What are Singapore Accounting Standards?

What are Singapore Accounting Standards?

As a business owner, you may not have to deal directly with Singapore accounting standards too often since it is the responsibility of your accounting services provider to be knowledgeable in the field. However, it is advisable to stay informed. They provide the guidelines for the financial statements you will read and show to potential partners.

We made this article to provide general guidance on Singapore accounting standards. Please, keep in mind that this is not a comprehensive list of standards or professional guidance but rather a broad introduction to the topic.


Financial reporting is used by businesses worldwide to report their financial performance. Historically, financial reporting formats differed by country, and each country’s financial reporting procedures followed a set of principles, laws, or conventions that arose in that country’s political, legal, economic, and cultural surroundings. As a result, financial reports were frequently incomprehensible and unaccepted on a global scale.

In today’s globalized world, comparable, transparent, and reliable financial information is critical for the successful operation of global capital markets. Due to the dramatic growth in the number, reach, and size of multinational corporations, foreign direct investments, cross-border purchases and sales of securities, and the number of foreign securities listed on stock exchanges, the need for comparable financial reporting standards has become paramount.

Accounting standards consist of a collection of principles and guiding norms for the treatment of various financial transactions. The accounting standards’ main goal is to define the rules for recognizing, measuring, presenting, and disclosing transactions and events that are significant in general purpose financial statements. These statements include data on a company’s performance, financial situation, and cash flow — in other words, all the crucial facts concerning financial decisions that affect the organization in question.

The users of financial statements include present and potential investors, employees, lenders, suppliers and other trade creditors, customers, governments and their agencies, and the general public. Typically, they use financial statements to meet their informational requirements and answer some questions they have in mind, for example:

  • What is the scope of the business’s operations?
  • Are there any debts that could prevent the company from meeting its obligations?
  • Should the company be included in Forbes’ Top 100 list this year?

Stakeholders will either make favorable decisions or avoid the company and its business relationships based on what they see in the financial statements. Therefore, the financial statements must be as transparent as possible. No one wants to obstruct the research of potential partners, especially if there are encouraging indicators.

What are International Reporting Standards?

Standard financial reporting is required in today’s interconnected economies. Shareholders in publicly traded companies come from all over the world, and they want to know how their money is performing. International companies must evaluate and compare the performance of their subsidiaries. For instance, a Singapore-based venture capital firm must be able to examine an American startup’s papers, quickly grasp the format, and focus on the numbers. To make all that possible, unified standards of financial reporting exist.

International accounting standards are a collection of guidelines that govern how information on a company’s activities and events is classified and presented in financial statements of the general purpose.

What are the origins of these standards?  

The International Accounting Standards Board (IASB), a non-profit organization, is the accounting standards-setting body of the International Financial Reporting Standards Foundation. The IASB and the Foundation create the standards, oversee their application, and make changes when something doesn’t work as it should.

The International Financial Reporting Standards Foundation’s accounting system is now required in 140 nations and acceptable in many more. There are two sets of worldwide standards: one for corporations and one for small and medium-sized businesses. The SME version is straightforward, focusing on showing data on cash flow, solvency, and liquidity (will be discussed later in this article).

So, What are Singapore Accounting Standards?

Singapore accounting standards are known as Singapore Financial Reporting Standards (SFRS). These standards are based on IFRS. All enterprises with financial periods beginning or after January 1, 2003, must comply with the SFRS, as mandated by ACRA.

One of the primary principles of Singapore accounting standards is accrual-based accounting. It is used to create financial statements. The impacts of transactions and other events are recognized when they happen (rather than when cash or its equivalent is received or paid), and they are recorded in the accounting records and reported in the financial statements for the periods in question. Users of accrual financial statements are informed not only of past transactions involving the payment and receipt of cash but also of future obligations to pay cash and prospective resources that represent cash to be received.

There are around 41 different Singapore accounting standards, each of which is designated by the letter FRS X, for example, FRS 1. Each standard addresses a specific area, such as financial statement presentation, revenue recognition, inventory accounting, and so on.

Singapore Accounting Standards for Small Entities

Like any other country, Singapore’s economy is dominated by SMEs. However, with their little resources, adhering to the full SFRS is difficult and they find the requirements to be a burden.

Fortunately, to ease the reporting burden on small companies, the IFRS Foundation developed a simplified version of international standards for SMEs. Thus,  in 2010, Singapore introduced its own Financial Reporting Standard for Small Entities (SFRS for SE).

To be eligible for using the framework, the company must have the following features:

  • It is not publicly accountable
  • It publishes general-purpose financial statements for external users
  • It is a small entity

A company is considered small if it meets at least two of the three following criteria:

  • The total annual revenue is less than S$10 million
  • The total gross assets are less than S$10 million
  • The company employs 50 employees or less.

It is important to note that an organization must have met the criteria for the preceding two years in a row. An entity that meets the requirements can continue to use the standards until it exceeds the size threshold for two consecutive reporting periods, at which point it must use the complete SFRS.

Choosing Between SFRS or SFRS for SE

Until recently, the full SFRS was applied to all Singapore registered firms, regardless of size. Now that there is an SFRS explicitly designed for small businesses, organizations who qualify for the new criteria must examine a few key aspects before implementing the SFRS for SE. Before adopting these guidelines, companies should assess their growth objectives and the nature of their business.  The following are some of the topics that must be examined:

  • Transition cost – If your business is getting bigger and then plans to switch from SFRS for SE to SFRS, it will need to prepare for the transition in advance, particularly in terms of costs (e.g., training cost, software cost, etc.).
  • Growth plans – Check whether the company is on the verge of becoming bigger. Consider expansions, mergers, and IPO ambitions, among other things.
  • The circle of impact – There are cases when it may be reasonable for small companies to adopt the SFRS framework while still eligible for SFRS for SE because switching over to a simpler version of the SFRS may negatively impact many accounting elements. This is especially true if the company becomes part of a holding where SFRS is already being used.
  • Financing –  A company should make it clear if the financial lenders, institutions, or shareholders demand the accounts to be presented in the full set of SFRS or not before making a decision.

In a nutshell, the streamlined SFRS for small enterprises is ideal for startups, businesses that have issues with the full SFRS, and businesses whose financial statements are not used by other parties.


Singapore accounting standards are practical. It adheres to international standards, making it simple to exchange your financial records with investors all around the world. In addition, they are designed to meet the needs of businesses rather than simply collecting data to pay taxes at the end of the fiscal year.

While the details of Singapore accounting standards are usually only understood by professional accountants, the fact that they exist has an impact on your life as an entrepreneur. Your reporting costs and what you see in the statements your accountants create for you are determined by the nature of the accounting standards applied to your organization.


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