In ST’s “Making sense of financial statements amid rule changes” by Reinhard Klemmer, highlighted the changes since 2018 and the consequential impact of these changes.
What are the changes? ——————————————————————-
i) In 2018, Singapore transitioned from local to International Financial Reporting Standards (IFRS), also known as Singapore Financial Reporting Standards (International) (SFRS (I)).
Applicable to all listed companies issuing equity or debt on the Singapore Stock Exchange.
ii) Secondly, all Singapore companies have to adopt the new accounting standards for Revenue (SFRS 115) and for Financial Instruments (SFRS 109).
What are the consequences? ———————————————————–
i) The transition to SFRS (I) allows for some flexibility in accounting choices that companies can use. This could result in diversity in practice and a lack of comparability of financial statements; and
ii) The move towards fair-value accounting requires significant judgments and estimates to be included in the fair-value adjustments. Most of these unrealised changes in fair values are recorded directly in the income statement, without a clear distinction between realised and unrealised components.
As such, users are finding it difficult to understand and analyse the underlying performance of the companies.