Singapore Financial Reporting Standards
In this article, you will find a thorough discussion on the Financial Reporting Standards that are applicable to the companies operating in Singapore. This article comprises all the accounting concepts governed by the reporting standards of Singapore and much other relevant information.
The main concept for the use of the accounting concepts is to prepare the financial statements which give an authentic and reasonable view. This authentic and reasonable view appears when an attention is provided for the presentation and preparation of the financial statements by fulfilling all the disclosure requirements as suggested by the standards.
Although the main reason behind using a single reporting framework is to harmonize the accounting practices but apart from this, these reporting standards also help in making the fair judgments in an event of any issue.
These accounting standards are applicable to the financial statements issued by the companies, on which the external and internal stakeholders of the company rely to make sound economic decisions. The financial statements give a picture of the cash flows, the assets and the obligations of the company.
Accounting Standards in Singapore:
In Singapore, the accounting standards to report financial statements for the companies operating in Singapore is governed by Council on Corporate Disclosure and Governance also known as CCDG. This council presented a set of accounting standards, which are linked with the International Financial Reporting Standards and are applicable to the companies in Singapore.
However, in the year 2007, the CCDG was replaced by the ASC which is known as the Accounting Standards Council, this council now looks after the process of providing for the accounting standards for the profit generating organizations as well as for not for-profit organizations.
The process of ensuring the compliance with the accounting standards by the companies is carried out by the Accounting and Corporate Regulatory Authority; the compliance by the societies is overseen by Registrar of Societies; the compliance by the charities is ensured by the Commissioner for charities.
In Singapore, all the companies operate either as a resident or as a branch of any foreign company are required from the year 2003 to prepare their financial statements in compliance with the financial reporting framework applicable in Singapore known as SFRS. This SFRS is very closely aligned with the IFRS; however, the ASC is in future going to take steps to ensure that the SFRS will be converged with IFRS in full in order to make the financial statements more comparable globally.
The financial information is used to analyze the financial position of the company and therefore, form a key part in scrutinizing the financial performance of a company. However, the financial information presented in the financial statements is based on assumptions and estimates and is consequently dependent upon some key concepts laid down by the framework.
These concepts are as follows:
- Going Concern:Financial statements of a company are usually prepared on a going-concern basis unless a company has an intention to liquidate soon. The going-concern concept implies that the company is going to operate for foreseeable future and has no intentions to end up the business or liquidate. In case if any such intention of liquidation exists, the company has to explicitly declare it to the users and have to prepare financial statements on a break up basis.
- Accrual Concept:The accrual concept used in the accounting while preparing the financial statements is also of major importance to the users. The accrual concept works on the principle that any future obligations of the company which will result to an economic outflow must be disclosed to the users in the financial statements. As there can be many such obligations that occur during the business activities that imply to make future payments within the time span of one year. All such obligations must be disclosed as soon as they become liable.
- Relevance:The financial information presented in the financial statements of a company must be of a nature that helps making the users relevant decisions. The information must reflect the past and must be sufficiently complete enough to let the users make future predictions.
- Faithful Representations:It is the responsibility of the management of the company to present the financial information in the financial statements which is true and shows the correct picture of the financial affairs of the company. The financial statements are used by the users and investors to make financial decisions. Therefore, special care must be taken by the management in presenting the true picture of the financial statement.
- Compatibility:It is very common for investors to make comparisons of the financial statement of different companies in order to make better financial decisions. Therefore, the financial statements prepared by the companies must be made with greater flexibility and comparability so they are capable to be compared with other companies.
- Verifiability:The financial statement as reported by the companies must be capable of verification. The financial information presented in the financial statements is based on many different assumptions and estimates and is being verified by the users before relying. Therefore, the financial statement presented by the companies must be verifiable.
- Timeliness:The information presented in the financial statement must be timely so that the users can make the accurate decisions on the accurate time. To ensure timeliness the information presented must represent the historic as well as prospective information.
- Understandability:The information presented in the financial statements must be easy to understand for the users who do not have a deep knowledge of accounting. Not all the users to the financial statement are expert accountants; therefore, the information must be understandable by a layman.
Financial Reporting Standards in Singapore for SME’s:
The SME’s stands for the Small and Medium-Size Entities. The smaller entities lack resources in terms of finance as well as human resources; therefore, imposing unnecessary burden of reporting on them will be unjustifiable. In order to lessen down the burden of reporting over the smaller entities the authorities issued a separate set of standards for such entities. After the IFRS applicable to SMEs was in place, the SFRS for SMEs was also being issued for all the small entities working in Singapore. The requirements in the separate set followed by the SMEs is less stringent and is easy to follow for them without injecting unnecessary resources.
SFRS Applicable To SMEs:
- The disclosure requirements imposed on SMEs is less as compared to the normal SFRS.
- The rules applicable to the SMEs for the measurement and recognition are less complex.
- The choices of accounting standards allowed to SMEs is less.
- The presentation requirements applicable to SMEs are also easy.
- The amendments required to be made are once in three years.
- Such standards which require a lot of cost involvement on application are not applicable on SMEs like, interim reporting, discontinued operations, etc.
In order to qualify for being regard as an SME, a company is required to fulfill the following three conditions:
- The revenue generated must be less than S$10m;
- The assets’ value must not increase beyond S$10m;
- The employees working in the entity must not exceed 50 in total.
In case if the above criteria are not met by the company for its past two years, the company will not be regarded as an SME.
The following suggested matters must be taken into account when a company is going to transfer itself from SFRS to the SFRS for SMEs.
- The prospective costs that may be required for the new software and the training of the staff.
- In case if the criterion is not met, the penalties caused,
- The conditions of the loans attached.
- Prospective plans to seek public listing.
- The effects on the different companies in a group.