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RAM Ratings updates analytical adjustments to financial statements for non-financial institutions

Published on 03 Aug 2020.

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RAM Ratings has published an update for a criteria paper, Guide to RAM’s Analytical Adjustments to Financial Statements. We do not expect this update to affect the ratings of any RAM-rated issuers or debt instruments.  

International/Malaysian Financial Reporting Standards 16 (IFRS/MFRS 16) Leases, which took effect on 1 January 2019, requires the inclusion of almost all leases on a lessee’s statement of financial position. While this treatment is consistent with RAM’s long-standing view that operating lease obligations are akin to debts, we note that the adoption of IFRS 16 may result in sizeable lease liabilities. This is because the lease term under the new accounting standard extends beyond the non-cancellable period under the previous IAS 17 or MFRS 117 Leases. To address this, RAM has updated its lease adjustments to incorporate the changes under the new accounting standard. 

The new requirements have also led to changes in the presentation of an entity’s financial statements. For easy comparison between an entity’s financial statements and RAM’s disclosure formats, we have also refined the presentation of financial statements in our publications and updated certain terminology.  

In conjunction with the roll-out of the updated disclosure formats for financial statements, we have refined the computation of net gearing ratios to include money-market instruments. These had previously been considered but not explicitly reflected in RAM’s adjusted financial ratios.

For further details, please refer to the updated commentary, Guide to RAM’s Analytical Adjustments to Financial Statements for Non-Financial Institutions, which is available at www.ram.com.my.  


Analytical contact
Chew Wei Li 
(603) 3385 2499 
weili@ram.com.my

Media contact
Padthma Subbiah
(603) 3385 2577
padthma@ram.com.my

 

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2020 by RAM Rating Services Berhad



Publication Date Published Category
Guide to RAM’s Analytical Adjustments to Financial Statements for Non-Financial Institutions 03-Aug-2020 Criteria & Methodology View PDF

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