Singapore financial reporting standards
Singapore companies with fiscal periods beginning after January 1, 2003 must follow the Singapore Financial Reporting Standards (SFRS), which are based on the IFRS. Financial statements are prepared under the accrual basis of accounting, which is a one of the main principles of the accounting standards in Singapore.
Under this accounting method, revenues are recorded when a transaction occurs rather than when the payment is received.
When the International Accounting Standards Board (IASB) issued the IFRS for small entities (SE), the Accounting Standards Council of Singapore introduced the SFRS for small entities (SE).
Singapore Financial Reporting Standard (SFRS) for Small Entities (SE)
Singapore Financial Reporting Standard for Small Entities applies for accounting periods beginning on or after 1 January 2011. Eligible entities have the option to apply the SFRS for SE or to continue to apply the full set of Singapore Financial Reporting Standards (“SFRS”).
Businesses that are eligible to apply for SFRS for SE are:
- Classified as a small entity, meaning they must also qualify in two of the three aforementioned criteria under audit exemptions, being:
- Total revenue of not more than S$10 million (US$7.4 million);
- Total assets of not more than S$10 million (US$7.4 million); or
- Total number of employees of not more than 50.
- The company is not publicly accountable; and
- It publishes financial statements for external.
- The company is not publicly accountable; and
- It publishes financial statements from external users.
Some of the advantages for small companies abiding by the SFRS for SE are that the process for preparing a company’s financial statements are much simpler, and there is a reduction in the disclosure requirements.
Choosing between SFRS and SFRS for SE
Companies that qualify for SFRS for SE must consider a few factors before adopting SFRS for SE. Companies should consider their growth plans and the nature of their business as those that are on the verge of breaching the size threshold better of using full SFRS. Businesses that plan to go for an IPO for example will exceed the size threshold in terms of assets, revenue, and total employees.
Businesses must also consider the cost of training of employees as well as the cost of accounting software, particularly if the business belongs to a group or held by parent companies that follow the full SFRS.
The cost of adopting to SFRS for SE could make the business inefficient. Moreover, financial institutions and lenders often demand full SFRS statements.
SFRS for SE is more ideal for startups and whose financial statements will not be used by external parties.
Annual reports
Singapore’s authorities require companies to submit their estimated chargeable income within three months from the financial year-end.
This accounting should include the following:
- Statement of comprehensive income (profit and loss accounting);
- Company details;
- Balance sheet;
- Shareholder details;
- Dates of annual returns and AGM;
- Detail of company officers;
- Cash flow statement; and
- Statement of changes in equity.
Penalties for non-compliance
Businesses that fail to hold an AGM and are late to file financial statements are at risk of fines, summons, and even an arrest warrant issued by ACRA.
The penalty for late annual lodgements beyond three months by Singapore-incorporated companies, Variable Capital Companies and Limited Liability Partnerships will go up to S$600 (US$442).
