What Are Accounting Standards in Singapore? A Guide for Entrepreneurs

In Singapore, businesses are required to follow a set of established guidelines known as the Singapore Financial Reporting Standards (SFRS). These standards provide the foundation for how financial information should be recorded, reported, and interpreted. 

Whether you’re running a small business or a large corporation, understanding and applying these standards is crucial to avoid penalties and build credibility with stakeholders. 

In this article, we’ll explore what accounting standards are, why they’re vital for your business, and how to navigate the requirements that keep your financial reporting in check.

What Are Accounting Standards in Singapore?

Accounting standards in Singapore refer to the Singapore Financial Reporting Standards (SFRS), which set guidelines that businesses must follow when preparing financial statements.

The Accounting Standards Council (ASC) develops and updates SFRS, balancing regulatory requirements with business flexibility.

Singapore’s framework is based on the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB), to align with global financial reporting practices.

Since 1 January 2003, all Singapore-incorporated companies must comply with SFRS when making their financial statements. [1]

Why Do Accounting Standards Matter for Your Business?

Accounting standards are essential for Singapore businesses to ensure financial accuracy, legal compliance, and credibility. Here’s why they matter:

• Legal Compliance – Businesses must follow SFRS to meet ACRA and IRAS requirements and avoid penalties.
• Investor and Lender Confidence – Transparent financial records improve credibility, making it easier to attract investors and secure business loans.
• Accurate Tax Reporting: – Proper reporting ensures businesses pay the correct amount of taxes, avoiding underpayment or overpayment.
• Better Business Decisions – Clear financial reports provide insights into cash flow, profits, and liabilities, helping business owners make informed decisions about growth, investments, and expenses.

Legal Requirements for Keeping Accounting Records

According to Section 199 of the Companies Act, Singapore companies must keep proper financial records to comply with financial reporting regulations.

What Businesses Must Do:

• Retain financial records for at least 5 years after the financial year they relate to.
• Ensure records clearly explain all transactions and reflect the company’s financial position.
• Make records available for inspection. If stored outside Singapore, summaries must be kept locally.

Additionally, public companies and their subsidiaries must implement internal controls to safeguard assets and ensure transactions are properly recorded.

Types of Accounting Standards in Singapore

Different businesses follow different accounting standards based on their size and type:

• Singapore Financial Reporting Standards (SFRS) – The standard framework for most businesses in Singapore. Based on IFRS, modifications are made to local requirements. [2]
• Singapore Financial Reporting Standards (International) (SFRS(I) – Required for listed companies, fully aligned with IFRS for global financial reporting. [3]
• Singapore Financial Reporting Standard for Small Entities (SFRS for SE) – A simpler framework for small companies, reducing reporting complexity while maintaining financial transparency. [4]
• Charities Accounting Standard – A framework designed for non-profit organisations and charities, ensuring transparency and accountability.

How Singapore Accounting Standards Work

As mentioned above, the SFRS framework is based on IFRS, but it includes modifications to fit Singapore’s regulatory environment and business needs. Businesses must prepare and submit financial statements, including but not limited to:

• Balance Sheet (Statement of Financial Position) – A summary of what the business owns (assets) and what it owes (liabilities and equity) at a given time.
• Profit & Loss Statement (Statement of Comprehensive Income) – A report showing income, expenses, and profits over a period. It can be shown as one full statement or split into separate sections.
• Statement of Changes in Equity – Tracks changes in business ownership, such as investments, profits kept in the company, and dividend payments.
• Cash Flow Statement – A record of all money coming into and going out of the business, divided into day-to-day operations, investments, and financing.
• Explanatory Notes – Extra details explaining financial numbers, accounting methods, and key business decisions that may affect reports.

Key Principles of Singapore Financial Reporting Standards (SFRS)

For financial reports to be accurate, transparent, and useful, they must follow these key principles:

1. Accrual-Based Accounting

Businesses must record transactions when they occur, rather than when cash is received or paid. This method provides a more realistic view of a company’s financial health and obligations, allowing for better financial planning and decision-making.

2. Revenue Recognition Guidelines

Revenue should only be recorded when goods or services have been delivered to the customer. This prevents businesses from inflating earnings with unearned revenue and ensures financial statements accurately reflect a company’s true performance.

3. Compliance with Tax Regulations

All financial reports must align with corporate tax regulations set by IRAS to ensure proper tax reporting. Accurate records help prevent underreporting or overreporting of earnings, reducing the risk of fines, audits, or legal consequences.

Key Elements of Useful Financial Reports

The financial report should be:

• Relevant – Helping business owners make informed financial decisions.
• Accurate & Reliable – Offering a true and fair view of the company’s financial position.
• Comparable – Ensuring consistency across different years for tracking performance.
• Easy to Understand – Presenting financial data clearly so business owners, investors, and regulators can interpret it easily.

Key SFRS Accounting Standards Businesses Should Know

Singapore has issued more than 40 standards that cover a variety of accounting topics. Some standards focus on particular financial activities, like how to deal with leases, employee benefits, income tax, and many others.

Here are the most important standards businesses should be aware of.

1. Core Financial Statement Requirements

• FRS 1 – Presentation of Financial Statements: Defines the structure of financial statements (Balance Sheet, Income Statement, Cash Flow, etc.).
• FRS 7 – Statement of Cash Flows: Details how cash movements must be reported across operating, investing, and financing activities.

2. Revenue & Expense Recognition

• FRS 16 – Leases: Requires businesses to record most leases as assets and liabilities, affecting balance sheets.
• FRS 115 – Revenue from Contracts with Customers: Standardises revenue recognition based on performance obligations in contracts.

3. Financial Instruments & Investments

• FRS 109 – Financial Instruments: Covers classification, measurement, and impairment of financial instruments like loans and investments.
• FRS 110 – Consolidated Financial Statements: Requires parent companies to consolidate subsidiaries into one financial statement.
• FRS 112 – Disclosure of Interests in Other Entities: Requires businesses to disclose details of investments in subsidiaries, associates, and joint ventures.

4. Taxation & Asset Valuation

• FRS 12 – Income Taxes: Covers accounting for current and deferred tax liabilities.
• FRS 36 – Impairment of Assets: Requires companies to assess and record impairment losses when assets lose value.
• FRS 38 – Intangible Assets: Deals with accounting for non-physical assets like patents, copyrights, and trademarks.

5. Other Important Standards

• FRS 21 – The Effects of Changes in Foreign Exchange Rates: Mandates how businesses should handle foreign currency transactions and translation of financial statements.
• FRS 24 – Related Party Disclosures: Requires disclosure of transactions between a business and its key stakeholders (e.g., directors, shareholders).

Please note that this information is subject to change. Please refer to the Financial Reporting Standards on the ACRA’s website for the latest details.

Final Note

Following these guidelines will not only help you stay compliant but also give you better financial control over your business. Whether you handle accounting yourself or hire a professional, staying on top of your financial reports is one of the best things you can do for long-term success.