Compilation of Financial Statements Singapore – Understanding the Process and Requirements

The compilation of financial statements in Singapore is a crucial accounting process that helps businesses prepare their financial information in a structured and compliant manner. While it does not provide assurance like an audit or review, a compilation ensures that financial data is properly organized and presented in accordance with the Singapore Financial Reporting Standards (SFRS). This process is commonly used by small and medium-sized enterprises (SMEs) that are exempt from statutory audits but still require reliable financial reports for management, taxation, and compliance purposes.

What Is a Compilation of Financial Statements?

A compilation of financial statements refers to the preparation and presentation of financial information based on the data provided by management. In this engagement, accountants use their expertise in accounting principles and reporting standards to transform raw financial data into formal financial statements.

Unlike audits or reviews, compilation engagements do not involve verifying or expressing opinions on the accuracy of the information. The accountant’s role is limited to presenting the information clearly and in compliance with the required reporting framework.

Compiled financial statements typically include:

• Statement of Financial Position (Balance Sheet)

• Statement of Comprehensive Income (Profit and Loss Account)

• Statement of Changes in Equity

• Statement of Cash Flows

• Notes to the Financial Statements
  

Purpose of Compilation in Singapore

The primary objective of a compilation is to provide management, shareholders, and external stakeholders with an accurate summary of the company’s financial performance and position. In Singapore, this is especially relevant for small companies that are exempt from audit requirements under the Companies Act but still need financial statements for the following purposes:

• Annual filing with ACRA (Accounting and Corporate Regulatory Authority)

• Preparation of tax returns for submission to IRAS (Inland Revenue Authority of Singapore)

• Bank loan applications and credit assessments

• Internal financial management and decision-making
  

Regulatory Framework in Singapore

The preparation of compiled financial statements in Singapore must comply with the Singapore Financial Reporting Standards (SFRS) issued by the Accounting Standards Council (ASC).

Additionally, accountants performing a compilation must follow the SSAE 4410 (Revised) – Compilation Engagements, issued by the Institute of Singapore Chartered Accountants (ISCA). This standard provides guidelines on the responsibilities of accountants, the form and content of the compilation report, and the ethical requirements for professional conduct.

For private limited companies incorporated in Singapore, the Companies Act (Cap. 50) sets out the legal requirement to maintain proper accounting records and prepare annual financial statements that give a true and fair view of the company’s financial position.

Who Needs Compilation of Financial Statements

In Singapore, companies may engage in the compilation process for several reasons:

1. Small Companies Exempt from Audit

Under the audit exemption framework, a company qualifies as a small company if it meets two of the following three criteria:

• Total annual revenue ≤ S$10 million

• Total assets ≤ S$10 million

• Total number of employees ≤ 50

Although these companies are not required to be audited, they must still prepare compiled financial statements for submission and compliance.

2. Dormant Companies

Dormant companies—those with no accounting transactions during the year—are also exempt from audits but must submit unaudited financial statements (compiled statements) to ACRA.

3. Sole Proprietorships and Partnerships

Even non-incorporated businesses such as sole proprietorships and partnerships often prepare compiled financial statements to monitor performance and assist in tax reporting.

The Compilation Process

The compilation process generally follows these key steps:

1. Collection of Financial Data: Management provides accounting records such as ledgers, invoices, and bank statements.

2. Preparation of Draft Statements: The accountant compiles the data into structured financial reports following the SFRS.

3. Review by Management: The draft is reviewed by company management to ensure accuracy of inputs.

4. Finalization and Report Issuance: The accountant issues a Compilation Report, which states that no audit or review was performed and that the information is based solely on data provided by management.
   

This report is then attached to the compiled financial statements when submitted to ACRA or used for other official purposes.

Responsibilities of Management and Accountants

Management Responsibilities

• Provide accurate and complete financial information.

• Maintain proper accounting records as required by law.

• Take responsibility for the accuracy and reliability of the data compiled.
  

Accountant’s Responsibilities

• Apply professional judgment and knowledge of accounting principles.

• Prepare statements in accordance with SFRS.

• Issue a compilation report outlining the scope and limitations of the engagement.

• Maintain confidentiality and comply with ethical standards under ISCA’s Code of Ethics.
  

Limitations of a Compilation Engagement

It’s important to understand that a compilation engagement does not provide any assurance. The accountant does not:

• Verify the accuracy of the information provided.

• Perform audit or review procedures.

• Express an audit opinion or assurance conclusion.
  

Therefore, while compilations are useful for reporting and compliance, they should not be relied upon as evidence of financial accuracy or internal control effectiveness.

Benefits of Compiling Financial Statements

Despite its limitations, the compilation of financial statements offers several practical benefits:

• Provides structured and standardized financial information.

• Facilitates regulatory compliance with ACRA and IRAS.

• Supports decision-making for business owners and investors.

• Enhances transparency and accountability even for small businesses.
  

Conclusion

The compilation of financial statements in Singapore serves as an important financial reporting process for companies that are not subject to statutory audit. It ensures that financial data is accurately presented in compliance with local accounting standards and regulations.

By engaging qualified accountants and adhering to established reporting frameworks, businesses can maintain proper financial documentation, meet statutory obligations, and support informed management decisions—all without the additional cost of a full audit.