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New Financial Reporting Framework in Singapore

Corporate Services Singapore Sep 19, 2019
Most accounting companies in Singapore follow the SFRS, though the accounting and financial standards in the city have been evolving for the past few years.
Singapore is considered as one of the best business hubs in Asia. The country has always followed its accounting standards known as the Singapore Financial Reporting Standards (SFRS). Additionally, its accounting rules and guidelines are based on the ISBF or the International Financial Reporting Standards.

Understanding Singapore’s Strict Accounting Standards

The Companies Act of Singapore was enacted in 1967. This act applies to all companies based in Singapore, including accounting companies. Furthermore, this includes the required provisions from the life-cycle, management, and incorporation of a company.

Singaporean accounting companies are obliged to provide financial statements according to SFRS standards The main principles of  SFRS include:
The accounting system documents each transaction. The statement accounts should be complete, neutral, and show current financial position, cash flow, and performance. It should also reflect the economic substances of transactions and conditions. The financial statement comprises financial status, comprehensive income, change in equity, and cash flow.

What implementations are enclosed within the New Financial Reporting Standards?

The Council of Corporate Disclosure and Governance has been set up to replace the Institute of Certified Public Accountants in Singapore.
The accounting standards in Singapore follow the Financial Reporting Standards (FRS), which fall under the legislation of the Companies Act. Companies involved such as accounting companies and small businesses must submit the Ninth Schedule and Director’s Report requirements starting from the years before January 1, 2003.
The Companies Amendment Act of 2003 has brought change in the financial reporting standards. Private companies are exempted from audit requirements, with a turnover of less than $2.5 million or have been dormant for the stipulated period time.

Comparing Singapore’s Accounting Standards with other Asian Countries

Hong Kong is considered to be Singapore’s main competitor in business and commerce. Both cities have attracted foreign investors due to easy accessibility and free trade. Singapore and Hong Kong require companies and accounting services for small companies to file financial statements based on local standards.
These local standards are aligned with the International Financial Reporting Standards, attracting more foreign investors.
However, Hong Kong’s accounting standards differ from Singapore. Hong Kong updated a recent version of its Financial Reporting Standards last 2005. This consists of the Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards, and its Interpretations.
The Hong Kong accounting standards are divided into 41 accounting standards and 9 financial reporting standards. Their accounting standards cover financial instruments, inventories, and intangible assets.
Singapore accounting standards abide by the Singapore Financial Standards and comprises 39 measures. This covers financial instruments, revenue recognition, property, and plant & equipment.
Japan, one of Asia’s economic giants, possesses similar accounting standards with both Hong Kong and Singapore.

Japanese accounting standards are created by the Accounting Standards Board of Japan. Japan’s accounting standards may not be identical to the International Standards Accounting Board but serve as an equivalent as adopted by the European Union.

The Role of Economic Restructuring & Corporate Governance

Following the implementation of the new accounting policies, Singapore would leverage and improve the pre-crisis profitability experienced during the 1990s.This helps big and small companies expand their business, compared to the previous years when the corporate industry was plagued with vulnerabilities, including corporate bankruptcies.
The implementation of the new accounting guidelines would level the playing field and move industry players to a better equilibrium bounded by a stable macroeconomic environment and increasing financial reporting reliability.