ALL companies formed in Singapore and listed on the local stock exchange must start using a set of global accounting standards by 2012 - a move that will bring Singapore in line with other nations and enhance its role as a financial centre.
The International Financial Reporting Standards (IFRS), as the benchmark is known, is already used by 113 countries. By 2011, the standards will be in place in 150 nations.
Finance Minister Tharman Shanmugaratnam announced the step yesterday, stating that aligning companies in Singapore with international standards would 'further reinforce Singapore's role as an international business and financial hub'.
He said having global standards would eliminate any remaining financial reporting costs for Singapore-listed companies operating in more than one jurisdiction and help them participate in international capital markets.
'It will also provide international investors with the assurance of global comparability and transparency when they invest in Singapore,' added Mr Tharman, who was giving the keynote address at the KPMG Asia-Pacific IFRS Conference at Grand Copthorne Waterfront Hotel.
Singapore's move was welcomed by Mr Warren McGregor, a member of the International Accounting Standards Board.
'It will continue to reflect the important role Singapore has played in the development of accounting standards and quality financial reporting,' he said.
China and South Korea have announced they will adopt the standards, while Hong Kong and Australia are already fully compliant.
Mr Tharman said local companies have 'generally been 'IFRS-ready' and 'IFRS-compliant' in a substantive manner for a number of years now'.
The Singapore Exchange said there are 616 locally incorporated firms listed here. Incorporated means the firms were founded here.
Ms Euleen Goh, the chairman of the Singapore Accounting Standards Council, which prescribes accounting standards for companies, societies, charities and cooperatives, said: 'Many of the reasons for deviation have fallen away.
'We're an international financial centre. It makes a lot of sense for us to follow that convergence path as well...Our companies will be on the same platform.'
Ms Goh said Singapore is already 'pretty close' to convergence. Out of a total of about 50 standards, there are just two main differences between the Singapore Financial Reporting Standards and the IFRS, she noted.
One is the way property developers recognise revenue for the sales of condominiums. Under the IFRS, developers generally recognise revenue only when the project is completed and the keys are given to the buyer.
However, developers here can currently choose to recognise revenue as the project progresses.
The second key difference relates to the method of how equity for cooperatives is recognised.
So, there will be no need for changes in most companies, as the main parties which will be affected are the property developers, say industry experts.
'It's a refinement, not a major overhaul,' said Mr Tham Sai Choy, the head of audit at KPMG.
He noted that the portion of financial statements for companies that will change as a result of the convergence is 'extremely negligible'.
Local firms that are not listed could also eventually sign up to the standards.
'That's the next step for consideration,' said Ms Goh.
