Unless otherwise indicated, the company stated in this article refers to the private company incorporated in Malaysia in accordance with the Malaysian Companies Act 2016 (CA 2016).

In Malaysia, the first financial statements of the company are required to be prepared by the directors within 18 months from the date of its incorporation. Subsequently, they must be prepared within 6 months of the company’s financial year end. The company has the freedom to decide its own financial year end, as there is no provision in the CA 2016 in relation to the fixing of financial year end of a company.

However, it is advisable for the company not to set its financial year end on the 18th month of its incorporation. The sooner the company can determine the financial year end, the better, as it allows more time for the directors to finalise the accounts. This ensures that auditors have sufficient time to prepare the audited financial statements. The audited financial statements are required to be circulated to the members of the company within 6 months of the financial year end and subsequently lodged with Companies Commission of Malaysia within 30 days from the circulation date.

The are various factors to be taken into account when determining the most suitable financial year end for a company, like business nature and seasonality, industry standards, taxation period, accounting and auditing resources and global operations.

1. Change of Financial Year End
   
   A change of financial year end of a Malaysia Company may be due to the following reasons:
   
   

   (1)

   To coincide with the financial year of its holding company According to Section 247(1) of the CA 2016, a subsidiary is required to synchronise its financial year with that of its holding company. A holding company that is not a foreign company is mandated to take appropriate measures to ensure that within two (2) years of a corporation becoming its subsidiary, the financial year of the subsidiary aligns with that of the holding company. While approval from the CCM is unnecessary to synchronise the financial year of the subsidiary with its holding company, it is imperative that the holding company or any of its subsidiaries refrain from altering their financial year without the consent of the Registrar, as this could lead to non-coinciding financial years.

   (2)

   Change of its internal operations or policy A company may change its financial year end due to a change of its internal operations or policy. A manufacturing company may consider changing its financial year end to align it with their operational cycles. If a business experiences seasonal fluctuations in revenue or has significant project cycles, aligning the financial year end to the time when inventory is at its lowest can help to reduce and save time for counting inventory, decrease cost, increase accuracy in the presentation of financial performance and fewer audit queries from the auditor. Companies may have internal policies or guidelines that dictate the timing of financial reporting. If there are changes in these internal policies, it might prompt a shift in the financial year end. In addition, companies may change their financial year end to align with strategic planning cycles. This ensures that financial reporting coincides with key decision-making periods, allowing management to assess performance and plan for the future effectively.

   
   
2. Appropriate Actions following Change of Financial Year End
   
   When the company changes its financial year, proper planning must be exercised to ensure that the relevant provisions of the CA 2016 are complied with.
   
   Below are two illustrations and the appropriate actions to be taken following a change in Financial Year End of a company:
   
   Illustration 1:
   
   ABC Sdn Bhd (the Company) has decided to change its financial year end from 30 June 2023 to 31 March 2023.
   
   Original Financial Year End
   

   Financial Year End	30/06/2023
   Original Accounts Circulation due date (within 6 months from financial year end)	31/12/2023
   Original Accounts Lodgment due date (within 30 days from circulation)	30/01/2024

   
   New Financial Year End
   

   Financial Year End	31/03/2023
   New Accounts Circulation due date (within 6 months from financial year end)	30/09/2023
   New Accounts Lodgment due date (within 30 days from circulation)	30/10/2023

   
   Action to be taken:
   In this case, the change of financial year end will not result in a new circulation and lodgment due dates that are later than the original due dates. As such, no extension of time is required.
   
   Illustration 2:
   
   XYZ Sdn Bhd (the Company) has decided to change its financial year end from 30 June 2023 to 30 September 2023.
   
   Original Financial Year End
   

   Financial Year End	30/06/2023
   Original Accounts Circulation due date (within 6 months from financial year end)	31/12/2023
   Original Accounts Lodgment due date (within 30 days from circulation)	30/01/2024

   
   New Financial Year End
   

   Financial Year End	30/09/2023
   New Accounts Circulation due date (within 6 months from financial year end)	31/03/2024
   New Accounts Lodgment due date (within 30 days from circulation)	30/04/2024

   
   Action to be taken:
   As the new circulation and lodgment due dates are later than the original due dates, the application for an extension of time for circulation of financial statements must be made at least seven (7) days before the last day of the original circulation due date.
   
   

Kaizen, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professionals in Kaizen for further clarification.