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Five Reasons Why Sustainability Reporting Is Important

sustainability reporting-3

Five Reasons Why Sustainability Reporting Is Important

The capability of a company to positively affect social and environmental change has, over the years, turned out to be a massive thought for several businesses. Several factors, such as environmental, governance, and social factors, encapsulate a panoply of problems that covers everything ranging from company culture, employee compensation, the effect of climate, and sourcing standards.

Of course, we can blame bigger companies for excluding themselves from financial reporting, but these companies still note the immense influence that ESG has on the relation of investors, market behaviour, and financial achievement. In fact, a huge percentage of the Fortune Global 500 companies make use of a well-known framework in sustainability reporting.

 

About 80% of the biggest companies in the world make use of the Global Reporting Initiative (GRI) standards. The Global Reporting Initiative standard provides openness to investors, clients, including other stakeholders.

While for several years, public companies have embraced the act of sustainability reporting; but historically, it has been restricted (to some extent) to smaller businesses that don’t have the necessary resources to invest in analysis and reporting initiatives.

Sustainability reports are often prepared by accountants. Peradventure, you reside in Malaysia, and you need to know more about sustainability reporting, or you wish to get one for your business, you can contact an Accounting firm in Malaysia. An accounting firm in Malaysia boasts of accountants with the relevant skills and expertise, and they are all capable of providing you with whatever you need regarding sustainability reporting.

Irrespective of how big the company is, the following are some reasons why sustainability reporting is important to every business.

1. It is greater than the environment

While climate change was surprisingly a reason for the increase in ESG reporting, governance and social factor are turning out to be very significant. ESG reporting is quite potent; it has the ability to impact change faster than either the government or nonprofits, including the younger race after seeing their dollar investment as another extension of individual value.

According to a US SIF foundation, in the year 2008, investors retained $11.6 trillion in assets associated with the criteria of ESG, an increase from the $8.1 trillion that was retained in the year 2016. It was displayed by a TD Ameritrade survey that 19% of investors (ESG investors) view human rights as one of the most significant factors whenever they choose to make a decision.
sustainability reporting-1

2. More success less profit

A significant indicator of the long-term achievement of a company is non-financial performance.

With ESG metrics, a business can recognize when its adopted tactics need a complete renovation; it also assists in determining the practice that is connected with certain upcoming risks, even if it is effective at the moment.

For instance, is the manufacturing duty of the company being outsourced to countries that are prone to change in traffic or inflating the cost of labor? Does the hiring strategy of the management help in the retention of e employees? Indeed, traditional financial reporting doesn’t tackle so many important issues.
sustainability reporting-2

3. Individuals are significant

The workforce of today tends to hold their employers at a very high standard compared to that of several years ago when working conditions, the morale of employees, health initiatives, and general culture were considered as being very significant.

 

With sustainability reporting, these issues can be taken care of; it does this by offering the best understanding into the relative compensation of a company, its diversity, and retention rate. This isn’t just important for reeling in customers but for recruiting and maintaining talent as well.

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4. The key is openness

According to a TD Ameritrade survey, it was noted that 67% of ESG investors are primarily after advancing social and environmental causes rather than an investment rate of return. Millennials who make up about a quarter of the U.S population, portray a certain possibility of striking a connection with companies that boast of a rigid purpose and ethical governance standards.

 

Based on a 2005 Nielsen survey, which was conducted on 30,000 customers in 60 countries, it was observed that there were about 73% of millennials that were keen on paying more for sustainable goods and products.

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5. There exist some cheap tools

ESG reporting is quite expensive, but upon the inception of B Lab, that trend has been altered.

To make use of the B Lab assessment, you don’t have to be a B Corp. The B Lab assessment offers its users the best knowledge into significant and crucial ideas normally missing from the financial performance interaction. These ideas can be used to set a standard and scrutinize how a business can adjust the values of the business alongside that of its stakeholders.
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In a Nutshell

Aside from market differentiation and satisfying customer needs, by reporting on ESG consistently, the enterprise value of such a business will skyrocket, and it will turn out to be more accessible than it ever was. Aside from preparing sustainability reports, accounting firm in Malaysia also offer payroll and HR services.

 

Although other professionals also offer payroll and HR services, accountants are in fact, more skilled in that aspect. For more information on sustainability reporting or accounting and auditing, get in touch with us. 

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Accounting Trends to Look Forward to in 2020

Cloud based offices

Accounting Trends to Look Forward to in 2020

Over the past decade, there have been several changes in offering accounting services in Malaysia — with technological advancements and an increase in the number of accounting firms around the world.

All these firms are always on the lookout for new or improved trends to incorporate in their firms to stay on top of their game and be ahead of the competition.

Running an accounting firm at a time like this, with all that technology, means data will be processed faster and easier. Therefore, you should be aware of what’s currently working and what will be working later to choose the best strategy for your business.

Here are the accounting trends to look forward to in 2020.

1. Automated Accounting Processes

More accounting processes are becoming more automated. The automation of these processes takes away the confusion and reduces or eliminates errors in the process. Because of this, accounting firms are now investing in automated solutions for their business.

Since the automated process depends solely on computers, businesses are open to fraud and compromised security. However, these challenges have increased the demand for internal auditors to check for inaccuracies in the process.

As a result, there’s no need for in-house accounting services in Malaysia to worry about being replaced by computers.

In 2020 and beyond, automated accounting systems will take over the industry, and guide accountants in arriving at data-driven decisions faster, along with profit improvement.
accounting software

2. Rise of Accounting Software Solutions

The addition of technologically-driven solutions in the accounting world will intensify in 2020. Because the demand for computerized accounting will grow, accounting software companies will satisfy this need with robust solutions.

The software offers a wide array of functionalities, including those that accountants value the most, such as optimizing accounting processes and reducing manual tasks.

There is a strong demand for software platforms to manage spreadsheets and have a better understanding of tax management around the world. It is predicted that the accounting software market will grow at a CAGR of 8.5% between 2019 and 2024.

The software will also help accountants who offer tax advisory services provide better tax solutions for their clients.
Cloud based offices-2

4. Utilizing Social Media

The use of social media encompasses different industries, including accounting. Social media helps to increase brand awareness, sales, and drive traffic to your website.

Accountants have discovered that social media is a powerful branding and sales tool that boosts exposure and sales while demonstrating their expertise.

In 2020, an effective social media strategy will contribute tremendously to the profitability of any accounting firm in Malaysia. The social media platforms like Facebook, LinkedIn, blogs, and community forums will help firms keep in touch with clients.

Social media also helps accounting firms monitor what competitors are up to and learn new industry trends.
social media

5. Real-time Connections

2020 will be a year when accountants will connect with their clients in real-time and also enjoy greater security, transparency, and accounting services in Malaysia, using their company App.

Also, recording transactions that usually would take hours or days will now take minutes or seconds. And, if there’s a change made by one party, it will be updated in real-time for everyone with access to see.

Additionally, using digital tools like mileage trackers offers the perfect first step in engaging clients with digital technology, keeping the clients and accountants connected.

For instance, the tracker will automatically detect a trip so that the accountant’s App on the client’s phone tracks his movement. It means that there will be less chasing for the client’s business mileage when compiling the end of the year tax return.

Also, the details of the trip can be sent to the accountant with one click of a button or via email as an attachment.
analysis
Do you wish to find out how automated accounting can help to leverage your business and increase your business competitiveness in the long run?   Take a look at all the services we offer or get in touch with us to know more.
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Eight Reasons Why You Should Hire An Accountant

accounting

Eight Reasons Why You Should Hire An Accountant

Growing your business to greater heights involves you considering the right steps and strategies to take and ensuring that your financial goals are duly met in a given period. Every registered business is tax liable, and taxes can cut a deep hole in your business if appropriate measures are not taken.

Also, there will likely be a host of financial documents to fill from time to time, and since your primary focus is to make more money from your business, you may lack the technical know-how in handling taxes and filling these forms correctly in a way that would benefit you in the long run.

 

An accountant is highly skilled in all areas of managing the finances of any business.

Eight reasons why you should hire an accountant

1. Filling your tax forms

Filling your tax forms can be a simple matter, especially when your business is of a very simple nature, but even at that, a lot of business owners still fall victim to tax issues. Seemingly irrelevant mistakes made when filling these forms may pose a huge threat to your finances later on.

 

When you fail to fill and submit necessary tax forms — such as a tax return — before the deadline, then you could be asked to pay a fine. When you hire an accountant, he or she will ensure that all tax forms are filed correctly and submitted on time to avoid unnecessary issues.

filing tax

2. Planning for tax liability and tax incentives in Malaysia

An accountant would not just prepare your financial documents for you but would consider the best way to put you and your business at a tax advantage, and help you qualify for certain tax incentives in Malaysia. These are some special accounting services which an accountant would bring to your table when hired.

3. Cutting down on your taxes

This is also one of the several accounting services Malaysia which an accountant would provide you with when hired. He keeps track of the frequently changing tax laws and ensures that whatever tax you pay is minimal.

4. Rendering valuable financial advice to help grow your business

An accountant who has worked with you for several years would have developed some level of sensitivity into your business, and know just what touch to give the business to take it to the next level. Advice obtained from a reputable accountant is worth more than gold. Ensure you seek their advice before making any business decision.

accounting vs bookkeeping

5. Time savings

As a sole proprietor or freelancer, your time would be better spent on doing what you know how to do best, and that most certainly does not pertain to accounting. Some people do not want to hire an accountant because of the accountant fees.

But when you attempt to do your accounting yourself, you’d be wasting useful time, which you should be using to make more money. It would save you valuable time when you leave accounting for the accountant.

6. Making financial statements

When you hire a reputable accountant such as one from an accounting firm in Malaysia, rest assured that he or she would be highly skilled in preparing financial statements.

 

A financial statement involves summarizing and giving report periodically on all your business’s financial transactions in such a way that would clearly highlight the direction in which the business is moving, and what exactly is responsible for that movement. By so doing, important financial decisions can be made to enhance business growth.

7. Maximizing profits

An accounting firm would help a business reduce costs while maximizing profits. It seeks out financial information about your environment and uses business tactics and dynamics to help you attach costs to your goods in such a way that would boost your sales and provide maximum profit.
money

8. Dealing with financial problems

A business can sometimes run into a financial problem such as taxes, fines, bankruptcy, court cases, etc. As a freelancer or sole proprietor, you may be at a loss of what to do. Having a professional accountant by your side during this storm is like finding water in a desert.


If at all the problem is beyond the accountant’s scope, he or she is likely to be acquainted with a lawyer or any other professional which could be of immense help to you.

In a Nutshell

There are certain things you simply don’t have the expertise to do as a business owner, and one of these things are issues regarding financial analysis such auditing, drafting out financial correct statements, etc. Hiring a professional accountant incurs an expense, but with their services, you will end up preventing your company or business from losing cash unnecessarily.

The services an accountant provides are aimed at indicating hiding issues regarding the finances of your company and offering you the best solution on how to tackle such issues. Save yourself the stress of overthinking and consider hiring the services of a professional accountant.
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Why Should You Audit Your Company?

Why Should You Audit Your Company

Why Should You Audit Your Company

Auditing comes with several benefits. A good auditor can help your company in many ways such as clearing your issues quickly and enhancing your company via the excellent auditing services he or she provides.

 

Though the primary reason for auditing is associated with business and legalities, you should not ignore the psychological facet that is quite significant when handling entities such as banks, clients, and shareholders.

If you perform auditing regularly, you will attract more confidence from the individuals you work with, including government institutions as well. For businesses in Malaysia, there are several audit firms in Malaysia that offer audit services.

Before you are made to understand the benefits of carrying out an audit on your company, you should know what a financial audit is.

What is a Financial Audit?

As soon as an auditor gets to your company, they will carry out a complete and thorough examination of the financial records of your company, including other statements tendered by your accountant(s).

The job of the auditor is to examine and discover any detail that was inadvertently or intentionally left out by your system and put them in a report. While conducting an audit internally is possible, it is advisable to hire an auditor from an accounting firm who isn’t in any way connected to the company so that the report is objective.
Why Should You Audit Your Company-1
Below are a few reasons why you should audit your company:

1. You will be presented with a thorough overview

As soon as the auditors are done with their findings, you will be presented with the final report. Afterwards, you will have a comprehensive overview of how your business is functioning.

Even if you have splashed lots of cash in ensuring that your company has clear records and adhere to every rule, there are going to be little mistakes that ought to be corrected. Also, the report by the auditor will display to you the stable regions of your company.

2. Your company becomes more reliable

If you are the owner of a big company that boasts of upper management or corporate investors, a consistent audit can make your clients and investors believe that your business is going in the right direction. Even if you own a small business or just starting out, you will derive several benefits from the reliability your company will display to tax authorities.

Because you have an audit report, tax officials will be able to depend on these reports to ascertain your level of taxation or other matters that interest them.
Why Should You Audit Your Company-2

3. Gives you insight into the direction of your company

With an audit carried out by an expert, you will have the best insights into the aspects of your business that are performing well and those that are underperforming. For areas that display no error, you will know that those areas don’t require any recalculations to your original business plan.

While those areas that display the issues, however, requires a careful inspection such as: how they are activated and how you can rectify the problems before they end up hurting the company.

4. Enhance your credit rating

If you own a business that is quite strong and expands at regular intervals, your shareholders, banks, and investors should know all about this business of yours. Having a consistent audit report will enhance your relationship with stakeholders or financial bodies that you are in business with.

Your investors will want to know how successful your business is, and a financial statement is the best way to do that. Also, before a bank offers you a loan, it would want to be sure that you are capable of replaying the loan; an audit report is the best proof to display that you have the required resources to repay the loan.
Why Should You Audit Your Company-3

In a Nutshell

The regular audit of your company’s financial statements is essential to the reliability of your company. With an audit, you can indicate and resolve any internal problems that might ultimately bring down your company.


By auditing your company, you tend to prove to your investors and shareholders that you have the best intention for your company, and this can enhance the trustworthiness of your company. Looking for a reliable auditing firm, get in touch with us. 

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Duties of Auditors in Malaysia

Duties of Auditors in Malaysia

Duties of Auditors in Malaysia

In Malaysia, a qualified auditor is someone that has been approved by the Ministry of Finance.

 

According to Company Law in Malaysia, all registered companies — publicly listed, private equity firms, joint venture capital — are required to have a professionally certified auditor. The auditor is charged with the responsibility of going through the company account and ensuring that all necessary procedures are followed in the preparation of the account. It is important to know that the account are not to be prepared by the auditor but to be verified by him or her.

 

The standard procedure is to create an end to end checkup system for the company account such that there are no discrepancies whatsoever. While the directors of the company are required to prepare the account of the company, the auditors are required to check for any imbalanced rationales or factors.

 

At the end of every business year, companies are required to present their shareholders the audited financial statement at the annual general meeting (AGM) that points to how business was operated throughout the year and possibly the expectation of the business for the new year.

Duties of Auditors in Malaysia-1

Duties Of An Auditor

1. The number one duty of an auditor is to check that the companies account has been drawn up properly and that they follow the Malaysia and Companies act of 2016.These duty perhaps is the drive that makes an auditor wear the face of a stranger while performing their duties for their organization. They are responsible for cross checking every little detail that goes into the financial accounts of their organization.

 

2. An auditor is responsible for giving informed opinion about the position of the account of their organization.

They can tell whether the account of the company truly implies the financial position of the company and that the shareholders and the public (in a case where they are publicly listed) are not charmed with an engineered financial accounts of the company.


3. Their job involves making sure that no member of the organization regardless of their power or position is allowed to tamper with the true financial position of the company. The auditors’ license and most importantly goodwill and reputation lies on this.


They must give the shareholders a complete assurance that the financial statement of the organization is untampered with.


4. An auditor must ensure that all accounting papers, and necessary records stipulated to be kept by the Malaysia and Companies act are all well-kept without any speck of atrocity.


5. Other responsibilities of an Auditor in Malaysia include:

  • Auditors are responsible to the shareholders of a company. They understand that while their duties are completely to the company, their loyalty is to the shareholders.
  • Auditors have the right to enquire any member of the organization about any information that will shed light on the true financial position of the company.
  • An auditor is expected to attend all annual general meeting (AGM) with the shareholders and any emergency meeting as deemed fit by the company.
  • In a case where the company has subsidiaries, auditors of the organization at all the branches are requested to submit their findings to the general auditor for the audition of a consolidated financial statement. Auditors at the subsidiaries are also required to give access to their books as requested by the general auditor.

For more information about auditors and accountants, fell free to get in touch with us.

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Avoid These Common Malaysian Tax Offences

tax payment

Avoid These Common Malaysian Tax Offences

If there is anything that business people cringe at, it’s at the thought of paying taxes. In 2017, a lot of Malaysian top notch celebrities were owing taxes and the Malaysian tax authorities were right on their tail.

One would think that since these people earn a lot, paying taxes shouldn’t be a problem to them but just like it is a problem when you earn so little money, it is even a bigger problem when you earn a higher income. The logic behind thus is not far-fetched.

The Malaysian tax system is progressive in nature and so, there is a range of higher income you earn that your taxes will become higher in rates than those earning less than you. Those earning less than the stipulated government range get a fixed tax rate that they must deliver on unfailingly.

In this blog post, we’ll be showing you some common tax offences you should avoid an all cost.

1. Bad Tax Advice

The first worst thing that can happen to anybody in any issue like tax payment that they are naive about us getting a compelling bad advice. It’s like putting the wrong foot first in a dance, every other step will definitely be a bad movement.

If you feel you need to understand how a few things work about taxes and maybe having a streamlined advice for your own tax payment, it is always better to find a professional to dish that advice not just someone who perhaps read economics in school.

The importance of having a professional advice you cannot be overemphasized. If you find out that you cannot get any professional advice from people around you then it is best to visit the nearest Lembaga Hasil Dalam Negeri (LHDN) around you.
counting taxes

2. Failure to submit tax return forms

Everyone is expected to submit their personal tax return form by the 30th of April and for those doing business, the 30th of June every year unfailingly.

It becomes an offence if these date passes and you as a rightful taxpayer did not make your submission. You can be liable to a fine raging from RM200 to RM20,000 or face imprisonment for not exceeding 6 months or both.

In addition, if not submit for 2 years or more, the fine is increased to RM1,000 to RM20,000 and special penalty equal to treble the amount of tax or additional tax. If you are unsure whether you are required to submit tax return and pay the income tax, it is advisable that you visit the tax agent to assist you on this matter.

In a case where you’ve already started paying taxes and filing tax return forms, then you shouldn’t ever forget to keep you from rolling in on it before the stipulated date.

3. Not disclosing your true income

This is a terrible offence to commit and it is classified under one straightforward order- tax evasion. The Malaysian law does not take it easy on those evading taxes. Penalty for omission or understatement of income can be equivalent 100% of the tax undercharged.

 

Therefore, to ensure that you calculate your tax return figures properly and if you can’t do that yourself, employing the skills of an audit firm in Malaysia is a viable option especially for business owners.

 

One other important thing is that the intricacies of tax laws change yearly and as such, tax payers must ensure that they evolve with the trend as it goes. Any slack in the knowledge gap about your supposed tax system can have government tax officials knocking on your door years later when the money is probably even finished.

 

To understand your standings about taxes, get in touch with us today on our website.  In case of any query, IRBM is always contactable through the online system, the Live Chat of HASIL and Help Line of HASIL at 03-89111000.

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What Does It Take to Register Your Company in Malaysia?

registering your company

What Does It Take to Register Your Company in Malaysia?

One of the best steps a business will ever take is registering as a legal entity. Business registration gives the business and its owners of administrators a proper perspective of what business truly is. Doing business without proper registration is just illegal.

The business is just there, unregulated by any institution yet it keeps making money from the economy of the country. In fact, unregistered business faces higher risk by not being a legal entity because a lot of government support for business will not pass through their way at all.

They will not be entitled to credit facilities from standard organizations, and in a civilized environment like in Malaysia, consumers might not even purchase their goods or services if the business is not properly registered.

The process of company registration in Malaysia especially for foreign companies is an easy one. The most important factor is to have the necessary papers and documents. Also, following due process in the incorporation process is very important.

While seeking for a work permit for your company, you should first decide on what the structure of your business will be like. Is it going to be a 100% foreign control company or a joint venture company with some Malaysian parties?

100% Foreign Controlled

This type of business structure is when the proposed company will be bringing all the workers and expatriates from their own country. Though the Malaysia government allows this on a very rare cases where the company’s operations can only be handled by staff that are well trained for it and such well-trained personalities are not present in Malaysia.

While the 100% foreign ownership might be learnt in some sectors of the economy, some secrets have been specially placed as a matter of law that there cannot be a 100% foreign ownership. A few examples of these sectors are: Education, Petroleum (Oil and Gas), Tourism, Agriculture, Banking and Finance.

This list however changes from time to time and as such business owners should always make sure to do their due diligence on a consistent basis to avoid falling on the wrong side of government laws.

The minimum Paid up capital for consultancy and advisory services and business is RM 500,000. And a minimum of RM 1million for import, export, trading and restaurants business.
shaking hands

Joint Venture Company

This type of business structure involves the participation of Malaysian nationals in the business. At least a minimum of 50% ownership must be held by the Malaysian business counterpart. The business is required to have a minimum paid up capital of RM 350,000.


  1. Define the focus of the business, know what type of business you’re about to embark on and go through all regulations related to such sector. Ensure that you decide on what structure of business you want to take and how you would run the processes. Make up your mind that all processes you’ll go through will be legal. This will ensure that you put a good foot forward on starting your business.
  2. Decide on who the directors of the companies will be. Leadership is very important in a business, the more so, you’ll need to fill their names and those of the shareholders in the business.
  3. Choose the name you’ll like your business to bear. This process is very important because it must not clash with the business name or identity of another business. You’re to run theses proposed names on the business name availability check.
  4. Prepare the requested registration documents and check that they all need standards.
  5. The commissioner’s office will get back to you either with your incorporation certificate or a request to update some document that is required to process not application.


For more information, please do not hesitate to get in touch with us. 

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Tax avoidance or tax planning?

money

Tax avoidance or tax planning?

There is a popular saying that “the only constant thing in life is change”. This means that there is always an evolution going on somewhere and we can choose to acknowledge it or not.

This however has proven to be much truer in the business world. The ways and processes of conducting business in the last decade is dramatically different from the ways in which we conduct business operation in this era.

These change has permeated all fibers of the business end and in this blog post, we’ll be discussing one of the issues that has changed the face of business.

In a bid to maximize profit and minimize cost including taxes, companies and organizations around the world now have strategic planning and thinking processes that allow them to make more money with reduced cost of business.

One of the very cost they try to avoid is tax and one of the best ways in which they perpetuate this legal reduction in their cost is through transfer pricing.

How To Use Transfer Pricing?

The concept of how transfer pricing is used in tax avoidance can be explained in a situation as follows:


A company which has another related party company based in a different country transacts with each other at a discounted or excessive price for the goods or services with the intention of achieving a tax advantage.


The companies may be under the same management, share the same parent company or simply share a strategic partnership. Imagine that company A is a subsidiary of company B. Company A produces rice in Malaysia and exports to company B.


Company A, in the process of trying to reduce its taxes decides to sell its product to company B at a price that is lower than the average market price. This would result in a lower tax outflow for Company A and ultimately a higher profit for the Group as whole.


In a nutshell, a tax advantage is achieved by tweaking the prices between organizations. It’s also common for profit earned in the trade to be transferred to a lower tax jurisdiction.


Hence, most governments these days, including Malaysia have introduced their own transfer pricing regulation. Transfer pricing in Malaysia is well regulated and watched to avoid shady type of tax avoidance schemes.


These companies fail to understand that while their actions might seem profitable to them in the short term, it is at the detriment of the economy and ultimately the country.


To know more details about transfer pricing, get in touch with us.  In case of any query, IRBM is always contactable through the online system, the Live Chat of HASIL and Help Line of HASIL at 03-89111000.

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Types Of Transfer Pricing

transfer pricing

Types Of Transfer Pricing

Transfer price is defined as the price at which two parties transact with each other. For example, during the trade of supply or labor between the two departments. These prices are used when two individual parties of a big multi-entity firm are treated as though they are run separately. This is common in very large corporations. A transfer price is also called transfer cost.

There are five types of transfer pricing methods that can be applied. Three of the five are traditional pricing methods while the last two are transactional pricing methods.

Traditional Pricing Methods

Traditional transaction methods work by measuring the terms and conditions of actual transactions between independent entities and compares them to a control transaction. There are three types of transfer pricing under this method:

1) The CUP Method

The CUP method is a method that compares the terms, conditions and the price of a controlled transaction to those of a third party transaction. In this method, there are two types of third party transactions. The first type is a transaction between the taxpayer and an independent enterprise. This is known as internal Cup. While the second type is a transaction between two enterprises known as external Cup.

2) The Resale Price Method

This is also called the “Resale Minus Method.” The beginning of this method takes note of the price at which an associated enterprise sells products to a third party. This price is known as the “resale price.” This resale price is then altered with a gross margin, this is done by comparing gross margins in comparable uncontrolled transactions.

When this is done, the costs associated with the purchase or the products, such as custom duties are deducted from the price. After all the deductions, what is left is the arm’s length price for the controlled transaction between associated enterprises.

3) The Cost Plus Method

This method compares gross products to the cost of sales. The first thing to do is to determine the costs incurred by the supplier in a controlled transaction for products sold to a related purchaser. After that, an appropriate mark-up is added to the cost in order to make a profit.

After adding this markup to the cost, it can then be considered at arm’s length. When applying this method, you are required to identify a mark-up on costs applied for comparable transactions between independent entities. This has to be done before this method can be applied.

Transactional Pricing Methods

Unlike the traditional method, this method does not measure actual transactions. Rather this method measures the net operating profits that are gotten from controlled transactions and compares them to profit level realized by independent enterprises that are engaged in comparable transactions. There are two types of price transfer methods under this.

1) The Transactional Net Margin Method (TNMM)

In the TNMM, you will need to calculate the net profit of a controlled transaction of a related enterprise. This net profit is then compared to the net profit realized by comparable uncontrolled transactions of independent entities.

This method requires that the transactions are broadly similar before they can be compared. For this method, a comparable uncontrolled transaction can be between a related enterprise and an independent enterprise or between two independent enterprises.

2) The Profit Split Method

There are times when associated enterprises engage in transactions that are interrelated. This means that these transactions cannot be examined on separate basis. For transactions in this category, associated enterprises just split the profits realized.


This method looks at the terms and conditions of these transactions by extrapolating the division of profits that independent enterprises would realize from participating in those transactions.


These are the different types of transfer pricing. Still have questions? Please feel free to get in touch with us.

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Accounting Vs Bookkeeping

accounting vs bookkeeping-3

Accounting Vs Bookkeeping

As a small business owner, you will need your financial data to be very accurate and also current as this will help your business to maintain healthy cash flow. However, as your business starts to grow and expand, the act of financial management becomes more cumbersome because now more money is flowing in and out of the business. At this point, you will not be able to manage your finances on your own because it will be time-consuming and you will not have that time.

When your business gets to this level, you will need help but most business owners are confused on what kind of help to get. Should they hire a bookkeeper or an accountant? Sometimes both works are used interchangeably but are they really the same thing? The answer is No.

So how does a bookkeeper differ from an accountant?

Bookkeeping vs. Accounting

Importance of Vacancy Tax

Bookkeeping is defined as the process of recording the day-to-day transactions of a business and it is the bases of building a financially successful business. So what are the things that are done in bookkeeping?

Bookkeeping is made up of activities like:
  • Recording Financial transactions
  • Posting debits and credits
  • Producing invoices
  • Making sure that the subsidiaries, general ledgers and historical accounts are balanced.
  • Managing payroll.

Managing the general ledger is the key component in bookkeeping. This general ledger is the document where the bookkeeper records amounts of sales and expenses that were made. The process of doing this is called posting. A ledger can be created with a software, or a computer excel spreadsheet or simply using a piece of paper depending on the choice of the business.

These are the functions of the bookkeeper and the thing is, the work gets more complex as the business increases in size. This is because all the transactions must be recorded and if the amount of sales and purchases keep increasing, the work gets more tasking.
accounting vs bookkeeping-2

Accounting

The accounting process is a high-level process that uses the information compiled by a bookkeeper or a business owner to general financial models that will help the business move forward.

The process of accounting is different from bookkeeping because accounting is subjective while bookkeeping is transactional. The accounting process is comprised of:
  • Recording expenses that have been made but not yet recorded in the bookkeeping process.
  • Preparing the financial statements of the business.
  • Running analysis of operation costs.
  • Completing income tax returns.
  • Helping the business owner to understand the impact of his financial decisions.

The accounting process provides reports that merge the important financial indicators of a business. The result is that the business owner better understands the state of his business and is aware of how profitable the business is.

The accounting process takes the information in the ledger and breaks it down in such a way that it reveals the bigger picture of the business. This helps the owner to plan and set down strategies for growth and business advancement.
accounting vs bookkeeping

The Difference

Basically the difference is that while the bookkeeper is tasked with recording that transactions and keeping the business financially organized, the accountant helps to make the sense of the financial records. The accountant is more like a consultant.


So now that you know the difference, you need to ask yourself: What do I need for my business? Is it an accountant or a bookkeeper?


If you are still confused, you can simply employ the services of an accounting firm in Malaysia, who will help you manage your finances and you will not have to worry about a thing. Feel free to get in touch with us.


Your finances is the most important part of your business. Take it seriously.