# MFRS or MPERS: Which Framework Does Your Company Use?

> How to determine whether a Malaysian company reports under MFRS or MPERS, using the MASB private entity definition rather than the public-interest-entity test most guides wrongly apply.

- Category: accounting
- Language: en
- Status: published
- Updated: 2026-07-20
- Canonical: https://negaraku.md/en/accounting/mfrs-vs-mpers

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Most Malaysian guidance answers this question with the phrase "public-interest
entity". That phrase is doing no work. It is not the test MASB applies, it is
not in the definition that decides the question, and relying on it produces the
wrong answer in the one case that comes up most often in practice — a Malaysian
subsidiary of a foreign-listed group.

The actual test is short, and it is a lodgement test.

## What the MASB definition actually says

A **private entity** is a private company incorporated under the Companies Act
2016 which:

1. is **not itself required to prepare or lodge** any financial statements
   under any law administered by the **Securities Commission Malaysia** or
   **Bank Negara Malaysia**; and
2. is **not a subsidiary** of such an entity; and
3. is **not an associate** of such an entity; and
4. is **not jointly controlled** by such an entity.

All four limbs must hold. Fail any one and the company is not a private entity.

Notice what the definition never mentions: revenue, total assets, number of
employees, whether the company is "significant", whether the public has an
interest in it. Those are the criteria for audit exemption, and they belong to a
different instrument entirely.

## Why "public-interest entity" is the wrong frame

The public-interest-entity concept exists in Malaysian regulation — auditors use
it, and the Securities Commission uses it — but it is not the switch that
decides MFRS or MPERS. Substituting it for the real definition causes two
concrete errors.

**Error one: the foreign-listed parent.** A Sdn Bhd whose holding company is
listed in Singapore, Hong Kong or London is routinely told it must move to MFRS
because its group is "public interest". MASB's position is the opposite: a
private company that is a subsidiary of a parent listed **outside** Malaysia is
still a private entity. The definition is keyed to Malaysian regulators. The
group may well want MFRS reporting for consolidation, and the subsidiary may
adopt it voluntarily — but it is not required to.

**Error two: the associate and joint venture limbs get dropped.** A
public-interest framing thinks in terms of parents and subsidiaries. The MASB
definition also disqualifies an entity that is an **associate** of, or **jointly
controlled** by, a Securities Commission or Bank Negara reporting entity. A
company with a 30% shareholder that happens to be a licensed insurer is caught
by the definition even though nobody would describe it as a subsidiary of
anything.

## Working through the decision

| Step | Question | If yes |
| --- | --- | --- |
| 1 | Is the company a private company incorporated under the Companies Act 2016? | Continue. If no — a public company, a foreign company, a body incorporated under other legislation — MPERS is not available. |
| 2 | Is the company itself required to prepare or lodge financial statements under a law administered by the SC or BNM? | MFRS. This catches listed issuers, licensed banks, insurers, takaful operators and capital markets licence holders. |
| 3 | Is it a subsidiary of an entity in step 2? | MFRS. Note that step 2 means a Malaysian SC or BNM reporting entity. |
| 4 | Is it an associate of, or jointly controlled by, an entity in step 2? | MFRS. |
| 5 | None of the above? | It is a private entity. It may apply either MPERS or MFRS in full. |

Step 5 is a choice, not a default. MPERS is an entitlement that a private entity
may take up or decline. Declining it and applying MFRS is entirely permissible;
what is not permissible is cherry-picking between the two.

## Status is assessed period by period

An entity is a private entity only for the periods **throughout which** it meets
the definition. This has a practical edge. If a company is acquired by a
Bursa-listed group in month eight of its financial year, it did not satisfy the
definition throughout that period, so it is not a private entity for that period
— it moves to MFRS for the whole of it, not from the acquisition date onwards.

The same logic runs in reverse. An entity that ceases to be a subsidiary of a
regulated parent and again satisfies all four limbs may return to MPERS for
periods throughout which it qualifies.

## What the choice does not determine

Three separate obligations get bundled with this decision and should not be:

- **Audit exemption.** Governed by SSM Practice Directive 10/2024, with its own
  phased revenue, asset and employee thresholds and its own excluded categories.
  A company on MPERS may still require a statutory audit; a company on MFRS may
  in principle be exempt.
- **Lodgement format.** Financial statements go to SSM through MBRS regardless
  of framework. The tagging taxonomy does not branch on MFRS versus MPERS.
- **Tax.** The tax computation starts from accounting profit, so the framework
  affects the starting figure — but no provision of the Income Tax Act 1967 is
  switched on or off by the choice.

Where the Companies Act and the standards appear to conflict on the content of
financial statements, **s.244(7) of the Companies Act 2016** resolves it in
favour of the approved accounting standards.

## Common mistakes

- Applying a public-interest-entity test that MASB does not use, and reaching
  the wrong answer on foreign-listed groups.
- Telling a Malaysian subsidiary of an overseas-listed parent that MFRS is
  mandatory. It is not — the definition is keyed to the SC and BNM.
- Checking only the subsidiary limb and ignoring the associate and jointly
  controlled entity limbs, which catch minority-held companies.
- Treating MPERS as compulsory for small companies. It is an option for private
  entities, not an obligation.
- Reading the framework decision off the audit exemption thresholds, or the
  reverse. The two tests share no criteria.
- Assessing status once at incorporation and never revisiting it, when the
  definition is expressly period-specific.

## What's next

If the test above puts you outside the private entity definition, the transition
itself is a first-time adoption exercise with its own transition date and
restated comparatives — that is covered in the guide to switching from MPERS to
MFRS, including whether a company can move back. If you have settled the
framework and now need to know which individual standards apply and from when,
the accounting standards index lists the current MFRS and MPERS positions,
including MPERS (2025) and MFRS 18, both effective for periods beginning on or
after 1 January 2027.

## Sources

- Implementation of MPERS — private entity definition — https://www.masb.org.my/pages.php?id=275 (MASB)
- MASB Approved Accounting Standards for Private Entities — https://www.masb.org.my/pages.php?id=20 (MASB)
- Malaysian Financial Reporting Standards — status and effective dates — https://www.masb.org.my/pages.php?id=89 (MASB)
- MPERS (2025) — https://www.masb.org.my/pages.php?id=615 (MASB)
- Companies Act 2016 (Act 777), reprint as at 1 August 2022 — https://www.ssm.com.my/Pages/Legal_Framework/Document/Companies%20Act%202016_Akta%20777_BI%20(1.8.2022).pdf (SSM)

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