The Singapore Accounting Standards Council (ASC) has announced that it will allow stakeholders more time to implement the Singaporean equivalents to the ‘package of five’ standards addressing accounting for consolidation, involvements in joint arrangements and disclosure of involvements with other entities.
The mandatory effective date of the standards has been deferred for a year (originally scheduled to be applied to annual periods beginning on or after 1 January 2013) and they now apply to annual periods beginning on or after 1 January 2014.
Entities can elect to early adopt the standards. More details can be found at the ASC website.
The five standards are:
- FRS 110 Consolidated Financial Statements (equivalent to IFRS 10)
- FRS 111 Joint Arrangements(equivalent to IFRS 11)
- FRS 112 Disclosure of Interests in Other Entities (equivalent to IFRS 12)
- FRS 27 Separate Financial Statements (equivalent to IAS 27)
- FRS 28 Investments in Associates and Joint Ventures (equivalent to IAS 28) (which the ASC refers to as the ‘Relevant Standards’)
The main changes are:
- One control model for all entities
- De facto control defined
- Potential voting rights – substantive not currently exercisable
- Decision making rights – principal vs. agent
- Protective rights defined
- All contracts/investees must be reassessed
Control exists when an investor has ALL three of the following elements:
- Power over the investee
- Exposure or rights to variable returns from its involvement with the investee
- The ability to use its power over the investee to affect the amount of the investor’s returns
FRS 111 describes the accounting for joint arrangements with joint control. Focus on rights and obligations of the joint arrangements, rather than its legal form.
2 type of joint arrangements:
- Joint operation:
– A joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement
– Line-by-line accounting of the underlying assets and liabilities
- Joint venture
– A joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement
– Equity accounting (proportionate consolidation not permitted)
FRS 112 includes the disclosure requirements for subsidiaries and all form of interests in other entities, including joint arrangement, associates, special purpose vehicles, and other off balance sheet vehicles. The existing guidance and disclosure requirements for separate financial statements are unchanged.
A number of new disclosures are required to include:
- the judgments made to determine whether it controls another entity
- interest of non-controlling interest (NCI) in group activities and cash flows, and information about each subsidiary that has material NCI
- accounting for changes in the ownership interest in a subsidiary without a loss of control
- a schedule of the impact on parent entity is required
- accounting for the loss of control
- subsidiaries that are consolidated using different year ends