Understanding Singapore Financial Reporting Standards
As a business owner in Singapore, it's important to understand the financial reporting standards that apply to your business. These standards provide a framework for preparing and presenting financial information, and help ensure that your financial statements are consistent, reliable, and transparent.
In Singapore, the financial reporting standards are set by the Accounting Standards Council (ASC), which is responsible for issuing and maintaining the Singapore Financial Reporting Standards (SFRS). The SFRS are based on the International Financial Reporting Standards (IFRS) used in over 120 countries around the world.
Financial Statement Types
Depending on the size and complexity of your operations in Singapore, you may be required to prepare the following types of financial statements:
- Statements of financial position: Also known as balance sheets, these reflect the financial position of your business on a given day. Typically, the final day of your company’s fiscal year. These show your business's assets, liabilities, and equity. They also provide information on the its financial structure and solvency.
- Statements of comprehensive income: Also known as income statements, these show your business's revenues, expenses, and profits over a specific period. They provide information on your business's financial performance and can help identify trends and patterns.
- Statements of cash flows: These show the flow of cash in and out of your business over a specified period. They provide information on your business’s cash management and liquidity. They also help identify its income sources and how cash is being used.
- Statements of changes in equity: These show changes in your business's equity over a specific period. They provide information on its equity structure and any transactions that have affected it.
In addition to these primary financial statements, you may also be required to prepare and present supporting schedules, notes, and disclosures. The necessity of this will depend on the type of business reporting and the nature of your transactions.
Preparing Financial Statements
To prepare the financial statements necessary when operating in Singapore, you will need to follow the SFRS and any other relevant guidelines and regulations. You will be able to prepare accurate and reliable financial statements by following the SFRS guidelines and taking the following steps:
- Identify the financial reporting framework: Your first step when preparing financial statements is to determine the applicable financial reporting framework. This framework will include the SFRS guidelines and any other additional standards relevant to your business.
- Identify the financial reporting period: Financial statements cover a specific period known as the financial reporting period. This may be a calendar year, a fiscal year, or some other period, depending on your business and the standards being applied to it.
- Identify the financial reporting entity: Financial statements are prepared for a specific financial reporting entity. This may be the business itself or a group of related businesses. The financial reporting entity is determined based on the scope of your financial statements and the nature of the transactions and events being reported.
- Identify the type of financial statements: Financial statements can take several forms; these can include standalone statements or consolidated statements. Standalone statements show the financial position and performance of your business itself, while consolidated statements show the financial position and performance of your business and any of its subsidiaries or affiliates.
- Identify the accounting policies: Financial statements must be prepared using consistent accounting policies. These are the principles and methods used to recognize, measure, and present financial transactions and events. The accounting policies must be consistent with the SFRS and any other relevant standards or guidelines.
- Identify the presentation and disclosure requirements: Financial statements must be presented in a clear and concise manner. You will need to include all relevant disclosures and notes. The presentation and disclosure requirements vary depending on financial statement types and the nature of the transactions and events being reported.
Auditing Financial Statements
In some cases, financial statements in Singapore may require an audit from an independent auditor. An auditor will review the financial statements for accuracy and thoroughness and provide an opinion on the fairness and reliability of the statements. Auditing is typically required for public companies and large or complex businesses, but it may also be required for smaller businesses in certain circumstances.
Auditing is performed by qualified and independent auditors, who follow specific standards and guidelines to ensure the audit is conducted properly. Auditors must be independent of the business being audited, and must have the necessary skills, knowledge, and experience to conduct the audit.
Auditing has the benefit of providing stakeholders assurance that financial statements are reliable and accurate. Company stakeholders who can benefit from information gained by an audit include investors, lenders, or regulators. Audits can also help identify any errors or irregularities and provide the opportunity to make necessary corrections.
It is essential to understand and comply with the standards laid out by the ASC when preparing financial statements in Singapore. By following the SFRS, alongside any other relevant guidelines and regulations, you can prepare accurate and reliable financial statements that provide valuable information to your stakeholders. These statements can also serve as a tool for success by giving you the confidence and knowledge you need to promote your business.