Former Economy Minister Datuk Seri Rafizi Ramli has defended the use of marked-to-market accounting in assessing Tabung Haji’s (TH) financial position, arguing that the Realisable Asset Value (RAV) approach could conflict with key financial reporting principles.
In a post on X, Rafizi, a chartered accountant with the Institute of Chartered Accountants in England and Wales (ICAEW), said claims that both the National Audit Department (JAN) and PwC were correct in their respective approaches should be examined against fundamental accounting principles rather than political arguments.
He said financial reporting standards may be updated over time, but several fundamental principles remain relevant, including substance over form and prudence.
Rafizi explained that substance over form requires transactions to be reported according to their economic reality rather than how they are classified.
For example, he said an instrument that effectively functions as debt should be reported as debt even if it is classified as preference shares, depending on factors such as recurring coupon payments and fixed redemption terms.
He also highlighted prudence, which requires financial reporting to reflect a realistic assessment of what an asset could be worth when realised, rather than relying on values that may be higher than what the market would support.
In the case of TH, Rafizi argued that using RAV instead of marked-to-market values could result in assets being valued above what they could realistically fetch in the market.
He also questioned claims that TH had recorded more than RM3 billion in paper profits rather than a loss of about RM1 billion under the marked-to-market approach.
Rafizi argued that the issue becomes more significant when TH needs to pay hibah to depositors.
“When it comes to paying hibah, when the money of depositors, especially new depositors, has to be used, that has become rolling depositors’ money,” he said.
According to Rafizi, this means the substance of the transaction changes because the hibah would no longer be generated from realised profits but from funds involving depositors.
He also cited the transfer of TH assets to Urusharta Jamaah Sdn Bhd (UJSB), saying the assets had been transferred eight years ago for recovery but had yet to be fully recovered, with UJSB’s debt to TH subsequently rolled over for another 10 years.
Rafizi said the debate should ultimately focus less on political positions and more on the financial principles involved.
“For those trained as financial professionals and who have sworn to become honest chartered accountants, this TH issue is already clear enough,” he said.
He added that greater attention should instead be given to resolving the debt burden faced by the public following the bailout of TH.
