At the end of every financial year, the directors of a company will need to compile their financial statements. The financial statements can be audited and unaudited. For exempt private companies limited by shares or small companies, they may present their financial statements unaudited as they qualify for audit exemption. For exempt private companies limited by shares with an annual turnover exceeding SGD$5 million, their accounts must be audited.
Once the financial year has ended, the directors of a company will have to close the accounts and open a new set of accounts for the new financial year. As for the financial year which just closed, the directors will have to compile a set of financial statements to be presented to the shareholders at the Annual General Meeting (AGM). The AGM must be held within 6 months after the end of the financial year. At the AGM, the shareholders will have to accept and adopt the financial statements presented to them by the directors. Once this is concluded successfully, the company, usually the company secretary, will file the annual returns with ACRA.
Financial Statements should be prepared in accordance with:
- The Financial Reporting Standards in Singapore (FRSs)
- The Singapore Companies Act, Chapter 50 (CA)
Here are the components of Financial Statements.
- Directors’ Report
- Statement by Directors
- Statement by Auditors (For financial statements that are audited)
- Balance Sheet (or Statement of Financial Position)
- Statement of Profit and Loss
- Statement of Equity
- Statement of Cashflow
- Additional Notes to the Financial Statements
Here are some points to take note:
- It is required by The Companies Act to prepare financial statements of a company.
- Companies may be required to file your financial statements with ACRA.
- The financial statements are a report on the financial health of a company. This allows the shareholders a better idea of how the company is doing.
- The financial statements are also important for potential investors. Without a well prepared financial statement, investors may not be able to decipher whether to invest in the company or not.
- The financial statements are required to derive the net asset value of a company and this information may be used to calculate stamp duties when shares are transferred.
- When a company takes up a loan, the bank or financial institution may require a copy of the financial statement.
Who can prepare the financial statements?
- Someone from the company itself. It can be the director or an in house accountant.
- The corporate secretary. Usually, corporate secretarial service providers can provide such services.
- An accountant or a bookkeeper who is well versed with what is required.
It is really up to the directors to decide on how they would like their financial statements prepared. If the directors have a good grasp of what is required, then, by all means, they can prepare the financial statements themselves. However, if it is something that they are unfamiliar with, it would be wise to hire someone who can assist them with the financial statements.