Consolidated Financial Statements under Singapore Standards

A company is generally required to prepare consolidated financial statements if it is a parent, i.e., a company that controls one or more subsidiaries.

According to SFRS 110: Consolidated Financial Statements, a parent company is considered to have control exists if it:

(a) Has power over the subsidiary;

(b) Is entitled to variable returns from its involvement with the subsidiary; and

(c) Can use its power to influence those returns.

In practice, this means a Singapore-incorporated parent company must consolidate the financial results of all its subsidiaries, whether incorporated in Singapore or overseas.

Under SFRS 110, a parent company does not need to prepare consolidated financial statements if all of the following conditions are met:

(a) It is a wholly-owned subsidiary, or

(b) It is a partly-owned subsidiary, and all other owners (including those without voting rights) have been informed and do not object;

(c) Its ultimate or any intermediate parent company prepares consolidated financial statements that are publicly available and comply with SFRS or equivalent IFRS standards; and

(d) Its debt or equity instruments are not publicly traded, and it is not in the process of issuing such instruments.

Even if a parent company is exempt, a subsidiary incorporated in Singapore is treated as a separate legal entity. It may still need to prepare local financial statements in compliance with ACRA filing obligations is mandatory, and directors must ensure timely preparation and submission of financial statements in accordance with the Companies Act and SFRS. Directors are responsible for ensuring that these statements are prepared and submitted on time.

Finally, even where consolidated financial statements are required, the audit requirement depends on whether the company or group qualifies as a small entity or small group. If it does not qualify, the consolidated financial statements must be audited, ensuring accountability and transparency for stakeholders.

Where consolidated financial statements are required, whether they must be audited depends on the size of the company or group.

1. Small entities or small groups may qualify for audit exemptions.
   

2. Other companies or groups must have their consolidated financial statements audited to ensure accountability and transparency for stakeholders.
   

Consolidated financial statements provide a holistic picture of a group’s financial position, but not every parent company is required to prepare them. Understanding the requirements, exemptions, and audit obligations under SFRS is essential for compliance and for maintaining stakeholder confidence.