The Guide To Understanding Singapore Financial Reporting Standards

Financial reporting standards are an essential part of doing business in any market. With Singapore being a global financial hub and the world’s most open economy, multinational companies must know the accounting standards they must adhere to. This article will explain what Singapore Financial Reporting Standards are and how they can help global companies run their businesses in Singapore.

Background About Accounting Standards

Formats for financial reporting have historically varied from one country to another. This resulted in the lack of international comprehensibility and acceptance of financial reports. Fortunately, globalization brought about the necessity for equivalent standards of financial reporting across the globe. This need became even more clear with the rise of many different businesses worldwide.

Accounting standards are a common body of principles and procedures that serve as the foundation for financial accounting rules and practices. These guidelines and standards regulate how companies should handle different financial transactions used by significant actors, including investors, lenders, and governments.

The International Financial Reporting Standards (IFRS) serve as the guideline for international companies reporting financial statements. It was published in 2001 by the International Accounting Standards Board (IASB), which creates and interprets accounting rules in preparing financial statements for international communities.

What are the Singapore Financial Reporting Standards?

In Singapore, the accounting standards landscape is now broader than simply “SFRS.” The Accounting Standards Committee under ACRA issues three main financial reporting frameworks relevant here: SFRS (I), FRS, and SFRS for Small Entities. In practice, the right framework depends on whether the company is publicly accountable, listed or issuing instruments in a public market, and whether it qualifies as a small entity. This means companies should confirm the correct framework before preparing or filing their financial statements.  

The Singapore Financial Reporting Standards landscape is governed by the Accounting Standards Committee under ACRA. Today, the main frameworks are Singapore Financial Reporting Standards (International) (SFRS (I)), Financial Reporting Standards (FRS), and the Singapore Financial Reporting Standard for Small Entities. It is therefore no longer accurate to describe all Singapore companies as following a single framework called “SFRS.”  

 SFRS (I) comprises standards and interpretations that are equivalent to IFRS Accounting Standards issued by the IASB. Singapore-incorporated companies that meet the specified criteria for the SFRS (I) framework, including companies with equity or debt instruments issued or in the process of being issued for trading in a public market in Singapore, apply this framework for annual periods beginning on or after 1 January 2018. Other Singapore-incorporated companies may continue to apply other applicable Singapore frameworks where eligible.  

SFRS adheres to accrual-based accounting, which acknowledges transaction effects as they are incurred rather than when they are paid. Accrual-based accounting offers a more accurate estimation of a company’s cash flow, insights into the effectiveness of its operations, and knowledge of how the market affects the entity’s success. 

Singapore directors must present financial statements that comply with the prescribed accounting standards and give a true and fair view. It is also outdated to state that the framework “currently contains 41 different standards,” because the standards are updated periodically and ACRA publishes current annual volumes and amendments rather than a static count.  

For clarity, the position in Singapore can be summarised as follows: 

Framework	Typical use case
SFRS (I)	Singapore-incorporated companies that meet the specified public-market criteria
FRS	Other Singapore-incorporated entities that do not apply SFRS (I) and do not elect or qualify for another framework
SFRS for Small Entities	Eligible non-publicly accountable small entities meeting the prescribed criteria

Singapore Financial Standards for Small Entities

The Singapore Financial Reporting Standards for Small Entities (SFRS for SE) serves as a simplified, alternative set of standards for qualifying companies in Singapore. It aims to help SMEs who had difficulties complying with the requirements of the full SFRS, especially those with limited resources. The Singapore Accounting Standards Council (ASC) issued the SFRS for SE in 2010. 

The Singapore Financial Reporting Standard for Small Entities is an alternative simplified framework issued by the ASC. The current edition on ACRA’s site is effective for annual reporting periods beginning on or after 1 January 2024, but before 1 January 2027, and amendments have already been issued for periods beginning on or after 1 January 2027.

A company may qualify to apply SFRS for Small Entities only if it is not publicly accountable, publishes general purpose financial statements for external users, and qualifies as a small entity under the relevant applicability criteria. The commonly cited size tests remain based on meeting at least two of the following three thresholds:

• total annual revenue of not more than S$10 million 
• total gross assets of not more than S$10 million 
• not more than 50 employees.  

It is better to describe SFRS for Small Entities as being based on the IFRS for SMEs Accounting Standard, rather than saying only that it is “consistent with IFRS for Small Entities.” That distinction matters because the Singapore framework is issued locally by the ASC and updated through Singapore-specific editions and amendments.  

Deciding Between “SFRS” and “SFRS for SE” For Your Business

In practice, businesses are usually deciding among SFRS (I), FRS, and SFRS for Small Entities, rather than only between “SFRS” and “SFRS for SE.” The right choice depends on legal applicability, public accountability, group reporting needs, lender or investor expectations, and whether the company expects to outgrow the small-entity thresholds. 

Even if your multinational company is eligible for the alternative set of Singapore Financial Standards, there are a few things you should think about before implementing the SFRS for SE. For instance, you need to assess the nature of your business and the growth objectives for your organization. Here are a few things to consider when deciding between SFRS and SFRS for SE.

• The cost of transition – These costs include expenses for training, accounting systems, and software
• Company’s plans – These plans can include those of IPO. Companies must also consider the likelihood of exceeding the size threshold.
• Consideration of the company group – When choosing between reporting frameworks, a business must also consider the impact on holding companies and consolidation requirements. 
• Considerations for financing – Financial institutions and lenders may prefer fuller financial reporting. 

If your business is close to exceeding the size restriction, following the full framework is often preferable to minimize future transition costs. On the other hand, companies whose financial statements are not widely relied on by outside stakeholders may find the small-entity framework more practical. 

The article should also note that choosing a reporting framework does not remove directors’ legal obligations. Under the Companies Act, directors remain responsible for presenting compliant financial statements and ensuring those statements give a true and fair view, regardless of whether the company uses SFRS (I), FRS, or SFRS for Small Entities.  

Practical filing and governance points businesses often miss

Using the correct accounting framework is only one part of compliance. ACRA states that all Singapore-incorporated companies must generally prepare financial statements, except dormant relevant companies, and many companies must also file financial statements with ACRA as part of their annual return process. Depending on the company’s category, filing may be in Full XBRL, Simplified XBRL, or another permitted format. Since the revised XBRL filing requirements have applied from 1 May 2021, businesses should also check whether they fall into the smaller and non-publicly accountable category for simplified filing. These filing mechanics are separate from the choice of reporting framework, but the two issues often interact in practice.  

How Can We Help?

Managing the accounting for your business is a complex procedure, even more so when you’re new to it. Analyzing all the different accounting standards, determining whether the Singapore Financial Reporting Standards for Small Entities (SFRS for SE) applies to your business, deciding which accounting methods to adopt, and implementing them can be time-consuming.

With Premia TNC managing your accounting and financial reporting, you can focus on running your core business activities. We make the accounting process less complex with customized solutions that take the hassle out of your accounting and bookkeeping tasks. Whether you’re just starting or looking for professional help to manage your financial reporting requirements, Premia TNC offers customized accounting services that will fit your needs.