As a brief introduction to Singapore accounting, the Singapore Companies Act requires every company to keep documents of accounting as directors of the company have a right to inspect the documents as these records will show the financial position and transactions of the company. It can also be used to prepare accurate financial statements.
Accounting standards in Singapore
All companies and branches of foreign companies are required to have annual financial statements prepared in accordance with the Singapore Financial Reporting Standards (SFRS), which are consistent with the International Financial Reporting Standards (IFRS).
In most cases, companies that are classified as small companies are permitted to prepare accounts under SFRS for Small Entities (SFRS SE), which is closely aligned with IFRS for Small Entities.
Accurate financial statements are vital to any well run, successful business. They give an up-to-date picture of the financial health of a company at any time, as well as allowing compliance obligations to be satisfied efficiently. When a business is seeking to expand, either through borrowed funds or additional equity, financial statements are vital to an assessment of the creditworthiness of a business and its future growth prospects.
The majority of companies in Singapore are small companies. An entity can use SFRS SE if it is a company that is not publicly accountable. A company that is not publicly accountable is one that does not have to file accounts with statutory authorities or one that has not issued securities or shares to the market. Even if a company is a small company under Singapore’s Company’s Act, it may still need to comply with IFRS if it is publicly accountable.
The main difference between SFRS and SFRS SE is disclosure which results in simplified financial statements. The aim is to meet the needs of the users of the statements more efficiently and cost-effectively.
The implementation of and any changes to SFRS or SFRS SE are overseen by the Singapore Accounting Standards Board (SASB).
When is the financial year-end in Singapore?
The standard financial year-end for companies in Singapore is 31 December. However, it is open to any company to choose its financial year-end. This allows companies that are part of a larger worldwide group to align their year-end in Singapore with that of the group, making consolidation of accounts a more streamlined process.
The building blocks of reliable financial statements are accurate bookkeeping records. Such records are put together from the basic financial documents of a business – invoices, purchase orders, payroll records, business expenses and bank statements.
The products of bookkeeping are a comprehensive general ledger, a record of receivables and payables, a reconciliation of cash generated and used by the business. Ultimately the result is a profit and loss statement, balance sheet and cash flow statement which can be produced monthly, quarterly or annually.
Annual financial statements
Every company in Singapore needs to prepare annual financial statements, either under SFRS or SFRS SE. The accounts include a profit and loss statement, balance sheet, statement of cash flow and statement of changes in equity, accompanied by notes to the accounts.
If a company is part of a larger group, consolidated financial statements need to be prepared.
Companies are required to maintain all supporting documents from which the financial statements are compiled. Those documents and records must be kept in such manner as to enable them to be conveniently and accurately audited.
Audit requirements for Singapore companies
Accounts of Singapore companies need to be audited unless the company is small, as defined in the Companies Act.
A small company is a private company that satisfies 2 of the 3 criteria below in the two immediately preceding financial years:
- The revenue of the company does not exceed SGD10 million per fiscal year.
- The company’s total assets do not exceed SGD10 million in value at the end of each financial year.
- The company does not have more than 50 employees at the end of each fiscal year.
If the Singapore company is part of a corporate group (whether onshore or offshore), then the tests above are measured by reference to the group, rather than the company in Singapore. This can mean that a company with limited operations in Singapore may still need to be audited, because of the activities in the rest of the group.
Singapore companies with corporate shareholders and companies that are audited are required to file their financial statements with ACRA in eXtensible Business Reporting Language (XBRL) format. XBRL is a standardized way of transmitting financial records.
Keeping financial records is essential for every company around the world, which the same applies to Singapore. The guide above lists all that is necessary for Singapore accounting. Having good accounting records is advantageous for both big and small companies as they will show the transactions and funds for each fiscal year and will also comply with the Singapore law. To ensure accounting is processed as stated by the Singapore Companies Act, we advise to use Acclime’s corporate services to assure that all steps and documents comply with the law.
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