Preparation of Compilation Financial Statements Service
According to the Companies Act of Singapore, the Director of a company incorporated in Singapore is obligated to prepare a comprehensive set of financial statements and present them at the Annual General Meeting (AGM) of the company. Following the AGM, the company is required to submit its Annual Returns to the Accounting and Corporate Regulatory Authority (ACRA) within one month.
What is compilation of financial statements for private companies in Singapore, and why are unaudited financial statements important?
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Even if a company is exempt from the requirement to undergo an audit, it is still obligated to produce a complete set of unaudited financial statements, accompanied by explanatory notes and a Directors’ Statement, in accordance with the Singapore Financial Reporting Standards.
These unaudited financial statements are necessary for various purposes, such as Annual General Meetings, tax filing, and accountability to shareholders. They can also be used to obtain banking facilities, apply for government grants, and comply with regulatory requirements in specific industries.
However, preparing Financial Statements in compliance with SFRS can be a challenging task, particularly for smaller companies lacking in manpower or expertise. As such, partnering with a professional accounting firm is highly recommended, as they are qualified and equipped to draft, prepare, and review Financial Statements in accordance with the latest financial reporting standards.
What are the typical components of unaudited financial statements for a private company in Singapore?
Unaudited financial statements typically include the following components:
- Directors' Statement
- Statement of Comprehensive Income (also known as Income Statement)
- Statement of Financial Position (also known as Balance Sheet)
- Statement of Changes in Equity
- Statement of Cash Flows
- Notes to the Financial Statements.
These components provide a comprehensive overview of a company’s financial position, performance, and cash flow, and are essential for various purposes such as tax filing, Annual General Meetings, obtaining banking facilities, and complying with regulatory requirements.
What are the criteria for small companies in Singapore to be exempt from audits and how can they seek assistance to determine their eligibility?
Singapore’s commitment to supporting its dynamic business environment and promoting the growth of Small and Medium Enterprises (SMEs) led to a change in the Companies Act on 1 July 2015, which granted small companies an exemption from mandatory audits under certain conditions. Prior to this amendment, only exempt private companies with annual revenues of less than SGD5 million were excused from audits.
The small company audit exemption enables a wider range of company stakeholders, including customers, employees, and creditors, to access the company’s financial statements while also reducing compliance costs for smaller businesses.
To qualify as a small company, a private company must meet at least two of the following three criteria for the immediate preceding two consecutive years:
- Total annual revenue of no more than SGD10 million.
- Total assets in the financial year not exceeding SGD10 million.
- Total number of employees in the financial year is not more than 50.
If a business satisfies the criteria, it will be exempt from audits. If a company has difficulty determining its eligibility for audit exemption due to complex issues, it may seek the assistance of an accounting professional to prevent inadvertent violations of statutory requirements and avoid penalties.
What are the statutory requirements for companies and how can an accounting firm help with compliance and maintaining accurate financial records?
Regardless of whether a company is exempt from audit requirements, it is imperative that businesses comply with ongoing statutory requirements. Such requirements include filing financial statements, maintaining accurate accounting records, and being prepared for shareholders who possess 5% or more of voting rights to request audited accounts. It should be noted that the Accounting and Corporate Regulatory Authority (ACRA) will conduct regular spot-checks on businesses’ financial statements, and if any legal issues arise, the ACRA may appoint an accounting firm to audit the company.
Consequently, it is incumbent on companies to maintain precise financial statements and accounting books. This can be achieved through providing employees with the necessary knowledge to carry out the accounting and bookkeeping procedures, or alternatively, outsourcing these tasks to a reliable accounting firm that can ensure compliance. Beyond mere compliance with statutory requirements, accounting firms provide an ongoing advantage for companies as they help maintain accurate financial records and statements in the long run.