Compilation of Financial Statements
Most companies incorporated in Singapore and branches of foreign companies are required to prepare their financial accounts annually in accordance with the Singapore Financial Reporting Standards (“SFRS”). Moreover, Since 2011, ACRA has established the Financial Reporting Surveillance Programme (“FRSP”), where a selected pool of financial statements are reviewed to determine if they comply with the SFRS and give a true and fair view of the company’s profit and loss, as well as the state of affairs of the company.
Compilation of the balance sheet (with profit & loss)
A complete set of financial statements includes
- a balance sheet
- an income statement
- a statement showing either all changes in equity or changes in equity other than those arising from capital transactions with owners and distributions to owners
- a cash flow statement, and
- accounting policies and explanatory notes.
This is must be done in accordance with the Financial Reporting Standards (FRSs) and general accounting practice. Companies are legally obliged to include a Director’s Report in their annual financial statement under sections 201(2) and 201(5) of the Companies Act. The statements must give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
All Singapore-registered companies are required to prepare audited financial reports unless they are excepted as under:
Those that fall within the definition of a “small company” during a financial year (FY) if it meets any 2 of the 3 criteria within the FY; companies with corporate shareholders can also qualify for this exemption if the whole group collectively satisfies any 2 of the following 3 criteria within the FY –
- Total annual revenue of not more than $10 million
- Gross assets total as at the end of the financial reporting period of not more than $10 million
- Total number of employees as at the end of the financial year of not more than 50
It is very important that the above reports are prepared by applying suitable accounting policies in accordance with FRSs, as well as provide additional disclosures to enable a clear understanding of transactions, other events and conditions on the company’s financial position and financial performance.
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Financial reporting methods under SFRS
- An entity shall prepare its financial statements, except for cash flow information, using the accrual basis of accounting.
- An entity shall present separately each material class of similar items. An entity shall present separately items of a dissimilar nature or function unless they are immaterial.
- An entity shall not offset assets and liabilities or income and expenses, unless required or permitted by a FRS.
- An entity shall recognise all items of income and expense in a period in profit or loss unless a FRS requires or permits otherwise.
- An entity shall present a complete set of financial statements (including comparative information) at least annually. When an entity changes the end of its reporting period and presents financial statements for a period longer or shorter than one year, an entity shall disclose, in addition to the period covered by the financial statements:
- (a) the reason for using a longer or shorter period, and
- (b) the fact that amounts presented in the financial statements are not entirely comparable.
- Except when FRSs permit or require otherwise, an entity shall present comparative information in respect of the preceding period for all amounts reported in the current period’s financial statements. An entity shall include comparative information for narrative and descriptive information if it is relevant to understanding the current period’s financial statements.
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