In general, company owners in Singapore demand the precise recording of business transactions in the books of accounts. Yet, most owners are not aware of the general Singapore accounting standards for companies. However, some business owners know that, besides investors, Singapore regulators, such as the IRAS and ACRA, will also go over the financial statements.
It is important to note that third parties, including the business owner, can only understand the figures on the financial statements if the applicable accounting standards are followed. After all, the accounting standards set the rules of the financial statements that people read to know how the business is doing.
So, to prevent any problems, most companies engage the services of a Singapore accounting service provider, such as Premia TNC, to assist the internal accounting team.
Singapore Accounting Standards: Accounting Standard Defined
Singapore accounting standards are a group of rules and ways utilized to categorize accounting work, including bookkeeping, over a period and within firms. These standards affect the full range of a business’s financial picture, consisting of its assets, liabilities, income, expenses, and equity.
General Singapore accounting standards for companies champion the public’s interest and the government’s corporate governance, besides serving as the city-state’s financial reporting foundation. They are recognized as SFRS or Singapore Financial Reporting Standards.
Singapore Accounting Standards: Origin
Businesses worldwide report their financial management via financial accounting. But, historically, the layout of reporting finances varies per country. The underlying reason for this is that the financial reporting ways of each country follow a cluster of beliefs or norms that change with its economic, legal, cultural, and civil background.
As a result, financial reports lacked international directness and acceptance. Since the 21st century globalized the world, there is now a need for comparable, clear, and consistent financial information for easy functioning of worldwide capital markets.
Thus, similar standards on financial reporting have become a ground rule because of the intense rise in the extent and number of multinational firms, foreign direct ventures, cross-border trading of securities, and foreign securities roll on the stock markets.
The essential purpose of the general Singapore accounting standards for companies is to specify recognition, measurement, reporting, and disclosure requisites dealing with events and transactions that are vital in financial statements.
These statements present information about cash flow, position, and performance valuable to many users in creating financial judgments. The users of the financial statements include the general public, government agencies, current and potential stockholders, employees, lenders, dealers, and other business lenders.
The International Accounting Standards Board (IASB) is the key driving force for creating the International Accounting Standards. The broad goal of the IASB exists further to harmonize accounting practices via the Singapore accounting standards creation and to encourage their worldwide recognition.
Key Concepts of the General Singapore Accounting Standards for Companies
Accrual Accounting
The first key concept of the general Singapore accounting standards is accrual accounting. The report must do accounting following the accrual basis. This means that the impact of events and transactions are recognized when incurred, not when paid. This accounting approach provides a clearer image of a firm’s economic claim and resources, besides its changes.
It is also a better way to see the firm’s performance by making possible a better assessment of the business’s cash flow. On top of that, this method facilitates financial statement users to get a more vivid insight into the business’s operational efficacy. It also offers a good grasp of the impact of the market on the firm’s performance.
Comparability
The next key concept of the general Singapore accounting standards is comparability. Information on the reporting business is more helpful if it is comparable with similar data on other firms and the same information on the same firms for another date or period. This is crucial for financial reports users to understand the matches or differences within the reported items to gauge them in making informed decisions.
Faithful Representation
Information furnished through the financial statements must be comprehensive, neutral, and error-free. Indeed, this is hard to do. Still, the firm’s accounting process must take all possible measures to ensure the above. After all, the reporting business must ensure that management’s vital accounting estimates, beliefs, and judgments are reasonable.
Going Concern
Financial statements are usually made with the belief that a business remains ongoing and will carry on operating for the near future. Thus, it is held to neither have the need nor intention to curtail its operation level or liquidate. If there stands any shift from this “going concern” assumption, the reporting firm must adequately disclose its plan or the prospect of such occurrence.
Relevance
The data in the financial statements must be relevant to influence a decision, if not, help in the decision-making process. Therefore, the information must possess both projecting and confirming values to make this possible. This means that the financial report information must assist users in forecasting an outcome and determining the accuracy of past projections. For example, an income of a business is helpful in forecasting sales and confirming past forecasts on sales.
Timeliness
Information has to be presented to users promptly. In this way, data is available for making well-timed decisions. Moreover, previous data can be helpful even past their reporting time for users wishing to predict trends or confirm a prediction.
Understandability
Information has to be classified and reported consistently to support the straightforward interpretation of the users.
Verifiability
The report users must be capable of verifying the given information. Hence, the reporting firm must disclose supporting and underlying assumptions, techniques for gathering data, and other contexts and issues to facilitate verification.
Singapore Accounting Standards: Singapore Financial Reporting Standards (SFRS) for Small and Medium-sized Entities (SMEs)
To properly ease the burden on these enterprises, known as the SMEs, who find adherence to SFRS cumbersome, the ASC issued the SFRS for SMEs in December of 2010. Inspired by the International Financial Reporting Standards for SMEs, but with modified applicability and scope, it stays as a substitute to the SFRS for the making and presenting of financial reports. Its requirements are not as complex as the SFRS, with key features as follows:
• Amendments at three years intervals;
• Fewer allowed options and choices in accounting treatment;
• Reduced disclosures;
• Simple drafting requisites for conciseness and understandability; and,
• Simplified measurement and recognition rules.
Of course, business owners have the option to outsource their accounting needs to a legitimate service provider. Instead of devoting precious time to grasping the general Singapore accounting standards for companies, owners can always leave this task to the Premia TNC experts. After all, Premia TNC representatives will be able to easily explain matters to them.
