For many Singapore-incorporated companies listed on the Singapore Exchange (SGX), the quarterly announcement for the interim financial period ending March 2018 will mark an important milestone. It will be the first time that listed companies announce a set of IFRS-compliant interim financial statements.
Singapore’s financial statements will be adopting the global accounting language of IFRS, cementing the country’s status as a global financial hub.
However, a recent poll by the Institute of Singapore Chartered Accountants has shown that, with less than 8 months to go before the first set of IFRS-compliant interim financial statements are due to be announced, many listed companies surveyed are not prepared. This poll that collated responses from audit partners of 235 listed companies showed that close to a third have not commenced any preparation work for IFRS Convergence.
Only 9% had substantially completed the impact assessment of IFRS 1 First-time Adoption of International Financial Reporting Standards and 25% are at the early stages of preparation work.
IFRS 1 is a standard that specifies how an entity should transition from a previous financial reporting framework to IFRS.
Although the existing Singapore Financial Reporting Standards (SFRSs) are modeled closely after IFRS, there may be a need to adjust prior years’ financial numbers when companies make the switch from SFRS to IFRS. This is because first time adopters applying IFRS 1 are generally required to apply all effective standards under IFRS retrospectively from date of incorporation, unless exempted under the transition provisions of IFRS 1.
As such, entities which had in the past applied certain accounting standards prospectively would now have to adjust their financial statements as if those accounting standards had been effective since the date of incorporation. Thus, as a first step towards IFRS Convergence, listed companies would need to assess the impact of IFRS 1 on their financial statements.
In view of the short timeframe, there is an urgent need for companies to commence their preparations for IFRS Convergence, especially since 2018 is also the year of implementation for the new revenue and financial instruments standards.
IFRS Convergence 2018 Implementation Roadmap
To help listed companies get back on track with IFRS Convergence, ISCA has collaborated with the Singapore Institute of Directors (SID) to develop the “IFRS Convergence 2018 Implementation Roadmap.”
The guidance helps companies navigate the maze of accounting change that the IFRS Convergence exercise requires. It also provides a bird’s eye view of what IFRS Convergence entails and areas that would commonly impact entities the most when adopting the IFRS Framework.
“Transitioning to the IFRS Framework is a complex exercise that will require due processes to be put in place,” says Lee Fook Chiew, Chief Executive Officer of ISCA.
“Companies will need to put in much effort to be in a position to assert that their 2018 financial statements are in compliance with IFRS. ISCA’s IFRS Implementation Roadmap serves as a useful and practical guide to help companies achieve a smooth transition to the new framework. It also reminds management of the need to adopt the right thought processes and action plans for IFRS Convergence.”