MANAGING PARTNER'S MESSAGE - bdo singapore

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BDO CONNECT 2SINGAPORE NEWSChinnu Palanivelu, AssistantAudit Manager, on the Board ofAssociation of Certified FraudExaminer (USA), Singapore ChapterChinnu Palanivelu,Assistant AuditManager at BDOLLP has recentlybeen elected aboard member ofthe Association ofCertified Fraud Examiners (USA),Singapore Chapter. Chinnu hadbeen awarded the Lifelong Learneraward organised by MediaCorpRadio and the Singapore WorkforceDevelopment Agency. Chinnu hasuniversity degrees, diplomas and atleast 30 other training certificatesand qualifications, and is truly alifelong learner.BDO Budget Update 2011, 1 March 2011Over 60 participants joined ourBudget Update 2011 seminar tounderstand the key budget changesin 2011 and its impact on thecurrent economy, corporationsand businesses. Attendees learntmore about the key implicationsof this year’s Budget. The sessionwas led by our Head of Tax, MrRohan Solapurkar. We were joinedby Dr Tan Kee Wee, an independenteconomist who commented on theeconomics relevant to Budget 2011.Other speakers included, AssociateDirector, Michelle Seat and SeniorTax Consultant, Manmohan Singh.SINGAPORE FINANCIAL REPORTINGSTANDARDS (SFRS FOR SES)SHOULD YOU JUMP ONTO THEBAND-WAGON?By Narissa Chen,Audit Technical & Training ManagerT: 6828 9178E: narissachen@<strong>bdo</strong>.com.sgThe introduction of Singapore FinancialReporting Standards for Small Entities(SFRS for SEs or the Standard) in December2010, which is effective for annual periodsbeginning on or after 1 January 2011,gives qualifying entities an alternative tothe existing Singapore Financial ReportingStandards (SFRS) to adopt a purportedlymore user-friendly and cost efficientfinancial reporting framework.STANDALONE STANDARDSFRS for SE is a completely stand-alonestandard with only one “fallback” optionto SFRS with regards to the application ofSFRS 39 for recognition and measurement(and not disclosure) provisions.SIMPLER ALTERNATIVEAt fewer than 240 pages, SFRS for SEboasts a reduction in reporting anddisclosure requirements.Certain deemed irrelevant topics forqualifying entities, including SFRS 33Earnings per Shares, SFRS 34 InterimFinancial Reporting and SFRS 108 OperatingSegments, have been eliminated.SFRS for SE are also made simplerthrough the elimination of optionsgranted under SFRS and qualifyingentities are left with the deemedsimpler option to apply.Some of the examples are as follows:● Property, plant and equipment are to beaccounted for under the historical costdepreciation-impairmentmodel. There isno option to apply a revaluation model.● All borrowing costs are to beexpensed off. There is no optionfor capitalisation. SFRS requires allborrowing costs to be capitalised.● All research and development costsare to be expensed off. There is nocapitalisation of development costsincurred even if the correspondingproject is determined to becommercially viable.● All intangible assets are deemed tohave a definite useful life. If theuseful life cannot be estimated, theuseful life of the intangible asset isdeemed to be 10 years.● Financial instruments are eithermeasured at fair value through profitor loss or amortised historical cost.There is an elimination of “held-tomaturity”and “available-for-sale”categories for financial instruments.QUALIFYING ENTITIESEntities must not be publiclyaccountable, publish General PurposeFinancial Statements (GPFS) for externalusers and must be a small entity beforethey quality to adopt SFRS for SEs.PUBLIC COMPANY AND CHARITYThe Accounting Standards Council(ASC) clarifies that an entity isalso considered to have publicaccountability if it is defined as a publiccompany under the Singapore CompaniesAct (Cap. 50) or is a charity definedunder the Charities Act (Cap. 37).SMALL ENTITIESSpecific to Singapore, entities need tosatisfy prescribed size criteria beforethey are determined as small in size forthe purpose of applying SFRS for SEs.An entity has to meet at least 2 of the following3 criteria before it can satisfy the size criteria:● Consolidated annual revenue of notmore than $$10 million;● Consolidated gross assets of notmore than S$10 million; or● Consolidated number of employeesof not more than 50.
BDO CONNECT 3SINGAPORE NEWSRoger Loo, Management ConsultingServices Director, a panelist at theICT Business ForumThe ICT Business Forum was heldon 24 February at the RafflesCity Convention Centre bringingtogether 600 Info-CommunicationTechnology professionals.Organised by Singapore infocommTechnology Federation (SiTF),this full-day forum had leadersand Infocomm Technology (ICT)professionals from the Singapore ICTcommunity come together to gaininsights into ICT business landscape,emerging trends and opportunities,and technological developments.The theme for 2011: “Prosper withPeople, Productivity, and Planet”provided invaluable perspectiveson how organisations could reapprofitability by incorporatingsustainable innovations that increasebusiness efficiency and productivity.MCS Director, Roger Loo was apanelist at the event togetherwith other professionals such asRaju Chellam, Managing Director,TechTrenders Asia, See Ai-Ling,Director, IBM Software MarketingGroup – ASEAN, William Chin,General Manager – Asia RegionalSales, Universal Steel Industriesand Yap Chee Yuen, Senior VicePresident and Head – Innovation &Technology, and Operation Services,Resorts World at Sentosa.An entity has to meet the size criteriafor each of the previous 2 consecutivefinancial reporting periods before it canapply the SFRS for SE. For example, anentity needs to satisfy the prescribed sizecriteria in FY2009 and FY2010 before it isconstrued as meeting the size criteria forFY2011.Similarly, after it has applied SFRS forSEs, an entity shall cease to apply theStandard if it fails to meet the sizecriteria for the previous 2 consecutiveyears. For example, after applying SFRSfor SEs in FY2011, the entity must ceaseto apply SFRS for SEs in FY2014 if it doesnot meet the size criteria for FY2012 andFY2013. However, it can continue to applythe Standard in FY2013 even though itfails the size criteria in FY2012.A concession is given to newlyincorporated entities under theCompanies Act where they are deemedto qualify the size criteria for the first 2financial periods after incorporation.SHOULD YOU JUST JUMP ONTOTHE BAND-WAGON?SFRS for SEs will generally provide costand time savings in the preparation oftheir GPFS in the long-run for certainentities, mainly stemming from itsfewer and simpler requirements as wellas the lower frequency in changes tothe Standard (i.e. once every 2 years).Nonetheless, there is seldom, if any, aone-size-fits-all solution out there. Hence,before jumping onto the band-wagonwith the crowd, it is good to do a costbenefit analysis.ELIMINATION OF OPTIONSThe Standard did away with what weredeemed as complex options to makeaccounting simpler. However, it alsotook away the option from entities toapply an accounting treatment thatbest reflects the financial statements totheir advantage. As examples, an entitymay be sitting on an “undervalued”property under the cost model when itcould be presenting a more attractivebalance sheet subsequent to an upwardvaluation of the property to reflect thehigher market price under the revaluationmodel. A research and developmententity may experience lower profits ifthey expense all development costs whensome of these costs could have beencapitalised under SFRS or when theyhave to amortise intangible assets whichwere previously determined to haveindefinite useful lives and hence couldhave been carried at cost should there beno impairment. A capital intensive entitymay suffer from lower profits if theyexpense all borrowing costs which wouldhave been capitalised under SFRS.COST SAVINGSThe Standard reduces compliance costsof financial reporting in the long term.However, entities need to be aware of theadditional effort and costs that may arisefrom the transition from SFRS to SFRSfor SEs. Such efforts and costs may arisefrom the education of accounting staffon the Standard, turnover of accountingstaff who are resistant to changesor who prefer to stay closely alignedwith SFRS, modification of the currentaccounting software to align the reportingrequirements to SFRS for SEs and otherincidental conversion costs. In addition,if the entity is reporting to a holdingcompany which reports in SFRS, theentity will have to incur additional effortsand costs in keeping 2 books – one in SFRSfor reporting purpose and the other inSFRS for SEs for filing purpose.SINGAPOREUnlike certain jurisdictions which adopt alocal GAAP for smaller entities, Singaporeadopts SFRS, which is closely alignedto IFRS, for all Singapore-incorporatedentities. Consequently, the introductionof the Standard does not have any impacton the comparability of the financialstatements in Singapore’s context.In view of the above, it would appearthat the biggest beneficiary will be newlystart-up entities which can immediatelyenjoy the benefits of simplifiedaccounting and substantial reductionin disclosure requirements. That beingsaid, such entities should also think ofthe implications in the long run from theadoption of the Standard. For example,entities projected for growth includingthose which have plans for listing maywant to reconsider the adoption of theStandard as the costs of conversionfrom SFRS for SEs to SFRS may be quitesubstantial.
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