How to Prepare Unaudited Financial Statements in Singapore

25th Mar

kohlimaudit

How to Prepare Unaudited Financial Statements in Singapore

Introduction

Unaudited financial statements are a key requirement for private limited companies in Singapore, especially those that qualify as small companies and are exempt from statutory audits. These financial statements provide an overview of a company’s financial health and are essential for compliance with the Accounting and Corporate Regulatory Authority (ACRA) and the Inland Revenue Authority of Singapore (IRAS).

In this guide, we will cover:

What unaudited financial statements are
Who needs them
Key components of an unaudited financial statement
Steps to prepare them
Best practices for accuracy and compliance

1. What Are Unaudited Financial Statements?

Unaudited financial statements are financial reports prepared by a company without the need for an external auditor’s verification. These statements summarize the company’s financial position, income, and cash flows for a specific financial period.

Companies that meet the audit exemption criteria under the Companies Act (Cap. 50) are allowed to file unaudited financial statements. However, they must still adhere to Singapore Financial Reporting Standards (SFRS).

2. Who Needs Unaudited Financial Statements in Singapore?

Small and medium-sized enterprises (SMEs) and exempt private companies (EPCs) in Singapore typically prepare unaudited financial statements for tax reporting, loan applications, or internal decision-making.

A company is exempt from audit if it meets at least two of the following three criteria:

Total revenue is not more than SGD 10 million.
Total assets are not more than SGD 10 million.
The company has not more than 50 employees.

Even if a company is audit-exempt, it must still prepare financial statements as required by ACRA and IRAS.

3. Key Components of Unaudited Financial Statements

A standard set of unaudited financial statements in Singapore includes:

Directors’ Statement
- A declaration by the company’s directors on the financial performance and compliance with regulatory requirements.
Statement of Financial Position (Balance Sheet)
- A snapshot of the company’s assets, liabilities, and shareholders’ equity at a given date.
Statement of Comprehensive Income (Profit & Loss Statement)
- A summary of the company’s revenues, expenses, and net profit or loss for the financial year.
Statement of Changes in Equity
- Details changes in equity components such as retained earnings and issued capital.
Statement of Cash Flows
- Tracks the movement of cash in and out of the company, categorized into operating, investing, and financing activities.
Notes to the Financial Statements
- Additional explanations on accounting policies, significant transactions, and financial risks.

4. Steps to Prepare Unaudited Financial Statements

Step 1: Gather All Financial Data

Start by collecting financial information for the financial year, including:

Revenue and sales reports
Bank statements
Expense records (rent, salaries, utilities, etc.)
Invoices and receipts
Loan agreements and liabilities
Fixed assets register

Make sure all transactions are properly recorded in the accounting system.

Step 2: Prepare the Profit & Loss Statement

This statement outlines revenue, cost of goods sold (COGS), and expenses to determine the net profit or loss.

Example Format:

Step 3: Prepare the Balance Sheet

The balance sheet reflects the company’s financial position as of the reporting date.

Example Format:

Step 4: Prepare the Statement of Cash Flows

This statement tracks cash movements in the company.

Example Format:

markdown

Cash Flows from Operating Activities:

   - Net Profit: SGD 180,000

   - Adjustments for Non-Cash Items: (+/-) SGD 10,000

   - Working Capital Changes: (-) SGD 20,000

-------------------------------------------------

Net Cash from Operating Activities: SGD 170,000
Cash Flows from Investing Activities:

   - Purchase of Equipment: (-) SGD 50,000

-------------------------------------------------

Net Cash Used in Investing Activities: SGD 50,000
Cash Flows from Financing Activities:

   - Bank Loan Repayment: (-) SGD 30,000

-------------------------------------------------

Net Cash Used in Financing Activities: SGD 30,000

Net Increase in Cash: SGD 90,000 Opening Cash Balance: SGD 10,000 ------------------------------------------------- Closing Cash Balance: SGD 100,000

Step 5: Draft the Notes to Financial Statements

Include explanations of accounting policies, depreciation methods, taxation, and contingencies. The notes should align with SFRS.

Step 6: Review for Accuracy and Compliance

Before finalizing:

Cross-check figures for consistency.
Ensure compliance with SFRS.
Obtain directors’ approval.

5. Best Practices for Accuracy and Compliance

1. Use Accounting Software

Accounting software such as Xero, QuickBooks, or MYOB can streamline financial data entry and reduce errors.

2. Keep Proper Documentation

Retain invoices, receipts, and agreements for at least five years for compliance with ACRA and IRAS.

3. Follow Singapore Financial Reporting Standards (SFRS)

Ensure all financial statements adhere to SFRS, especially regarding revenue recognition and asset valuation.

4. Seek Professional Help if Needed

If you are unfamiliar with financial reporting, engage a qualified accountant or corporate services provider to ensure accuracy.

5. Submit on Time

Financial statements must be prepared within six months after the financial year-end.
The company must file its Estimated Chargeable Income (ECI) with IRAS within three months after the financial year-end.

Conclusion

Preparing unaudited financial statements in Singapore is crucial for compliance and financial management. By following structured steps and best practices, companies can ensure accurate financial reporting without requiring an external audit.

If you need professional assistance, consider engaging an accounting firm to prepare your unaudited financial statements accurately and efficiently.

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