AS the calls increase for a global convergence of accounting standards, Singapore has gone on record to say that it sees many benefits to adopting International Financial Reporting Standards (IFRS) - but that allowances need to be made for unique circumstances.
'Standards set need to take into account the realities of the local environment, while fairly representing the underlying business,' said Senior Minister of State for Finance and Transport Lim Hwee Hua at the Accounting Standards Council public seminar yesterday.
Specifically, she believes that the same set of accounting standards should not be applied to smaller and simpler businesses, such as the small and medium-sized enterprises (SMEs).
SMEs in Singapore currently have to adopt the Singapore Financial Reporting Standards (SFRS) which are based on the IFRS.
But the International Accounting Standards Board (IASB), which issues the IFRS, is looking to introduce simpler standards for SMEs, called the IFRS for Private Entities.
'While this differentiated accounting standards is a step in the right direction . . . there remain concerns from some quarters that the IFRS for Private Entities are still too complicated and should be further simplified. We hope that the IASB would take into account all these feedback before introducing the final set of standards,' Mrs Lim said yesterday.
The seminar - attended by IASB chairman David Tweedie and 30 foreign delegates from the region - discussed the IASB's work programme and the convergence initiatives undertaken by each country.
Mrs Lim said she recognised that there are many benefits to adopting IFRS.
She cited a 2006 survey by PricewaterhouseCoopers and Ipsos MORI of fund managers across Europe which showed that the adoption of IFRS helped to improve transparency and management information, and enhance the consistency of reporting between jurisdictions and sectors.
But she added that financial reporting standards should give room for judgemental application and for consideration to be paid to local cultural, legal, tax and business circumstances.
'A good case in point would be the requirement to provide for deferred tax on investment properties. While this may be a sound practice in countries that have in place capital gains tax, it may not be appropriate in a country like Singapore that does not levy such a tax,' she said.
She added that the IASB should issue new accounting standards at a pace that is comfortable to all stakeholders, and that it should become more involved in Asia as more countries embrace the IFRS.
'The IASB should continue the dialogue it has with all countries, with special focus on smaller, developing and emerging economies so that they too will make the IFRS the accounting standards of choice,' she said.
This article was first published in The Business Times on 18 July 2008.
