25th Mar

kohlimaudit

What is Included in Unaudited Financial Statements in Singapore?

Introduction

Unaudited financial statements are an essential component of financial reporting for businesses in Singapore. While these statements are not reviewed by an external auditor, they must still comply with the Singapore Financial Reporting Standards (SFRS) and be prepared with accuracy and transparency.

Businesses in Singapore, especially small and medium enterprises (SMEs), use unaudited financial statements for multiple purposes, including tax filing, securing loans, and internal decision-making. Companies that qualify for audit exemption are still required to prepare and file financial statements with the Accounting and Corporate Regulatory Authority (ACRA) and Inland Revenue Authority of Singapore (IRAS).

In this article, we will explore:

What unaudited financial statements are
Who is required to prepare them
The key components of unaudited financial statements
The role of compliance in financial reporting
Best practices for accuracy and completeness

1. What Are Unaudited Financial Statements?

Unaudited financial statements refer to financial reports that have not been independently audited by an external auditor. These statements summarize the financial position and performance of a company but do not carry an auditor’s certification.

Companies that qualify for audit exemption under Section 205C of the Singapore Companies Act can prepare unaudited financial statements. However, these statements must still be prepared in accordance with SFRS and submitted to regulatory authorities.

2. Who Needs to Prepare Unaudited Financial Statements?

Companies in Singapore are required to prepare financial statements unless they are exempt under the Companies Act. The following types of companies typically prepare unaudited financial statements:

2.1 Audit-Exempt Companies

A company qualifies as a small company and is exempt from audit if it meets at least two of the following three criteria for the past two consecutive financial years:

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.

If a company belongs to a group, the entire group must qualify as a small group to be exempt from audit.

2.2 Sole Proprietorships and Partnerships

Sole proprietors and partnerships are not required to submit audited financial statements, but they may still need unaudited financial statements for tax filings or loan applications.

2.3 Dormant Companies

Companies classified as dormant (having no significant business activities during the financial year) may be exempt from preparing full financial statements but may still need to prepare simplified financial reports for compliance.

3. Key Components of Unaudited Financial Statements

A complete set of unaudited financial statements in Singapore includes the following components:

3.1 Directors’ Statement

This section includes:

Declaration by directors regarding the company’s financial position.
Confirmation that financial statements comply with SFRS.
Statement on whether the company can meet its financial obligations.
Details of dividends declared (if any).

3.2 Statement of Financial Position (Balance Sheet)

The balance sheet provides a snapshot of the company’s financial position at a given date, showing assets, liabilities, and equity.

Typical format:

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ASSETS

Current Assets:

- Cash and Bank Balances: SGD 100,000

- Accounts Receivable: SGD 50,000

- Inventory: SGD 30,000

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Total Current Assets: SGD 180,000
Non-Current Assets:

- Fixed Assets (Property, Equipment): SGD 250,000

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Total Non-Current Assets: SGD 250,000
TOTAL ASSETS: SGD 430,000
LIABILITIES

Current Liabilities:

- Accounts Payable: SGD 40,000

- Short-term Loan: SGD 60,000

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Total Current Liabilities: SGD 100,000
Non-Current Liabilities:

- Long-term Bank Loan: SGD 80,000

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Total Non-Current Liabilities: SGD 80,000
EQUITY

- Share Capital: SGD 150,000

- Retained Earnings: SGD 100,000

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Total Equity: SGD 250,000

TOTAL LIABILITIES & EQUITY: SGD 430,000

3.3 Statement of Comprehensive Income (Profit & Loss Statement)

This report summarizes the company’s revenues, expenses, and net profit or loss for the financial year.

Typical format:

3.4 Statement of Changes in Equity

This statement tracks the changes in shareholders’ equity due to profits, losses, dividends, and new share issuance.

Example:

3.5 Statement of Cash Flows

This statement outlines cash inflows and outflows, categorized into operating, investing, and financing activities.

Example:

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Operating Cash Flows:

   - Net Profit: SGD 190,000

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

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

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Net Cash from Operating Activities: SGD 180,000
Investing Cash Flows:

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

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

   - Loan Repayment: (-) SGD 30,000

   - Dividend Payment: (-) SGD 40,000

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Net Cash Used in Financing Activities: SGD 70,000

Net Increase in Cash: SGD 60,000 Opening Cash Balance: SGD 40,000 --------------------------------------------------- Closing Cash Balance: SGD 100,000

3.6 Notes to the Financial Statements

This section provides detailed information on:

Accounting policies used (e.g., revenue recognition, depreciation).
Breakdown of fixed assets and liabilities.
Contingent liabilities and commitments.
Taxation details.
Related party transactions (if applicable).

4. Compliance and Best Practices

4.1 Compliance with SFRS

Financial statements must be prepared in line with SFRS to ensure consistency, accuracy, and regulatory compliance.

4.2 Proper Record Keeping

Businesses must keep financial records for at least five years, as required by ACRA and IRAS.

4.3 Use of Accounting Software

Accounting software such as Xero, QuickBooks, and MYOB can help streamline financial reporting.

4.4 Seeking Professional Help

Engaging a qualified accountant or corporate services provider can ensure accurate financial statements.

Conclusion

Unaudited financial statements are an essential part of financial reporting in Singapore. While they do not require an audit, they must be prepared accurately and comply with regulatory standards.

A well-prepared unaudited financial statement should include:

Directors’ Statement
Statement of Financial Position
Statement of Comprehensive Income
Statement of Changes in Equity
Statement of Cash Flows
Notes to Financial Statements

Companies should ensure accuracy, compliance, and transparency in their reporting to avoid legal and financial risks. If in doubt, it is advisable to engage an accountant to assist with financial reporting.

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