Although the Singapore Financial Reporting Standard for Small Entities has been available as a framework for the preparation and presentation of general purpose financial statements since 2011, its adoption by small entities has been negligible. Some public accountants have even described this standard as redundant and the standard itself has no practical value. Nevertheless, this standard on many instances is more suited to the circumstances and the actual reporting environment of small entities and can result in more meaningful financial information being presented on the financial statements. More importantly, it could avoid boilerplate information, which is assembled only for financial statements disclosure and has little meaning for the users of the financial statements. More information does not necessarily enhance the overall quality of the financial statements.
Through the enactment of the Accountant Standard Act in 2007, the Accounting Standards Council (ASC) has undertaken the role as the prescriber of accounting standard in Singapore. The broad policy intention of the ASC is to adopt the International Financial Reporting Standards issued by the International Accounting Standard Board. In-line with this policy the ASC has adopted the International Financial Reporting Standard for Small and Medium-sized Entities (“IFRS for SMEs”) as the Singapore Financial Reporting Standard for Small Entities (“SFRS for Small Entities”) as at 30 November 2010.
For financial reporting periods beginning on or after 1 January 2011, the SFRS for Small Entities is an alternative framework to the Singapore Financial Reporting Standard (“SFRS”) for the preparation and presentation of general purpose financial statements of entities.
For the purpose of this statement, “entities” refer to
(a) companies incorporated under the Companies Act (Cap. 50) or pursuant to any corresponding previous written law in Singapore; and
(b) foreign companies defined in the Companies Act (Cap. 50) in respect of their operations in Singapore.
The SFRS for Small Entities is intended for use by small entities. Small entities are entities that:
(a) do not have public accountability;
An entity has public accountability if:
(i) Its debt or equity instruments are traded in a public market or it is in the process of issuing such instruments for trading in a public market (such as a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets); or
(ii) It is a deposit-taking entity and/or holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses. This is typically the case for banks, insurance companies, securities brokers/dealers, mutual funds and investment banks; or
(iii) It is a public company defined under the Singapore Companies Act (Cap. 50); or
(iv) It is a charity defined under the Charities Act (Cap. 37).
(b) publish general purpose financial statements for external users;
Examples of external users include owners who are not involved in managing the business, existing and potential creditors, and credit rating agencies.
(c) satisfy at lease two of the three following criteria:
(i) total annual revenue of not more than S$10 million;
(ii) total gross assets of not more than S$10 million; and
(iii) total number of employees of not more than 50
In case of company that is required to prepare its accounts on a consolidated basis, the above is calculated on a group basis and not on the basis of the company as a single economic entity.
Where the reporting period is more or less than 12 months, revenue must be pro-rated accordingly.
The total number of employee refers to the number of full-time employees employed by the reporting entity at the end of the financial reporting period.
Subject to (a) and (b), an entity must be the criteria for the previous two consecutive financial years for it to be eligible to use SFRS for Small Entities.
Conversely, subject to (a) and (b), if an entity qualifies for SFRS for Small Entities, it ceases to meet the criteria if it fails to meet the criteria for the previous two consecutive financial years.
For newly incorporated entities, the SFRS for Small Entities is available as an option for the first and second financial reporting periods after incorporation if the entity meets the qualifying criteria set out in (a) and (b) for the full financial reporting period in respect of which the SFRS for Small Entities is sought to be used.
Main differences between SFRS for Small Entities and Singapore Financial Reporting Standards (SFRS)
|SFRS for Small Entities||SFRS|
|Disclosure on financial risk management||Not required. There is also no requirement to disclose the foreign currency balances of financial assets and liabilities.||Required under FRS 107.|
|Associates||Cost model available as an option.||Equity method required under FRS 28.|
|Investment properties||Cost model available as an option under property, plant and equipment if fair value measurement cannot be obtained without undue cost and or effort*. No disclosure of fair value necessary if cost model is adopted.||Cost model is available as an option but disclosure of fair value and fair value measurement required under FRS 40 and FRS 113, respectively.|
|Property, plant and equipment||No prior year reconciliation of opening balance and closing balance required.||Required under FRS 1 and FRS 16.|
* Undue cost and effort is not defined as this depends on the specific circumstances and on management’s professional judgement in assessing the costs and benefits. Assessing whether a requirement will result in “undue cost or effort‟ should be based on information available at the time of the transaction or event about the costs and benefits of the requirement