carry the most risk. But when properly included in a portfolio, equities may eventually help give your finances that much-needed boost.

If you want to boost returns while maintaining a well-diversified portfolio, stocks are the ideal choice for you.

As a general guideline, you should reduce your stock allocation as you become older. You may balance risk and reward at different stages of your life with the aid of age-based equity allocation.

4. Cash Instruments

Financial products known as cash instruments have values directly affected by market conditions. There are two categories of cash instruments: loans and deposits and securities.

It is highly important to consider cash instruments during financial instrument valuation and business valuation to get the best results.

Loans and Deposits

Because they both represent financial assets with some type of contractual agreement between parties, loans and deposits are both regarded as cash instruments.

Securities

Security is a kind of financial instrument exchanged on the stock market and has a monetary value. Security indicates ownership of a share of a publicly listed corporation on the stock market when it is bought or sold.

If you hire a professional audit firm in Malaysia to handle business valuation, you should have no issue going through this process easily.

5. Real-Estate Investment Trusts (REITs)

As an alternative to conventional real estate investing, think about REITs, which let you indirectly participate in a property while generating significant returns. Like mutual funds that hold real estate, real estate investment trusts carry out similar functions.

These funds pool real estate assets, including condos, shopping centres, vacation houses, hotels/motels, office buildings, etc., and manage them from beginning to finish. These businesses regularly pay dividends.

A private REIT, where an authorized agent works for you in exchange for a commission, or a publicly listed REIT are also options.

If you currently have a well-diversified portfolio of equities, mutual funds, bonds, etc., and want to spread out even more or want to pursue better returns, REITs are the best option for you.

Having said that, you should be aware that assets tied to real estate are not liquid before making an investment. Therefore, getting access to money takes longer. Therefore, you should only invest in REITs if you do not have immediate financial needs.

Final Takeaways

These are the top 5 financial instruments you should know about to build a well-diversified investment portfolio and secure your future by ensuring financial independence.

Relying on professional accounting and audit firms in Malaysia is also a good option for you to go through processes like financial instrument valuation and business valuation.

Blog

PCAOB Audit: Do I Need It?

Post author By admin
Post date August 2, 2022

PCAOB Audit: Do I Need It?

A non-profit body called the Public Company Accounting Oversight Board (PCAOB) is in charge of policing auditors of publicly listed companies.

PCAOB’s main goal is to reduce audit risk. The U.S. Securities and Exchange Commission-registered public corporations, brokers, and dealers are subject to PCAOB oversight of their audits (SEC).

It is important for businesses, accounting services, and audit firms in Malaysia to keep up with the changing requirements and instructions of PCAOB to provide the best services and comply with the industry standards.

There has been a significant update in the PCAOB requirements for auditing accounting practice related to professional auditing procedures and fair value measurements.

The usage of accounting estimates and fair value measurements is also rapidly increasing in financial reporting, so accounting services in Malaysia should pay special attention to these requirements to provide maximum accuracy and efficiency.

It is also important for the auditors to evaluate or oversee the work of the specialists to minimize risks and remove errors from accounting procedures. This article explores these changes and the requirements of PCAOB in detail.

Fair Value Measurements

According to the PCAOB, the new, single standard establishes a consistent, risk-based methodology. It underlines the necessity for auditors to use professional scepticism when examining accounting estimates, particularly taking into consideration any managerial bias.

Moreover, the new standard also offers further guidance on how to handle specific issues specific to auditing the fair values of financial instruments, such as the use of price data from third parties like pricing services, brokers, or dealers.

Auditing the Specialists

The PCAOB said its revisions improve the standards for assessing a business expert’s work, whether that expert is hired or retained by the firm.

The PCAOB said that the modifications are intended to boost audit attention in areas where a specialist is engaged and match the relevant requirements with the PCAOB’s risk assessment criteria.

The changes also utilize a supervisory strategy for professionals who are both hired by and engaged by auditors. Two current auditing standards, AS 1105, Audit Evidence, and AS 1201, Supervision of the Audit Engagement, were modified by the PCAOB.

The new AS 1210, Using the Work of an Auditor-Engaged Specialist, renamed and replaced AS 1210, Using the Work of a Specialist.

The purpose of such amendments to the PCAOB rules is to significantly improve the quality of PCAOB auditing procedures and bring greater transparency to the global audit and accounting standards.

Requirements of the PCAOB Audit

Your Tier 2 Regulation A offering is exempt from PCAOB audits, and, of course, Tier 1 offers are also exempt from audit requirements. However, listing on the top two exchanges requires PCAOB level audits (NASDAQ, NYSE).

For a Reg A+ IPO to the major markets, the offering begins as a straightforward Reg A+, but shortly before the offering is scheduled to list, the structure of the Reg A+ Offering Circular is altered (the content is left unchanged) to resemble an S-1.

Companies must submit a PCAOB audit for the most recent quarter before listing to participate in these IPOs. And the securities lawyer makes a number of files after the listing to effectively upgrade the SEC filings to those of a full reporting public business on a significant exchange.

You must carry out the audit in line with generally accepted auditing standards using the help of an audit firm in Malaysia unless the audit falls within the PCAOB’s purview. The audit may also be carried out in line with PCAOB standards but not only in compliance with those standards.

The PCAOB decides whose financial statement audits are within its purview, including those of issuers and non-issuers, brokers and dealers registered with the SEC.

The audit does not come within the PCAOB’s purview only because a regulator (other than the PCAOB) demands that it be carried out in line with PCAOB standards.

As a result, even when the regulator—for instance, the CFTC—mandates that an audit be carried out in accordance with PCAOB standards, the audit must also be carried out in compliance with GAAS.

The auditor shall utilize the type of report required by the PCAOB standards, modified to specify that the audit was also carried out in compliance with GAAS when referencing the PCAOB standards in addition to GAAS in the auditor’s report.

In Closing

The bottom line is that PCAOB and other such relevant accounting and auditing authorities play an integral role around the world in monitoring audit firms and maintaining investors’ and the public’s trust in accounting and auditing procedures.

Such rules and regulations allow audit firms in Malaysia to operate within a standard framework and offer reliable services.

Tags PCAOB Auditors

Blog

BPO vs. Shared Services: What Is the Difference?

Post author By admin
Post date August 2, 2022

BPO vs. Shared Services: What Is the Difference?

Business Process Outsourcing (BPO) vs. shared services has always been a long debate when it comes to identifying their differences and choosing the best option among them.

Overall, both outsourcing and shared services are highly popular trends, allowing companies to make the most of their working procedures and maximize productivity. Most professional accounting firms and services in Malaysia offer both BPO and shared services.

Therefore, the goal of this article is to differentiate between BPOs and share services in detail to help you choose the best option.

What is Business Process Outsourcing (BPO)?

BPO is often seen as more effective since it uses superior systems and procedures. Since it is typically headquartered overseas, labour costs and overheads may be far cheaper than if this service were provided domestically.

Due to the knowledge of the resources inside these companies, outsourcing is often executed more swiftly and efficiently.

What Are Shared Services?

If your demands are unique, shared services can be a better option. A shared services model could be the best option if you have particular needs and non-standard procedures since BPO is typically one-size-fits-all.

The deployment of a shared services function inside a company, however, may be laborious and slow. Most often, this is due to a lack of internal expertise in providing this, and the service will fail if the systems, procedures, and data are not clear and effective.

Employee engagement might suffer greatly if the service is unsuccessful, and if users aren’t motivated to utilize it, they’ll fall back into their previous routines, making the service worthless.

Since thorough training is required to maximize the efficiency of the shared services, it is typically used by medium and large-scale companies.

Differences between BPO and Shared Services

BPO entails hiring an outside provider with the necessary resources and abilities to do the task you need to be done on their behalf.

Conversely, shared services relate to the establishment of a single, independent business unit to provide services concurrently needed by several divisions of an organization but which were previously provided “on-site” individually.

Since better systems, procedures, and technology often enable the outside vendor to execute the job more quickly and to a higher level, BPO is generally credited with delivering higher productivity.

However, if you already have the necessary time, tools, and expertise in-house, switching to an outsourced model may not be cost-effective given the money you’ll save and the higher quality of work you’ll get.

While it’s true that outsourcing often happens more rapidly, if the vendor’s abilities, outlook, and behaviour don’t align with the goals of your organization, the outcomes might be subpar or even ineffective.

Keeping these factors in mind, in general, you should explore shared services if you need a customized solution that can be implemented gradually.

On the other hand, BPO can be right for you if you need a general solution to fulfil your general requirements without paying significant attention to the internal working procedures of an organization.

In Summary

If your requirements entail standard processes that do not involve the internal factors of an organization, then BPO could be the perfect solution for you. On the other hand, if you want to consider unique requirements and allocate time and resources accordingly, then you should consider shared services.

Whether you want to implement BPO or shared services, you should consider factors like the end goal of an organization, the overall management engagement and support, and internal processes to arrive at the best option.

You can also consult professional accounting services in Malaysia to get help in exploring these differences in more detail and implementing BPO and shared services according to your specific requirements and business processes.

Blog

SPAC: Helpful Tips for Investors to Get Started

Post author By admin
Post date August 2, 2022

SPAC: Helpful Tips for Investors to Get Started

SPACs, or Special Purpose Acquisition Companies, have recently attracted a lot of interest from Wall Street, business boardrooms, and the media.

SPACs provide an alternative to conventional IPOs, have been available for decades in various versions and have become quite popular in various countries, including Malaysia, among pre-IPO advisory and accounting services.

Therefore, it is important for investors to be familiar with SPAC in order to make reliable decisions.

Goals of SPACs

SPAC acquisitions of private companies are popular because they are flexible and hassle-free than initial public offerings (IPO) for companies looking to go public.

The financial markets’ openness to new IPOs fluctuates according to the state of the economy and investors’ willingness to take on risk. A reverse merger enables a private company to go public after the IPO window has ended since a SPAC is already publicly traded.

Because their founders and other important shareholders may sell a larger proportion of their own shares via a reverse merger than they might with an initial public offering, SPAC purchases are also appealing to private companies.

The lock-up periods for selling newly public shares that are necessary for initial public offerings may likewise be avoided by private company founders.

Working of SPACs

SPACs use initial public offerings to obtain money for acquisitions. A Class A common equity share and a warrant make up the conventional SPAC IPO structure. A warrant allows its owner to purchase more shares of stock at a predetermined price in the future.

There is a possibility to exercise the warrants and get more common stock shares when the acquisition target is found and the deal is completed. The warrant is split off and trades independently from the SPAC shares a few weeks after the IPO is finished.

The SPAC management team is looking for a suitable acquisition target after the IPO. Since the IPO funds are invested in government bonds, the SPAC stock should trade close to that price throughout this time; nevertheless, during market selloffs, SPAC stocks are susceptible to falling below the IPO price.

SPACs may also trade above their IPO price if investors think management will find a strong candidate for an acquisition. SPACs have a certain amount of time to choose an acquisition target and complete the transaction. Typically, the phase lasts for two years.

The funds in the escrow account are refunded to the shareholders if the SPAC sponsor is unable to consummate an acquisition within the allotted time frame.

The SPAC sponsors will formally declare any possible target companies they find. The announcement date is the day when the general public is informed of the proposed purchase.

Risk Factors

Investing in SPACs is inherently hazardous since there is no assurance that the transaction will be successful. The risk is increased because SPAC acquisitions have less regulatory overhead than a traditional IPO.

Even though they may be nothing more than educated estimates, SPAC owners are permitted to offer forecasts of future profits. It’s crucial to do your own study as a consequence.

Since you are essentially investing in several SPACs at once with SPAC ETFs, the risk is fairly spread out.

However, you should still investigate how many SPACs the ETF owns, how evenly they are distributed among various industries, and the proportion of pre-deal SPACs to those that have already gone through the reverse merger process, because investing in SPACs prior to the merger has the potential to yield the highest returns.

It is important to consider all such risk factors when you are in the process of forming SPACs and going public with your company.

Market Saturation

The SPAC market is crowded, there aren’t many good targets left, and performance is declining, according to some experts. In 2021, SPACs underperformed both conventional IPOs and the entire stock market.

By the end of 2021, more than 60% of SPAC owners wanted their money back, prompting experts like Sonders to speculate that SPACs would no longer be a desirable investment.

In Closing

It is obvious that stock investing involves risk, but investing in SPACs also adds a new degree of excitement. Of course, a greater risk often offers a greater return.

All in all, as an investor, it’s important to do your homework, balance your portfolio, and educate yourself before investing in a SPAC stock or SPAC ETF.

Tags SPAC, Special Purpose Acquisition Company

Blog

What is the PCAOB, and what does it do?

Post author By admin
Post date July 1, 2022

What is the PCAOB, and what does it do?

The Public Company Accounting Oversight Board (PCAOB) is a nonprofit corporation established by the Sarbanes-Oxley Act of 2002 to oversee the audits of public companies. Its mission is to protect investors and enhance the accuracy and reliability of corporate disclosures through stringent oversight of audit practices. One of the PCAOB’s key responsibilities is registering, inspecting, and disciplining PCAOB auditors who audit public companies in accordance with U.S. federal securities laws.

History of PCAOB

As part of the Sarbanes-Oxley Act (SOX), which was implemented in reaction to a number of accounting crises (such as Enron and Worldcom), the PCAOB was established by Congress in 2002 to better regulate the auditing sector.

Before the PCAOB was established, the auditing industry was self-regulated. But in the early 2000s, it seemed that this strategy was falling short with the public.

The Securities and Exchange Commission (SEC), in charge of safeguarding investors and preserving the US securities markets, receives reports from the PCAOB. The SEC is also responsible for overseeing the PCAOB auditors.

The Role of PCAOB in Audit Oversight

PCAOB conducts regular inspections of registered public accounting firms to assess compliance with professional standards, laws, and regulations. This includes a detailed review of audit engagements performed by PCAOB auditors, especially those serving clients listed on U.S. stock exchanges. These inspections aim to promote consistent audit quality and accountability among PCAOB-registered auditors operating globally.

What is PCAOB and Why Does it Matter for Malaysian Audit Firms?

For Malaysian audit firms providing services to U.S.-listed companies or their subsidiaries, being recognized by the PCAOB is essential. PCAOB auditors must adhere to high standards of audit quality, including the adoption of robust internal quality controls and proper documentation of audit work. Failure to comply may lead to sanctions, fines, or the revocation of registration.

At ShineWing TY TEOH, we support businesses with cross-border reporting obligations by aligning our practices with PCAOB expectations. Our team includes experienced PCAOB auditors who understand the nuances of U.S. GAAP, PCAOB auditing standards, and SEC requirements.

Registration and Compliance with PCAOB

Objectives of PCAOB

PCAOB has well-documented goals and objectives that serve as an inspiration to many auditors and accountants all over the world, including audit firms in Malaysia. Following are the four main objectives of PCAOB:

Register public accounting firms that prepare audit reports for brokers, dealers, and issuers.
Adopt modern auditing standards for quality control, ethics compliance, and achieving independence.
Inspect the audit and quality control systems of the registered firms.
Investigate and discipline the registered accounting firms for violating the law, rules, and accounting standards.

Let’s look at these core activities of PCAOB in detail.

1. Registration

Public accounting companies are registered with the PCAOB. The PCAOB has to be aware of the businesses to monitor them. All entities that conduct financial audits of publicly traded corporations are required to register with the PCAOB.

2. Auditing Standards

The professional auditing standards that licensed auditing companies must follow are set by the PCAOB board. These guidelines are used to keep an eye on accounting companies. The AICPA established guidelines before the PCAOB.

The PCAOB rearranged the standards to combine them into a single, integrated numbering system, added its own, and essentially embraced the AICPA’s auditing standards. For a complete list of all the standards, please visit the PCAOB website.

The public, not the customer, should be a CPA or CPA firm’s main priority. To prevent CPAs from losing their independence, the Code specifies rules. It offers advice, as well as illustrations of interactions and pursuits that pose a danger to one’s real or perceived independence.

An auditor having financial ties to a client or close connections to individuals holding important positions inside the client’s business serves as examples.

The Code describes the steps a company or a person may take to remove or lessen risks to independence. So that businesses can prove their attempts to maintain independence, activities made to preserve independence should be recorded.

Here is a link to the professional Code of conduct for the AICPA. Ultimately, PCAOB auditors have to enforce the Code to maintain auditing standards throughout the board. Accounting services in Malaysia also follow a similar code of conduct.

3. Inspection

The PCAOB conducts inspections to assess how well businesses adhere to the requirements specified above. The PCAOB focuses its inspections on businesses that annually audit 100 or more public corporations.

At least once every three years, the PCAOB inspects businesses that audit fewer than 100 publicly traded corporations. The inspections will concentrate on locations that are thought to be at greater risk, according to the PCAOB.

Internal control over financial reporting, identifying and mitigating the risks of substantial misstatement, and accounting assumptions are some of these topics.

The PCAOB chooses audit engagements for the assessment using a risk-based methodology. The purpose of these inspections is to ascertain if an accounting company’s audit methods and documents include mistakes and whether the audit firm has suitable quality controls in place.

Audit shortcomings are noted in the inspection report posted on the PCAOB website if the PCAOB finds insufficient evidence to support the auditor’s assessment.

4. Enforcement

If the PCAOB auditors find that any major violation occurred as a consequence of the inspections, an enforcement hearing may be held. The PCAOB has the authority to penalize companies and individual auditors.

As a recent example, the SEC/PCAOB fined KPMG $50 million for malfeasance, including revising work documents to reduce the possibility of receiving inspection results from the PCAOB.

The Role and Functions of PCAOB

The PCAOB carries out its mission through the following core functions:

1. Auditor Registration

Public accounting firms that audit publicly traded companies must register with PCAOB.

2. Inspections of Audits

Regular inspections ensure that audit firms comply with professional standards and legal requirements.

3. Enforcement and Disciplinary Actions

PCAOB has the authority to investigate audit firms and enforce disciplinary measures in case of non-compliance.

4. Setting Auditing Standards

The organization establishes auditing rules that firms must follow to maintain high-quality financial reporting.

Why PCAOB Compliance is Important for Businesses

For companies operating in industries requiring public financial reporting, PCAOB compliance ensures credibility, builds investor trust, and mitigates financial fraud risks.

Compliance with PCAOB auditing standards is particularly crucial for firms planning IPO listings, mergers, or attracting foreign investments.

Key Differences Between PCAOB and Other Regulatory Bodies

While the PCAOB plays a critical role in auditing, other regulatory bodies also oversee financial reporting, including:

SEC (Securities and Exchange Commission)

Oversees overall securities regulation and investor protection.

AICPA (American Institute of Certified Public Accountants)

Develops guidelines for private company audits.

IAASB (International Auditing and Assurance Standards Board)

Establishes international auditing standards used outside the U.S.

Recent Developments in PCAOB Regulations

Keeping up with regulatory changes is crucial for audit firms and publicly traded companies. Recent amendments to PCAOB standards include:

Stricter quality control requirements for audit firms.
Increased transparency and disclosures for public company audits.
Enhanced measures to detect and prevent fraud within financial reporting

How PCAOB Affects Malaysian and International Companies

Although PCAOB is a U.S.-based organization, its regulations impact multinational companies, including those in Malaysia, Singapore, and other ASEAN markets. Malaysian firms working with U.S.-listed corporations or engaging in cross-border financial transactions must adhere to PCAOB auditing standards.

How to Ensure PCAOB Compliance in Auditing

To meet PCAOB requirements, companies and auditors should:

1. Stay Updated

Regularly review PCAOB updates and amendments.

2. Enhance Internal Controls

Implement strong financial reporting controls to reduce audit risks.

3. Engage PCAOB-Registered Auditors

Work with audit firms that are PCAOB-compliant.

4. Conduct Pre-Audit Assessments

Identify potential compliance gaps before undergoing formal audits.

In Closing

Such rules and regulations allow audit firms in Malaysia to operate within a standard framework and offer reliable services.

ShineWing TY TEOH – Your Trusted PCAOB Audit Partner

Our firm is committed to audit excellence and regulatory compliance. We are proud to have a dedicated team of PCAOB auditors ready to assist public companies, multinational corporations, and subsidiaries in meeting the rigorous audit requirements imposed by U.S. regulatory bodies.

Whether you are preparing for your first PCAOB audit or need ongoing support, ShineWing TY TEOH offers tailored assurance services delivered by qualified and experienced PCAOB auditors. We help you navigate complex audit landscapes and ensure full compliance with PCAOB standards.

Tags PCAOB Auditors