With the aim of strengthening Singapore as a leading international financial centre, the Accounting Standards Council (ASC) has announced the convergence of Singapore’s Financial Reporting Standards (FRS) to the International Financial Reporting Standards (IFRS). This will go into effect next year for companies listed on the Singapore Exchange and operating in Singapore.To date, there are already over 100 countries which have converged or are in the midst of converging to IFRS. After January 1, 2018, you will have the opportunity to receive more information on how to stay FRS-compliant.
What are the Singapore Financial Reporting Standards (FRS)?
According to the Singapore Companies Act, companies incorporated in Singapore and Singapore branches of foreign companies need to prepare and present financial statements in compliance with the Singapore FRS. The FRS has set the accounting standards, which consist of principles and governing practices for the treatment of various financial transactions. The intent of having such accounting standards is to measure and share the requirements pertaining to transactions and events of financial statements. The latter includes formal records of financial activities of businesses. In Singapore, there are a number of FRS within each of the standards related to a specific topic, such as presentation of financial statements or accounting for inventories. The full list of the FRS can be referred to here. The Singapore FRS is based on the IFRS which is issued by the International Accounting Standards Board.
What are the updates for 2018?
The ASC has indicated that the Singapore operated companies listed on the Singapore Exchange will need to align their FRS to those of the IFRS. In particular, the convergence of IFRS standards concern Singapore operated companies which have issued or are issuing equity or debt instruments for trading in a public market in Singapore. After January 1, 2018, these companies must apply the new reporting framework. It should be noted that registered business trusts will also need to follow the IFRS standards. In addition, there will be two new Singapore accounting standards regarding revenue and financial instruments, which will go into effect in 2018.
How to stay FRS-compliant?
It is highly recommended that companies do an impact assessment of IFRS 1 First-time Adoption of IFRS in order to stay FRS-compliant. This is a standard which outlines how to go about changing from an earlier financial reporting framework to the IFRS. While companies might argue that Singapore FRS is very similar to the IFRS, it is still important to carry out this step of impact assessment. It is recommended that companies clearly indicate their compliance with the IFRS formally. This will allow for better preparation and transition internally to conform to the necessary requirements of the new accounting standards.
In terms of timeline, a company that has a December year-end, should plan to have its first IFRS compliant financial statements put in place for the annual period beginning January 1, 2018. Due to the fact that the date of transition to the new accounting standards began on January 1, 2017, the financial statements should include an opening third balance sheet from that period. This will allow for a comparison basis as per the new accounting standards.
In fact, the transition to the new accounting standards encompasses various components. These include considering potential adjustments to comparative information, having implications for financial and regulatory ratios, and creating a retrospective application for the standards.
What are the available transitional reliefs?
Companies can tap on transitional reliefs for retrospective application namely fair value as deemed cost, cumulative translation differences as well as acquisitions and disposals of subsidiaries. The fair value as deemed cost relief affects a company’s tangible assets such as property, plant, equipment, and investment property; and intangible assets such as investment or joint ventures. The cumulative transitional differences relief is applicable to companies having foreign subsidiaries, joint arrangements or foreign operations. A company with such structure can choose to nullify the related cumulative translation differences which are present in the reserves upon moving to the IFRS. The acquisitions and disposals of subsidiaries relief allows a company to not have to reiterate the accounting of any of its past business acquisitions, joint ventures or associates. Furthermore, a company does not have to measure any past investments again.
What are the regulatory bodies for accounting standards?
The ASC oversees the accounting standards. It has the statutory authority to develop and disseminate accounting standards for companies, charities, co-operative societies as well as societies. The onus of enforcing the accounting standards differs based upon the respective types of organisations. These organisations include the Accounting and Corporate Regulatory Authority for companies, the Commissioner of Charities, the Registrar of Co-operative societies, and the Registrar of Societies.
AM Corporate Services is here to guide you for accounting services in Singapore and provide professional advice on how your company can stay on track with FRS compliance. Contact us today for a consultation.