Guide to Accounting Standards for Businesses in Singapore

Although business owners in Singapore do not have to deal with accounting standards all the time, it is still a critical component of a successful company in Singapore. These standards set the principles for their company’s financial statement, which they will need to assess themselves and present it to their prospective partners.

Foreign companies are advised to seek guidance from reputable accounting services in Singapore to ensure legal compliance. To better understand the accounting regulations for businesses in Singapore, here is everything you need to know about Singapore’s accounting standards.

What is the Financial Reporting

Financial reporting is the divulgence of financial statements and related details to external and management stakeholders on the performance of the company over a particular period. If a business is accountable as a public entity (that is listed on the public stock exchange), then by law, it is required to publish a financial report and be made available to the companies’ private investors, as well as the general public.

The report comprises of the performance of the company, its position, and cash flow. Every critical fact on the financial decisions which may impact the business shall be reported in the statement. Hence, the financial statements must be clear and concise.

What is the International Financial Reporting Standards

The International Financial Reporting Standards or the IFRS, issued by the Accounting Standards Board (IASB), set universal laws to achieve consistency and transparency in financial statements across the globe. These standards specify how companies should maintain and report their accounts, defining the transaction types and other occurrences with financial impact. Thus, they established a universal language that allows a reliable and consistent financial statement.

Understanding Singapore’s accounting standard (SFRS)

The IFRS becomes the basis for the Singapore Financial Reporting Standards or SFRS. These accounting standards include over forty sections, and they are called FRS X, such as FRS 1. Each of these standards covers a distinct topic, such as revenue recognition or inventories accounting.

One critical principle of the SFRS that businesses in Singapore need to know is the accounting’s accrual basis. This principle helps to make the companies’ books more indicative of their profits and provide them with a better understanding of their assets and liabilities by the end of the accounting period.

Moreover, the accrual system tracks the earnings and expenses incurred as they occur, not only during the transaction is finished. On the other hand, within the cash-basis system, the profits would not make it to the revenue statement until the expenses appear or earnings obtained in the bank.

What is Singapore’s accounting standards for small business entities

Singapore’s accounting standards for small business entities are a simplified edition of the international standards, created explicitly by the IFRS Foundation to ease the burden of financial reports for small-to-medium enterprises in Singapore. This particular accounting standard is referred to as the SFRS for SE.

Companies eligible for using this standard are those deemed small. This standard provides the best option for startups and companies which do not present their financial statement to outside parties.

Switching from SFRS for SE to SFRS

When small companies outgrow the size threshold for two successive reporting periods, they are required to switch to the full-fledged edition, which is the SFRS. To ensure a smooth transition, companies on the verge of becoming too big beyond the small entity criteria should start to educate their workers and purchase extended software for in-house accounting team.

Simplifying the accounting process with the help of professional accounting services in Singapore

Business owners, especially startups and foreign investors, should seek guidance from competent agencies providing accounting services in Singapore to stay compliant with Singapore accounting standards and get a better understanding of the benefits of adopting it.