Under the current norm, all Singapore incorporated companies are required to prepare their financial statements in accordance with the Financial Reporting Standards (FRS) framework that is in line with standards issued by International Accounting Standards Board (IASB). However, the Singapore ASC has proposed a distinct framework based on the International Financial Reporting Standard for Small and Medium-sized Entities for qualifying Singapore SMEs. The Council is currently seeking feedback from stakeholders and the public on the proposed differential standard.
GuideMeSingapore.com opines that if adopted, the new standards will reduce the cost of regulatory compliance for Singapore SMEs. According to Ms. Jacqueline Low, the Director of Singapore company registration agency Janus Corporate Solutions - the company that runs the GuideMeSingapore.com site, "In reality, SMEs do not require complex levels of accounting standards. The users of financial statements of SMEs are primarily interested in assessing the current liquidity, solvency, and short-term cash flow of the firm and not its long-term forecast. Another common use of financial statements is to evaluate corporate performance. However, SMEs may not really need financial statements as a means to assess their performance as most of the enterprises tend to be managed by the company owners themselves. With a simpler standard in place, SMEs will soon have more time, money, and resources to focus on their business operations, which will in turn enhance their productivity.
Analysis by GuideMeSingapore.com shows that the proposed standard for SMEs has omitted certain topics such as earnings per share, interim financial reporting, and segment reporting since they are not relevant to SMEs; has introduced simplified accounting policy options as well as other recognition and measurement principles; and has reduced disclosure requirements, among other amendments. A Singapore company is eligible to adopt the SFRS for Small Entities provided it is not publicly accountable and that it satisfies any two of the following three criteria:
Its total annual revenue must not exceed S$10million;
Its total gross assets must not exceed S$10million; or
Its number of employees must not exceed 50.
Singapore scores high on business friendly measures, whether it is the ease of company formation, low corporate taxes, or straightforward compliance requirements. By introducing a simplified financial reporting standard, Singapore joins the ranks of jurisdictions such as Hong Kong, Malaysia, Australia, UK, and Japan as having distinct reporting standards for SMEs. Singapore has been ranked as the worlds easiest place to do business and the new SME accounting standard definitely proves to be a feather in its cap, added Ms. Low.