GEORGE TOWN: The Penang state government will implement the Financial Reporting Standards (FRS) 139 Financial Instruments: Recognition and Measurement on Jan 1, 2010 as it seeks to change its financial standards from historical to fair value accounting.

Chief Minister Lim Guan Eng said although Malaysia's convergence with the International Financial Reporting Standards (IFRS) was targeted for Jan 1, 2012, Penang was keen to apply the fair value accounting in line with international accounting standards.

"We should adopt the FRS 139 as we will then be able to unlock the value and know the value of our assets which will not be a historical cost but on current valuation,” he said on May 8.

Lim said the state government emphasis on fair value accounting practices in the accounting systems would also apply to the open tender systems.

"Only then we will know the risks. We must know and understand the value of our assets, which is the basic management and accounting practice but it has never been practiced,” he said.

Countires which require the IFRS are Britain, France, Germany, Hong Kong, Spain, Switzerland and    Australia. Those which are considering converging with IFRS are the US and Japan. South Korea, Canada and India plan for convergence by 2011.

The  Malaysian government wants the FRS 139 convergence by 2012 so that Malaysia would comply with International Accounting Standards.

Lim cited the Penang International Sports Arena (PISA) which was built in 1997 at RM110 million, but until today the real value of the property which served as a stadium and also an aquatic centre was unknown.

Announcing an open tender to manage and run PISA, Lim said until now, the Penang Island Municipal Council (MPPP) which has contracted PISA to event management company PenEvents Sdn Bhd was only breaking even in terms of revenue.

"If we do not improve the infrastructure and only periodic maintenance is carried out, the place will go downhill. By calling for tender, we will know what the value of this place is and it will enable us to move forward.

"For now, it is still serving as a venue for events, but once someone else comes up with another venue, PISA will be "dead". We have to start now by calling for tender to assess the value of this asset," he added.

He said the open tender, which would close on Aug 28 would also be open to any party, both local or international companies.

"If the terms are good, and the company has a good track record and experience, we will consider them as long as they can show how much they are willing to invest into PISA and the income that will be generated for the state government," he added.

Penevents was previously a subsidiary of the Penang Development Corporation and was awarded the contract to manage PISA in 1999.  There was a management buyout of Penevents in August 2006 and under the contract,  95% of the profits from the running of PISA and RM5,000 monthly payment are channeled back to the Penang Municipal Council.

Since Dec 2007, Penevents has been managing PISA on a month-to-month contract basis.