The Essentials of Singapore’s Accounting Standards

An accountant working

Whether it’s starting a business or managing an existing company, understanding Singapore accounting standards is crucial for ensuring compliance and maintaining financial transparency. Governed by the Singapore Financial Reporting Standards (SFRS) and based on International Financial Reporting Standards (IFRS), these standards help businesses prepare accurate financial statements, making them comparable and consistent globally. This guide provides a Singapore accounting standards overview, covering essentials such as the applicability, the benefits of Singapore Financial Reporting Standards (SFRS) for Small Entities (SE), and local annual reporting requirements.

Singapore Accounting Standards Overview

Singapore accounting standards serve as a consistent approach to recording transactions, recognising revenue, and presenting financial information. Continue reading for their main aspects:

1. Applicability

Singapore companies with fiscal periods starting on or after 1 January 2003 must adhere to Singapore Financial Reporting Standards, ensuring their financial reports meet international standards and boost transparency. Whether you’re a startup, SME, or established corporation, these standards make your financial statements reliable, comparable, and compliant with local regulations. For better clarity, seek professional advice from reliable accounting services providers in Singapore.

2. Accounting Method

Local firms prepare financial statements as per the accrual basis of accounting. This means revenue is recorded when transactions occur but not necessarily when payments are received. This method is a core requirement under Singapore accounting standards, reflecting a company’s financial position and performance more effectively.

SFRS for Small Entities (SFRS for SE)

For smaller companies, there is a tailored framework called Singapore Financial Reporting Standards for Small Entities (SE). Designed to reduce the compliance burden, this set of standards is perfect for businesses that qualify as “small entities” and don’t need full disclosure.

1. Implementation Date

The framework became effective for accounting periods starting on or after 1 January 2011.

2. Eligibility Criteria

To be qualified, a company must meet at least two of the following:

  • Total revenue ≤ S$10 million (US$7.4 million)
  • Total assets ≤ S$10 million (US$7.4 million)
  • Total employees ≤ 50
  • The entity is not publicly accountable and shares financial statements only with limited external users.

3. Advantages of SFRS for SE

The standard significantly benefits qualifying startups and SMEs, allowing them to focus resources on growth while meeting regulatory requirements. Here’s a look at their key advantages:

  • Simplified Preparation

Fewer disclosure requirements enable companies to streamline financial reporting.

  • Reduced Complexity

Smaller entities can focus more on business growth without being weighed down by the full requirements.

A business discussion

4. Choosing Between SFRS and SFRS for SE

When deciding between the two standards, businesses need to evaluate key considerations:

  • Growth Plans

Companies eyeing growth or considering an IPO may prefer full SFRS to avoid breaching size thresholds. This ensures compliance with future investor or institutional needs.

  • Training and Software Costs

Adopting full SFRS can incur extra costs for training staff and updating accounting software. Startups and SMEs, in particular, should weigh the benefits of SFRS for SE to save on operational expenses.

  • Financial Institution Requirements

Many financial institutions and lenders require full SFRS statements when businesses seek loans or external financing. If this applies, SFRS for SE may not be a good fit for companies needing regular funding.

  • Ideal for Small Startups

SFRS for SE is especially suitable for new businesses that are not mandated for public financial statement preparation in Singapore.

Annual Reporting Requirements in Singapore

In addition to following Singapore accounting standards, businesses must meet annual reporting obligations. Companies need to submit their estimated chargeable income within three months of the end of their fiscal year to the Inland Revenue Authority of Singapore (IRAS), including:

  • Statement of Comprehensive Income (Profit and Loss)

Outlines the company’s income, expenses, and profit or loss.

  • Balance Sheet

Displays the company’s financial position, detailing assets, liabilities, and equity.

  • Company Details

Contains basic company info such as name, registration number, and contact details.

  • Shareholder Details

Shareholders’ information that is essential for IRAS compliance.

  • Dates of Annual Returns and AGM

Required dates for annual returns and AGMs should be accurately reported to comply with Singapore authorities.

Failure to meet these annual reporting requirements may result in penalties or legal repercussions. Therefore, companies must be cautious in maintaining accurate and up-to-date records.

Adhering to Singapore accounting standards and meeting annual reporting requirements help companies ensure transparency and avoid non-compliance risks. To navigate these standards confidently, consider partnering with a professional accounting service like Tianlong Services. Our chartered accountants in Singapore deliver tailored accounting solutions for businesses of all sizes—from small family enterprises to large listed companies and multinationals. 

Let our expertise support your financial success. Request a free trial now.

 

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