Singapore-incorporated companies listed on the Singapore Exchange (SGX) will apply a new financial reporting framework identical to the International Financial Reporting Standards (IFRS) in 2018, according to the Singapore Accounting Standards Council (ASC). SGX will work closely with the ASC to engage Singapore-listed companies on the transition to the new framework.
Chairman of the ASC, Michael Lim, announced this in his keynote address at the IFRS Foundation's IFRS Conference in Singapore. The ASC is the strategic partner of the IFRS Foundation for this Conference, which brings together stakeholders in financial reporting to discuss developments in the international standard-setting sphere.
Responding to the announcement, Ernst & Young says the move is timely, and will enhance ease of comparability with similar companies in other jurisdictions by global investors, thereby helping to promote better investment decision-making,
The ASC will continue working with the Monetary Authority of Singapore and SGX on other related issues. These include whether and when to extend the new financial reporting framework to other entities listed on SGX such as real estate investment trusts and business trusts, and the transition arrangements for entities seeking to list on SGX.
"Singapore has long been an advocate of a single global financial reporting language. Taking the final leap towards full convergence with IFRS for our capital market is a decisive step towards cementing Singapore’s standing as a trusted international financial and business centre," said Mr Lim.
"It will also place Singapore-listed companies on a level playing field with their counterparts in the IFRS community and eliminate any perception that they may be applying standards that are different from IFRS, even though they have been IFRS-compliant in a substantive manner for more than a decade," he added.
"The embrace of standards fully convergent with IFRS will enhance the standing of companies listed on SGX, the world’s most international stock market. Companies and investors will benefit from the comparability offered when global standards are applied. Together with other SGX’s initiatives, full convergence with IFRS will help transform the Singapore stock market into Asia’s foremost venue for investing and managing risks," said Magnus Bocker, CEO of SGX.
Singapore-listed companies have a lead time of more than three years to embrace the new financial reporting framework.
The full convergence of the Singapore Financial Reporting Standards (SFRS) with IFRS for Singapore-listed companies was the strategic direction of the ASC set in 2009. Following this, the ASC engaged proactively and worked with the International Accounting Standards Board (IASB) on a number of issues to enable full convergence with IFRS to be effected. There is also greater clarity now on the effective dates of a number of key projects undertaken by the IASB, which were of significance to Singapore entities.
Singapore-listed companies must apply the new financial reporting framework for annual periods beginning on or after 1 January 2018. Non-listed Singapore-incorporated companies may also voluntarily apply the new framework at the same time.
Leading up to 2018, the ASC will engage stakeholders on the future direction of SFRS for other entities that are under its standard-setting mandate.
“IFRS has essentially become the de facto language for financial reporting around the world and this convergence augurs well for Singapore given its position as a business and financial hub in the region,” says Mak Keat Meng, Head of Assurance, EY in Singapore. “Using a single set of accounting standards will allow Singapore companies to reduce the costs of preparing financial statements, particularly for companies that are listed or have operations in more than one jurisdiction.”
The IFRS conversion exercise also offers an excellent opportunity for companies to relook at the integration of their various business processes with financial reporting, and assess the need to fine-tune or improve existing infrastructure to achieve greater synergies.
“Conversion to IFRS is not merely an accounting exercise; it is an exercise in change management. Management should carry out an impact assessment as early as possible and put in place the IFRS conversion roadmap for their entities,” adds Mak.
The magnitude of IFRS conversion – and challenges -- will vary among companies. While it is envisaged that the IFRS conversion process will be a relatively straightforward exercise given that the SFRS is closely aligned to IFRS, there are however differences between SFRS and IFRS, and proper care must be taken to analyze these differences and their impact on the financial statements. The application of SG-IFRS 1 First Time Adoption of SG-IFRS must also be brought to bear.
Mak concludes: “In essence, detailed analysis and meticulous planning of the IFRS conversion roadmap in consultation with auditors and professionals that are specialized in IFRS conversion will be key to a seamless and successful transition.”