What Accounting Standards Should I Comply With In Singapore?

Singapore accounting standards

Find out what is the SFRS and its simplified version for small entities, and which you have to comply with in Singapore.

Why Do We Need Accounting Standards?

Financial reporting has to be standardised to ensure international compatibility. A set of principles and conventions known as international accounting standards are developed by the International Accounting Standards Board (IASB), an independent standard-setting body. Referred to as the International Financial Reporting Standards (IFRS), these principles are used to help businesses around the world measure their financial health against the same yardstick.

Who Sets Accounting Standards in Singapore?

The Accounting Standards Council (ASC) is responsible for formulating accounting standards in Singapore. Accountant standards in Singapore, known as the Singapore Financial Reporting Standards (SFRS), are largely based on the International Financial Reporting Standards (IFRS), with some differences such as effective dates of certain provisions.

What Must Companies Do?

Companies that are incorporated in Singapore, as well as Singapore branches of foreign parent companies, must prepare financial statements that comply with the Singapore Financial Reporting Standards (SFRS). The SFRS sets out principles and practices for the treatment of various financial transactions.

SFRS for Small Entities

As complying with the full SFRS can be challenging for small and medium-sized enterprises (SMEs), the SFRS for Small Entities is a simplified framework to the Singapore FRS for the preparation of financial statements for financial reporting. The SFRS for Small Entities excludes topics that are irrelevant for the typical SME, such as earnings per share, interim financial reporting, insurance contracts, segment reporting and assets held for sale. As a result, this streamlines the number of pages on one’s financial report to just a tenth of the full SFRS. Developed based on the IFRS for SMEs, the SFRS for Small Entities thus serves to alleviate compliance costs for smaller businesses while ensuring transparency and compatibility.

If your company meets any two of the following criteria for two previous years, it can qualify as a small entity and thus apply the SFRS for Small Entities:

  • Total annual revenue of not more than S$10 million
  • Total gross assets of not more than S$10 million
  • Total number of employees of not more than 50

Your company must also not be publicly accountable, and must publish general-purpose financial statements for external use.

Accounting Standards For Listed Companies

For many years, Singapore has been working to converge the FRS with the IFRS. As of 1 January 2018, Singapore-incorporated companies listed on the Singapore Exchange (SGX) must apply a new Singapore financial reporting framework, the Singapore Financial Reporting Standards (International) (SFRS(I)s), which is fully identical to the IFRS.

 

Should I Adopt The “SFRS” Or The “SFRS For Small Entities”?

Before the SFRS for Small Entities was effectively introduced on 1 January 2011, all Singapore-incorporated companies were adhering to the full SFRS. If you are planning to adopt the SFRS for Small Entities, you may wish to review the following considerations:

  1. Your growth plan

Are you aspiring to IPO and be listed on the SGX? Is your annual revenue likely to exceed $10 million in the near term? Under such circumstances, it may make more sense to adhere to the full SFRS. Companies that are on the verge of exceeding the thresholds for “SFRS for Small Entities” may be better off complying with the full SFRS.

  1. Transition costs

Switching between accounting standards may incur business costs such as training costs to re-educate your finance department, as well as costs associated with changing your accounting systems and software. Unless you are prepared to bear such costs, it pays to analyse your business plans before making a decision.

  1. Financing

Are you planning to take a loan or raise funds? As it is not uncommon for financial institutions and investors to request for full SFRS statements, you may wish to take into account your company’s financial roadmap.

  1. Parent company

If your company is part of a larger conglomerate, you may wish to consider the impact of adopting the simplified SFRS on the rest of the group. Groups of companies that are accustomed to the full SFRS may be otherwise affected by the treatment of specific accounting elements.

  1. Market fluctuations

Businesses operating in volatile markets may have turnovers that fluctuate along with the boons and banes of the global economy. Though the ASC has thought of this and provided a transitional relief for borderline entities, small businesses may wish to take market fluctuations into consideration before jumping on to the bandwagon.

A Comparison: “SFRS” Or “SFRS For Small Entities”?

We highlight an overview of key differences between the SFRS and SFRS for Small Entities.

Full SFRSFRS for Small Entities
Financial StatementsA full financial statement is requiredIn place of statements of comprehensive income and equity changes, companies may submit a "Statement of income and retained earnings"
Investments in associates and joint venturesTo account using the equity methodTo account using the equity method, cost model (cost less accumulated impairment losses) or fair value model (profit or loss)
Investment properties May apply cost method or fair value method for subsequent measurementsMay apply fair value method if fair value can be measured without undue cost or effort
Non-financial assets and goodwillMay apply cost model or revaluation modelMay apply the cost model
Revaluation of property, plant and equipment and intangible assetsMay apply the cost model or revaluation modelCosts less any accumulated depreciation and any accumulated impairment losses

Get Expert Advice From Corporate Services Singapore

It is recommended that smaller companies fully understand the costs and benefits involved before adopting an accounting standard. The simplified SFRS for Small Entities is generally targeted at small companies with no public accountability. It is also ideal for newly incorporated start-ups, since they would not have to grapple with the costs of switching from SFRS to SFRS for Small Entities. Companies that are comfortable reporting under the full SFRS should continue adopting the full SFRS.

At Corporate Services Singapore, our accounting professionals can guide you and provide specialist advice on how your company can stay on track with accounting standards compliance.

Access expert financial advice and solutions and stay on top of your business with Corporate Services Singapore. To find out more about our customised outsourced accounting services, give us a call at 6602 8286 or email us at info@corporateservicessingapore.com to get started today.

Posted in Accounting.