Introduction: Financial Reporting as a Core Governance Responsibility
As a director in Singapore, your responsibility for financial reporting has never been more critical. In an environment shaped by global trade realignments, tariff volatility, supply chain restructuring, and evolving accounting standards, regulators are placing sharper expectations on boards to demonstrate financial competence and vigilance.
Recognising these challenges, the Accounting and Corporate Regulatory Authority (ACRA) has issued updated guidance to directors, reinforcing that financial reporting is not merely an administrative exercise. Instead, it is a fundamental pillar of corporate governance, accountability, and market confidence.
This article explains your legal obligations under the Companies Act, highlights ACRA’s strategic focus areas for financial years ending in 2025, and outlines how directors should work with auditors and advisors while preparing for future regulatory changes.
Your Fundamental Legal Obligations as a Director
Upholding a “True and Fair View”
Under the Singapore Companies Act, directors are legally responsible for ensuring that financial statements presented at the Annual General Meeting provide a true and fair view of the company’s financial position and performance. This requirement is not satisfied simply by compliance with Singapore Financial Reporting Standards (SFRS or SFRS(I)). Rather, directors must apply judgment to ensure that the overall presentation faithfully reflects economic reality.
In practice, this means that even where accounting standards permit multiple treatments, directors must challenge whether the chosen approach genuinely represents the company’s circumstances. Overly optimistic assumptions, aggressive estimates, or selective disclosures can undermine this obligation.
Maintaining Proper Accounting Records and Controls
Directors must also ensure that the company maintains proper accounting records and a robust system of internal controls. These records must be sufficient to:
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Explain transactions accurately
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Enable financial statements to be prepared in compliance with accounting standards
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Safeguard company assets against loss or misuse
Weak documentation, poor segregation of duties, or over-reliance on manual processes can expose directors to regulatory findings, even if no fraud is involved.
Personal Responsibility Cannot Be Delegated
A common misconception among directors is that appointing qualified accountants, finance teams, or external auditors transfers responsibility. This is incorrect. While professional support is encouraged, ultimate accountability remains with the board.
ACRA has repeatedly emphasised that directors cannot excuse non-compliance on the basis that they are not accounting experts. The law expects directors to exercise reasonable care, skill, and diligence, including asking questions, seeking clarification, and escalating concerns when matters appear unclear.
ACRA’s Strategic Focus for Financial Years Ending in 2025
For FY2025, ACRA’s Financial Reporting Surveillance Programme will focus heavily on uncertainties arising from global trade disruptions and tariff policies. Directors should therefore expect increased scrutiny in areas where judgment and forward-looking assumptions play a significant role.
Going Concern Assessments Under Heightened Uncertainty
Directors must assess whether the company remains a going concern for at least 12 months from the date the financial statements are approved. In the current environment, this assessment requires more than a cursory review.
Boards should ensure that management performs rigorous stress testing on cash flow forecasts, considering scenarios such as supply chain delays, higher import costs, reduced demand, or financing constraints. Where material uncertainties exist, transparent disclosures are essential to avoid misleading stakeholders.
Impairment of Assets Beyond Direct Financial Losses
Asset impairment reviews should not be limited to obvious declines in revenue or profitability. ACRA expects directors to consider indirect indicators, including:
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Relocation or disruption of key suppliers
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Loss of competitiveness due to tariffs
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Inability to pass increased costs to customers
Goodwill, property, plant, equipment, and right-of-use assets are particularly sensitive to these factors. Directors should challenge whether cash-generating unit assumptions remain valid in light of changing trade dynamics.
Expected Credit Losses Must Reflect Forward-Looking Risks
Expected Credit Loss (ECL) models require directors to look beyond historical default patterns. Where customers are exposed to trade restrictions, cost pressures, or weakened export demand, forward-looking assumptions must be updated accordingly.
Blind reliance on past data may result in understated credit losses and non-compliance with accounting standards. Directors should ensure that scenario weightings and macroeconomic overlays are realistically calibrated.
Identifying Onerous Contracts and Provisions
Contracts that were once profitable may become onerous due to unavoidable cost increases, particularly in logistics, manufacturing, or long-term supply agreements. Directors must ensure that such contracts are reviewed and that appropriate provisions are recognised when obligations exceed expected benefits. Failure to identify onerous contracts early can lead to sudden profit shocks and regulatory findings.
Working Effectively with Experts and Auditors
Professional Scepticism Is a Board Responsibility
Directors often rely on external valuers, tax advisors, and consultants. However, ACRA expects boards to exercise professional scepticism when reviewing expert reports. Assumptions should be challenged, methodologies understood at a high level, and sensitivities discussed openly. Optimistic projections unsupported by market evidence should raise red flags. Directors are not expected to redo valuations but must demonstrate informed oversight.
Using Audit Quality Indicators Meaningfully
The Audit Quality Indicators (AQI) Disclosure Framework is a valuable tool when used correctly. Rather than treating AQIs as a compliance formality, directors should use them to engage auditors on matters such as team experience, audit hours allocation, and significant risk areas. Meaningful dialogue with auditors strengthens audit quality and reinforces the board’s governance role. For audit exemption, read here.
Preparing Today for Tomorrow’s Reporting Requirements
Climate-Related Financial Reporting
Although implementation timelines for climate reporting have been extended for certain Large Non-Listed Companies and listed entities, directors should not be complacent. Material climate risks must already be considered in current impairment testing, asset useful life assessments, and provisions. Early integration reduces future compliance costs and signals strong governance to investors and regulators.
SFRS(I) 18: A New Income Statement Structure
Effective from 2027, SFRS(I) 18 will significantly change how income statements are presented. Since retrospective application is required, companies must be able to capture comparative information starting in 2026. Directors should ensure that finance systems and chart-of-accounts structures are reviewed well in advance to avoid costly remediation.
Evaluating SFRS(I) 19 for Subsidiaries
For groups with subsidiaries, SFRS(I) 19 offers a voluntary simplified disclosure regime for eligible entities. Directors should assess whether subsidiaries qualify and whether adoption can meaningfully reduce compliance costs without compromising transparency.
Conclusion: Financial Literacy as a Governance Imperative
Financial literacy is no longer optional for directors. In a volatile and interconnected global economy, regulators expect boards to demonstrate informed oversight, sound judgment, and proactive engagement with financial reporting risks.
If you are uncertain about a specific accounting treatment or emerging standard, seeking training or professional advice is not a weakness—it is a hallmark of responsible governance. Acting early ensures your company remains compliant, credible, and resilient.
If you require guidance on director duties, financial reporting compliance, or accounting advisory support, the Raffles Corporate Services team is ready to assist. Please contact us at [email protected].
Yours sincerely,
The editorial team at Raffles Corporate Services