3 Essential Accounting Standards Every Singapore Company Should Know

Financial reporting and auditing standards are related to fostering transparency and reliability in financial statements. In Singapore, adherence to these standards is vital for businesses to maintain credibility and facilitate effective decision-making. 

This blog article highlights three essential Singapore Financial Reporting Standards (SFRS). It will explain their significance in the business landscape.

SFRS 1: Presentation of Financial Statements 

SFRS 1 outlines requirements for presenting financial statements. It also establishes fundamental principles for preparing high-quality financial statements. These financial statements must accurately represent a company’s financial performance and position. 

Understanding financial statements is essential as they serve as valuable tools for decision-making by investors, creditors, and other stakeholders. A comprehensive financial statement provides insights into a company’s profitability, liquidity, and overall financial health. 

SFRS 15: Revenue from Contracts with Customers 

standard considers various factors such as contractual terms, performance obligations, and transaction price, assuring revenue is recognized when earned. 

It provides a framework for businesses to determine when and how to acknowledge revenue, ensuring consistency and comparability across industries. Recognizing revenue is critical as it impacts a company’s financial performance. 

The impact varies across different types of businesses. Service-based businesses recognize revenue as services are provided. Companies involved in long-term projects use percentage-of-completion methods.

SFRS 109: Financial Instruments 

SFRS 109 addresses financial instruments such as loans, bonds, derivatives, and equity investments. It establishes guidelines for their recognition, measurement, presentation, and disclosure. It aims to enhance the consistency and relevance of financial reporting related to financial instruments. 

For Singapore companies, SFRS 109 has significant importance. It provides a comprehensive framework for measuring financial instruments at fair value and assessing their subsequent accounting treatment. It impacts financial reporting by requiring fair value adjustments, affecting a company’s profit. It emphasizes risk management using appropriate accounting techniques to evaluate financial instruments’ credit and market risks. 

Understanding and following SFRS 109 helps Singapore companies report financial instrument transactions accurately. This creates transparency and comparability in their financial statements. It also facilitates effective risk management strategies and disclosure requirements allowing businesses to make informed decisions based on accurate financial information. 

Financial statements are crucial in effective decision-making for any business to: 

  1. Understand the organization’s financial position using accurate and reliable data. 2. Demonstrate the company’s feasibility to prospective investors. 
  2. Illustrate the company’s profitability and aid in investment decisions. 
  3. Scrutinize the borrowing capacity while applying for finances to specify short and long-term liabilities.

5. Deepen the understanding of cash flow sources outflow patterns, monitor spending, and exercise cost control.

Example: Hyflux’s Ongoing Case Against KPMG 

Hyflux, a Singapore-based water and power solutions provider, encountered financial troubles in 2017. This led to a complex restructuring process and eventually the business went into liquidation in 2021. 

Hyflux subsequently made claims from the group’s former external auditor, KPMG, for alleged negligence in auditing the accounts. These allegations were refuted by KPMG in their claim that Hyflux’s financial statements were audited in line with auditing standards, and there were no material misstatements. They also argued in their defense that the obligation

to prepare the financial statements in compliance with the law and reporting standards lies with the Hyflux’s management and board. 

KPMG and Hyflux’s case emphasizes the essential role of adhering to auditing standards as non-compliance can have repercussions. 


Financial reporting standards (IFRS), such as SFRS, play a vital role in Singapore’s business landscape. SFRS 1 ensures the proper presentation of financial statements, and SFRS 15 governs revenue recognition for client contracts. Lastly, SFRS 109 addresses financial instruments. 

Compliance with these standards assists in audit requirements, enhances transparency, assists decision-making, and promotes effective risk management. 

Non-compliance with financial reporting standards can have serious consequences. Penalties and fines may be imposed. Additionally, legal proceedings will eventually result in a loss of investor trust, damage to reputation, and limited access to capital markets.