SFRS Compliance Checklist: What Singapore SMEs Often Miss in Financial Reporting

Did you know over 40% of SMEs in Singapore fail their first financial audit due to SFRS compliance errors? These mistakes are not only costly but can also severely damage a company’s credibility with investors, regulators, and partners.

This blog offers a step-by-step guide to help small and medium-sized enterprises (SMEs) in Singapore understand and comply with the Singapore Financial Reporting Standards (SFRS). We’ll walk you through SFRS vs. SFRS for Small Entities (SFRS for SE), the most common mistakes SMEs make, and how to avoid them—all while keeping your reports clear, timely, and audit-ready.

TL;DR: Don’t Let These SFRS Compliance Gaps Derail Your Business 📉

Singapore SMEs frequently miss key SFRS compliance points—and it can cost them.

• Director’s Responsibility – The buck stops with the board, not just the finance team.
• Inadequate Disclosures – A top concern for ACRA; your numbers need clear notes and context.
• Complex Valuations – Errors in asset impairment & fair value are common red flags.
• Wrong SFRS Framework – Assuming you qualify for the SME standard without checking is a classic pitfall.
• Ignoring Audit Issues – Failing to act on auditor feedback signals poor governance.

🛑 Non-compliance isn’t just a mistake—it’s a risk.

🧠 This guide walks you through the SFRS compliance checklist, uncovers common pitfalls, and shows how to stay audit-ready all year round.

👉 Need expert support? Let Grof simplify your accounting compliance.

Understanding the Singapore Financial Reporting Standards (SFRS)

What Is SFRS?

The Singapore Financial Reporting Standards (SFRS) align with the International Financial Reporting Standards (IFRS). They ensure businesses in Singapore provide consistent, transparent, and comparable financial information.

Every company in Singapore must prepare financial statements in accordance with either:

• Full SFRS, or
• SFRS for Small Entities (SFRS for SE), if eligible.

SFRS vs. SFRS for Small Entities (SFRS for SE)

SFRS for SE is a simplified framework designed for smaller companies. To qualify, a company must meet at least two of the following three criteria:

• Annual revenue of ≤ S$10 million
• Total assets of ≤ S$10 million
• Fewer than 50 employees

This version reduces compliance burden while preserving financial transparency. However, applying the wrong standard can lead to errors in compliance reporting.

💡 Tip: Double-check your eligibility annually, especially during business expansion. Find more details on ACRA’s guide to financial statements.

What Must Be Included in Your SFRS-Compliant Financial Statements?

No matter which standard your business follows, your SFRS Singapore financial statements must contain the following five components:

1. Statement of Financial Position (Balance Sheet)
2. Statement of Comprehensive Income (Profit and Loss)
3. Statement of Changes in Equity
4. Cash Flow Statement
5. Notes to Financial Statements, including accounting policies and assumptions

Each component provides crucial insight into your business’s financial health, and failing to include or correctly prepare any of these can put you at risk during audits or regulatory reviews.

Common Pitfalls in Financial Reporting for Singaporean Companies

1. Incorrect Application of Accounting Standards

A foundational step in financial reporting is selecting and applying the correct accounting framework. While many SMEs are eligible for SFRS for Small Entities, directors must first verify that their company meets all the specific criteria. Assuming eligibility without proper assessment can lead to fundamental errors in reporting.

Director’s Responsibility: The onus is on the directors to understand the different frameworks—SFRS, SFRS for Small Entities, etc.—and ensure the one chosen is appropriate for the company’s size and structure. This decision should be documented and reviewed periodically.

2. Inadequate Disclosures in Notes to Financial Statements

This is a major and growing area of concern highlighted in ACRA’s 5th FRSP report. Financial statements are more than just numbers; the accompanying notes provide crucial context. Common omissions include:

• Insufficient detail on key accounting judgments and estimation uncertainties (e.g., how a valuation was determined).
• Lack of information on revenue recognition policies.
• Incomplete disclosures regarding the impairment of assets.

Best Practice: Treat the notes as an integral part of the financial statements. They should clearly explain the ‘why’ and ‘how’ behind the figures, offering transparency to shareholders and regulators.

3. Improper Application of Accrual Accounting

The SFRS framework is built on the principle of accrual accounting, where revenue and expenses are recognized when they are earned or incurred, not when cash changes hands. SMEs transitioning from simpler bookkeeping methods may inadvertently continue using cash-based accounting, which is a significant compliance breach. This affects everything from revenue recognition to the recording of payables and receivables.

Best Practice: Ensure your bookkeeping process is strictly aligned with accrual principles from the start. This includes recognizing prepayments, accruing for expenses incurred but not yet invoiced, and correctly deferring revenue.

4. Failure to Address Complex Accounting Areas

ACRA’s surveillance frequently flags non-compliance in more complex areas. Directors cannot afford to overlook these. Key areas include:

• Impairment of Assets: Companies must regularly assess whether the value of their assets (like goodwill, property, or investments) may be overstated and record an impairment loss if necessary. This requires careful judgment and is a common area of non-compliance.
• Revenue Recognition (SFRS(I) 15): This standard requires detailed disclosures about the nature, amount, timing, and uncertainty of revenue from contracts with customers.
• Fair Value Measurement (SFRS(I) 13): When assets or liabilities are measured at fair value, the basis for that valuation must be robust and clearly disclosed.

Best Practice: If your company deals with these complex areas, it is crucial to have competent finance personnel or outsource accounting services to ensure they are handled correctly. Directors should challenge the assumptions used in these calculations.

5. Neglecting the Role of the Audit

An external audit is not merely a box-ticking exercise. The findings from an auditor, especially a modified audit opinion, can signal underlying issues in financial reporting. ACRA’s report notes that directors sometimes fail to take appropriate action on issues previously raised by auditors.

Best Practice: View your auditor as a professional partner. Prepare for the audit by keeping organized records and documentation. More importantly, when the audit raises issues, ensure management and the board develop a clear plan to rectify them.

6. Misunderstanding Director’s Responsibility vs. Management’s Role

While management prepares the financial statements, the ACRA report makes it clear that directors are ultimately responsible for ensuring the statements comply with accounting standards and present a “true and fair view.” Simply relying on the finance team or an external provider without personal oversight is not sufficient.

Best Practice: As a director, you should actively engage in the financial review process. This includes reviewing the draft statements, questioning management on key assumptions, and ensuring the board has the necessary financial literacy to provide effective oversight.

Best Practices for SFRS Singapore Compliance

1. Automate or Outsource Financial Processes

Manual entries increase human error. Adopt cloud-based tools like Xero or QuickBooks or outsource to a trusted accounting partner like Grof.

2. Reconcile Monthly, Close Quarterly

Don’t wait until year-end. Monthly reconciliations and quarterly closings keep your financials clean and audit-ready.

3. Train Your In-House Staff or Hire Experts

If your team lacks accounting know-how, invest in training or consult qualified professionals. Mistakes in reporting often start with lack of awareness.

4. Stay Updated with the Latest Announcements

ACRA and ISCA regularly update accounting standards. Follow ISCA updates or subscribe to newsletters to stay current.

Why Work With a Corporate Services Provider Like Grof?

Still unsure how to manage SFRS Singapore reporting efficiently?

Grof offers:

• Full-service outsourced accounting
• Experienced corporate secretaries
• Assistance in audit preparation and ACRA filings

By outsourcing, you focus on scaling your business while we ensure you meet every compliance requirement—on time and without stress.

👉 Learn more about Grof’s accounting services today.

Conclusion: Don’t Let Compliance Mistakes Cost Your Business

SFRS compliance isn’t just a legal requirement—it’s a sign of a professionally run business. Poorly prepared financials can deter investors, trigger fines, and erode trust.

Singapore SMEs often struggle with reporting not because they lack resources, but because they lack awareness. This checklist-style guide helps you avoid the most common pitfalls.

✅ Action Step: Reassess your eligibility, audit your books, and partner with professionals to ensure compliance.