Accounting standards in Singapore prioritise transparency, investor confidence, and alignment with international practices. At the heart of this system is the Singapore Companies Act, mandating all companies to maintain updated and accurate records.
Accounting Standards in Singapore
The accounting landscape in Singapore is primarily governed by two standards:
- Singapore Financial Reporting Standards (SFRS) form the backbone of financial reporting for most companies in Singapore. These standards largely converge with International Financial Reporting Standards (IFRS) to make sure Singapore-based companies adhere to globally recognised practices and ensure consistency, transparency, and reliability in financial reporting. SFRS covers a wide range of accounting topics, such as revenue recognition, lease accounting, and preparing and presenting financial statements.
- SFRS for Small Entities is introduced by the Accounting Standards Council. This subset of standards is closely aligned with IFRS for Small Entities (SE) and offers a more streamlined approach to financial reporting.
Both are overseen by the Singapore Accounting Standards Board (SASB).
Eligibility Criteria for SFRS for Small Entities
The Singapore Financial Reporting Standard for Small Entities is designed to simplify financial reporting for small businesses. To qualify for this, the following criteria must be met.
- The company must meet at least two of these three criteria:
- Total annual revenue of not more than SGD 10 million
- Total assets of not more than SGD 10 million
- Total number of employees not exceeding 50
- The company must not be publicly accountable.
- Does not have debt or equity instruments traded in a public market
- Does not hold assets in a fiduciary capacity for a broad group of outsiders as its primary business
- The company publishes general purpose financial statements for external users, such as creditors, credit rating agencies, or non-management shareholders.
- The company is not listed on a securities exchange or in the process of issuing any class of instruments in a public market.
- If the company is a subsidiary, its parent or group should not be publicly accountable.
Meeting these criteria makes a company eligible for SFRS for SE but it does not mandate its use. Eligible companies can still choose to apply the full SFRS if they prefer or if their business circumstances require it.
Advantages of SFRS for Small Entities
The following are its advantages for eligible businesses:
- Simplified financial statement preparation
- Reduced disclosure requirements
- Cost-effectiveness
- Tailored for SME needs
- Improved accessibility
- Flexibility in accounting policies
- Easier transition to full SFRS
- International comparability
Make the Right Choice
Singapore Financial Reporting Standard (SFRS) | Singapore Financial Reporting Standard for Small Entities (SFRS for SE) | |
| Complexity and Detail | Comprehensive and detailed guidance on complex financial transactions and events | Simplified guidance that focuses on transactions and events most common to small entities |
| Disclosure Requirements | Requires companies to provide detailed information on various aspects of their financial position and performance | Significantly reduces disclosure requirements (financial statements are more concise and easier to prepare) |
| Recognition and Measurement | Multiple options for recognising and measuring financial items | Simpler, more straightforward methods for recognition and measurement |
| Frequency of Updates | Updated more frequently to keep pace with changes in international standards and complex business environments | Updated less frequently (more stability for small entities) |
| Specific Topics | Broader range of topics, including complex financial instruments, share-based payments, and segment reporting | Omits guidance on topics that are usually not relevant to small entities |
| Fair Value Measurements | Requires fair value measurements for various financial instruments and assets | Limits the use of fair value measurements (often allows cost-based approaches where appropriate) |
| Consolidated Financial Statements | Detailed guidance on preparing consolidated financial statements for groups of companies | Simplified consolidation procedures or exemptions for certain small groups |
| Impairment Testing | Detailed impairment testing procedures for various assets | Simplifies impairment testing (using more straightforward indicators of impairment) |
| Financial Instruments | Extensive guidance on complex financial instruments and hedging activities | Basic guidance on common financial instruments (simplified classification and measurement requirements) |
| User Focus | Designed for a wide range of users including public markets, regulators, and sophisticated investors | Focused on meeting the needs of typical users of small entity financial statements |
Annual Reporting Requirements
All companies in Singapore are required to prepare and submit annual financial statements in accordance with the Singapore Companies Act. The following requirements apply regardless of whether a company follows SFRS or SFRS for SE.
- Components of Financial Statements
- Statement of Comprehensive Income (Profit and Loss Account)
- Balance Sheet (Statement of Financial Position)
- Cash Flow Statement
- Statement of Changes in Equity
- Notes to the Financial Statements
- Director’s Statement
- A statement from the directors declaring their opinion on the company’s ability to pay its debts as they fall due
- Submission Deadlines
- Companies must file their annual returns with ACRA within one month of the Annual General Meeting (AGM)
- The AGM must be held within 6 months of the financial year-end
- Estimated Chargeable Income (ECI)
- Companies must submit their ECI to IRAS within three months from the financial year-end
- Audit Requirements
- Most companies are required to have their financial statements audited
- Small companies may be exempt from audit if they meet specific criteria
- XBRL Filing
- Many companies are required to file their financial statement in XBRL (eXtensible Business Reporting Language) format
- Consolidated Financial Statements
- Companies with subsidiaries are generally required to prepare consolidated financial statements
- Compliance with Applicable Standards
- Financial statements must comply with either SFRS or SFRS for SE, depending on the company’s eligibility and choice
- True and Fair View
- Financial statements must provide a true and fair view of the company’s financial position and performance
- Additional Disclosures
- Specific industries may have additional disclosure requirements set by relevant regulatory bodies
- Language and Currency
- Financial statements should be prepared in English and presented in Singapore dollars
- Retention of Records
- Companies must retain their financial records for at least 5 years from the end of the financial year
Penalties for Non-Compliance
Here is a summarised table outlining the possible types of offences related to non-compliance and their corresponding legal consequences.
Offence | Maximum Fine | Imprisonment (Up to) | Other Consequences |
| General non-compliance with accounting standards | S$ 5,000 | 12 months | Additional penalties possible |
| False/misleading financial statements | S$ 50,000 | 2 years | |
| Persistent default in filings | S$ 10,000 | 2 years | Disqualification of directors (under some circumstances) |
| Late annual return filing | S$ 600 | – | |
| Tax errors (no evasion intent) | S$ 5,000 + 200% tax | 3 years | |
| Tax evasion (with intent) | S$ 50,000 + 400% tax | 5 years | |
| GST non-registration | S$ 10,000 | – | 10% of the GST due penalty |
| CPF late contributions | – | – | 1.5% per month (18% per annum) |
| CPF non-payment | S$ 1,000 – 5,000 (S$ 2,000 to 10,000 for repeat offenders) | 6 months (12 months for repeat offenders) | |
| Deduct CPF contributions but daily to pay to the CPF Board | S$ 10,000 | 7 years |
How Our Firm Can Help
Corporate Services Singapore can guide you from choosing between SFRS and SFRS for SE to preparing financial statements, audit support, advisory, accounting services, and growth support. Gain access to a team of professionals that supports your business objectives.
FAQs on Accounting Standards in Singapore
Why do we need accounting standards?
Accounting standards are important for transparency, comparability, and reliability in financial reporting. Without these standards, companies cannot produce credible financial statements and cannot be held accountable for their reporting because there would be no guidelines for recognising, measuring and disclosing financial transactions.
What is the best way to stay updated on accounting and auditing standards?
There are some ways to keep abreast of relevant changes to the standards. You can review the publications of the Institute of Singapore Chartered Accountants (ISCA) or attend professional development courses. Other ways can include subscribing to industry newsletters and online forums.
Which is better, GAAP or IFRS?
These two are global standards for financial reporting. Generally Accepted Accounting Principles (GAAP) are rules-based while International Financial Reporting Standards (IFRS) are principles-based. The answer to “Which is better?” depends on the location of the company, its needs, and investment plans.
Why do we need IFRS?
IFRS sets the global accounting standards. International Financial Reporting Standards specifies how businesses should maintain their financial records and report their finances.
Why are disclosures of accounting policies needed?
A company must fully disclose the accounting policies it adheres to so that potential investors can understand the reports better and make smarter decisions about whether to invest in the company.
