What Makes Application of IFRS in Singapore Possible?
It’s quite a long story how the application of IFRS in Singapore has occurred. Originally, the Institute of Certified Public Accountants of Singapore was the prevailing body that governs accounting practices in the country. However, the government had replaced this by creating the Council on Corporate Disclosure and Governance (CCDG) in 2002. After five years, the Parliament ratified the Accounting Standards Act on 27 August 2007. This resulted in the creation of the Accounting Standards Council (ASC).
Eventually, the ASC has issued a more systematic approach to accounting practices in Singapore. This is what we now know as Singapore Financial Reporting Standards (SFRS). You’ll find out what SFRS specifically is, but first, we’ll discuss the objectives of ASC as a whole.
The Accounting Standards Council (ASC)
The ASC exists as part of the Accounting Standards Act of 2007. This entity serves mainly as the governing body that observes Singaporean companies’ accounting practices. However, the ASC also extends its reach to charities, co-operative societies, and other NGOs.
While the ICPAS and CCDG functioned well in guaranteeing reliability in accounting standards, the ASC is a major improvement. It monitors and assesses financial statements between different entities, which the former two lack. In addition, the ASC develops the integrity and accuracy of financial reporting due to its comprehensive coverage.
Of course, the ASC has certain limitations. There’s no doubt that this entity is in charge of promulgating accounting standards. However, the ones who enforce these rules vary, depending on the type of company or organization:
- Accounting and Corporate Regulatory Authority (ACRA) – for companies
- Commissioner of Charities – for charities
- Registrar of Co-operative Societies – for co-operative societies
- Registrar of Societies – for Societies and other NGOs.
Comparison of SFRS and IFRS
The ASC’s SFRS applies practices from the IFRS model for the most part. As such, there are deviations that make SFRS unique from the original framework. These are the following:
- Singapore FRS 16 – One-off revaluations for fixed assets that took place between 1984 and 1996 are possible without using the revaluation model.
- Singapore FRS 17 – There’s an omission of words from paragraphs 14 and 15 of IAS 17. These statements specify that land typically has an indeterminate fiscal life. Moreover, the lessee will not receive all of the significant rewards relating to ownership if he has not received the title by the end of the lease term. This also applies to risks which can arise within the property.
- IAS 27, IAS 28, and IAS 31 – The differences relate to requirements in presenting financial statements and accounting for associates and joint ventures.
- IFRS 3 – This covers Business Combinations, which has undergone revisions in 2008.
- IAS 27 – A section that tackles “Consolidated and Separate Financial Statements”, which has undergone revisions in 2008.
- IFRIC 2 – SFRS revises the part with the title “Members’ Shares in Co-operative Entities and Similar Instruments”.
- IFRIC 15 – This outlines Agreements for the Construction of Real Estate.
SFRS for SMEs
ASC has expanded its coverage further by issuing the SFRS for Small Entities in December 2010. While it also follows IFRS, it differs basically on applicability and scope.
The application of IFRS in Singapore for Small Entities is possible upon meeting the following criteria:
- The entity is not publicly responsible
- It regularly circulates financial statements for general and external use
- It fits the definition of a ‘small entity’. This applies for those with two preceding and consecutive financial reporting periods, and a revised application to new entities.
Further, the SFRS defines a “small entity” as those which have at least two of the following conditions:
- overall yearly revenue S$10 million or less
- total gross assets of S$10 million or less
- 50 or less total number of employees
Adapt Your Business with SFRS Practices
Looking at these comparisons, it’s obvious that there are significant differences between SFRS and IFRS. However, the application of IFRS in Singapore through SFRS is far from complicated. In fact, it’s rather easier to adapt since every adjustment occurred in favor of the Singaporean business sector. It boils down to following these principles to ensure transparency in financial reporting.
Naturally, you’d still be confused by now. You may seek help from our reliable office. Our team specializes in the field, and we constantly update ourselves with the latest information available. Upon reading this article, you’d realize why Singapore is on top of the economic chain. No matter how big or small your goals are, the ASC has an accounting practice that suits you.
Chai Chung Hoong, Account Manager
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