Scope and period context
Practice Guidance No. 2 of 2019 guides directors approving Singapore-incorporated-company statements under FRSP. It is not exhaustive and ACRA can review other issues. Its cited 2019 GDP forecast was 0–1%, versus 3.1% recorded for 2018; cited M&A growth was 70.6% to S$121.8 billion in a September 2019 report. These are contemporaneous background figures, not current forecasts or transaction totals.
Leases: identify the full population and term
SFRS(I)16/FRS116 first applies in 2019, generally recognising lessee right-of-use assets and liabilities. Assess identified assets and control over how/for what purpose used, considering supplier substitution ability, and find the complete population. Renewal/termination options reasonably certain to be exercised affect term; contracts lacking explicit clauses need particular judgement.
Lease rates and JTC variable payments
Use the implicit rate if readily determined, otherwise incremental borrowing rate reflecting similar term, collateral, right-of-use value and economic environment. One rate for unlike leases is generally inappropriate. JTC market-rate revisions now remeasure liability when effective; initially use the current index/rate, not a forecast. This replaces the prior contingent-rent treatment described; the footnote links ISCA’s 23 November 2018 explanation.
Lease presentation and transition
Show right-of-use assets/liabilities separately on the face or notes, finance-cost interest separately from depreciation, principal cash payments as financing and short-term/low-value/non-liability variable payments as operating. Disclose critical term/rate judgements. Retrospective versus modified-retrospective choices may produce different balances; examine expedients/exemptions and evolving IFRIC decisions, including the cited 2019 term/useful-life and borrowing-rate discussions.
Uncertain income tax
SFRS(I) INT23 effective 1 January 2019 requires assuming the authority can examine with full relevant knowledge. Challenge estimates and assumptions, particularly tax treatments not probably accepted. The assessment is not based on an expectation that the authority will overlook information.
Revenue: all five challenges
Under SFRS(I)15/FRS115 effective from 2018, identify incentives/penalties/discounts/rebates/refunds comprehensively, measure at inception and reassess. Material financing effects from advance/late payment are recognised with interest separate from revenue. Borrowing costs for properties ready for sale uncompleted are not capitalised for sold or unsold units in the cited scenario. Monitor IFRIC decisions promptly. Tailor policies per material stream and make disaggregated revenue consistent with annual-report and analyst information.
Financial instruments and three ECL matrix factors
SFRS(I)9/FRS109 applies from 2018. Challenge unquoted-equity valuations and seek independent experts if material/no internal capability. ECL covers trade/contract/lease receivables for all companies, not just banks. A matrix groups similar risks such as geography/rating/product/customer type; uses relevant historical collection-period data; and adjusts for forward-looking credit losses.
Four impairment forecast errors
Finite-life PPE cash flows stop at remaining life rather than perpetuity, unlike goodwill/indefinite intangibles. Adjust discount rates for asset risks rather than using borrowing/inflation/government rates unmodified. Challenge optimistic revenue/margins/growth against past/current actuals and plans year by year. Disclose sensitivity for material low-headroom assets.
PPA and acquisition date
Separate amortisable customer lists, trademarks, patents, know-how and licences from goodwill. An accredited valuer’s scope includes identification, not merely pricing selected assets, and review of management assumptions. Omission may overstate goodwill/assets over time. Acquisition date fixes valuation of acquired assets/assumed liabilities and the start of consolidation.
Official source
This article independently explains the substantive contents of the official PDF, including the relevant conditions, procedures and annexes. The linked document remains the authoritative source for its original wording, and later changes should be checked separately.
Read the official PDF ↗