Singapore Accounting Standards
This article contains the general discussion about the purpose, objective and application of the financial accounting standards. The accounting standards that are applicable to the corporate operating in Singapore are being discussed in depth.
All the entities throughout the world are required to present their financial performance in the form of the financial statements. The reporting of financial information is whether mandatory or not is dependent upon the statute, law and the respective stock exchange requirements that are being applicable in different countries.
A company has many stakeholders like the employees, customers, suppliers, bank, government and the most importantly the investors. Investors are the owners to the business whereas, the directors are the agents. Whether the directors are taking care of the company in an appropriate way or not is being reflected in the company’s financial statements. Financial statements are available publicly over the Internet and are also published in a booklet form. Everyone has an access to the financial statements, and many financial decisions are being based on the financial statements.
In an attempt to ensure the reliability and relevance of the financial statement the international Accounting Standards Board has produced a set of accounting standards that are complied by the corporate when carrying out their financial activities.
Previously, there was a lack of harmonization in the accounting practices and policies of the distinct companies and that lack of harmonization made it impossible for the financial statements of the different countries to be compared with each other. In order to make the financial information comparable the IASB took steps to introduce a set of IFRS known as International Financial Reporting Standards to be followed.
These accounting standards help the company to provide for their financial information that is being appropriately recognized, disclosed and presented so that the users of the financial statements are capable of making sound decision no matter the corporate entity, and the users are resided in different countries.
The efforts made by the IASB have made it easier for the companies to use the IFRS as a measurement device to analyze and improve their performance.
The accounting standards that are being followed in the Singapore are known as the Singapore Financial Reporting Standards. These accounting standards are required to be followed by all those companies in the Singapore that have the financial year starting from the 1st January.
The most prioritized concept being followed by the companies operating business in the Singapore is the Accrual concept. The accrual concept works on the principal of recognizing the obligations of a company as soon as they arise. By way of following the accrual concept the companies not only reflect the historical data in their financial statements, in fact, it also gives a picture of the prospective obligation to its users and stakeholders.
The set of accounting standards being followed in the Singapore comprises of almost thirty nine different standards that cover distinctive accounting matters, for example, revenue recognition, borrowing cost, inventories, and presentations and disclosures. These FRS are named as FRS 1, FRS 2 and so on.
Reporting Standards for Small and Medium-Sized Enterprise:
The world is globally moving very faster, and nowadays the small and medium-sized entities are also working on a great way to compete with the huge corporate. This competition and passion made IASB to generate a separate set of accounting standards for the smaller and medium-sized entities as well. The new set was issued during the year 2009 and is very closely in line with the comprehensive set of SFRS.
The major reason behind the development of the set of accounting standards is to provide some comfort to the smaller entities and to avoid imposing unnecessary burden on them. The smaller entities have limited resources, and the compliance with the SFRS is considered to be expensive. The smaller entities very hardly meet their daily expenses and in case if the attempt to comply with the entire set of SFRS, they may not be able to manage it due to lack of their resources.
Therefore, in order to resolve this issue of the smaller and medium sized entities IASB issued a specific set of accounting standards to be followed by them, moreover this idea of IASB was also followed by the Accounting Standards Council based in Singapore, and they as well issued a separate financial reporting accounting standard for the Smaller and Medium-Sized Entities in the year 2010.
Singapore contains many smaller entities and in order to provide them comfort in issuing the financial information which is reliable, transparent and comparable the accounting bodies took a huge step which proved to be beneficial for the stakeholders of the small and medium-size companies.
A company that either entirely operates its business in the Singapore or a company that has its actual business in a foreign country but has a branch in the Singapore can opt the SFRS for the small and medium-size entity in case if that entity meets the below specified criteria:
- The company shall not be accountable to the public all in all,
- The financial statements being published by the small medium-sized entity are available for the general use to the external stakeholders.
- The entity is a small-sized entity if the entity meets the criteria for qualifying as a small-sized entity. The criteria to be met in order to qualify as a small-sized entity is the following:
- The annual revenue of that company shall not exceed above S$10m,
- The gross worth of the assets shall not exceed above S$10m,
- The number of total employees working at that company shall not be more than 50.
The above stated criteria shall be met for the two previous consecutive years by that entity; an entity will be disposed to the qualification as a smaller entity until it reaches the limit stated above. However, if the amount of revenue, gross assets and number of employees exceed the limit stated above, the entity will be subject to follow the entire set of reporting standards.
In case of a group company, any subsidiary of a group that meets the criteria of being a small-sized entity can also opt to follow the accounting standards of the small entities until it meets the threshold requirements.
When it comes on choosing for a company, whether to opt a full set of accounting standards or to opt for an accounting standard for SME, there are few matters to be considered by the company. These matters include the probable plans for prospective growth, the plans to obtain a listing in the stock market, the likely changes to the structure within the organization, any plans to go for acquisitions or mergers, etc.
All those companies which are about to cross the limit of the revenue, gross assets and number of implies should go for adopting the entire set of accounting standards. Moreover, all the companies in a group structure whose parent company adopts the full SFRS must try to opt the full set of SFRS rather than the SFRS for SME in order to avoid quality issues.
All in all, the companies which have just entered in the corporate zone must go for opting the SFRS for the smaller entities until they reach to the phase when they are in a position to have enough resources to meet the requirements of an entire set of SFRS.