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Countdown to Adopting FRS 109, 115 & 116

 

THE DEPARTURE DATE FOR FRS 109 & 115 IS FAST APPROACHING

For those entities with December, March and June year-ends, the transition date to adopting FRS 109 ‘Financial Instruments’ and FRS 115 ‘Revenue from Contracts with Customers’ has already passed. We warn anyone contemplating delaying transition to the last moment.

By 15 May 2018, Singapore listed entities with December year-ends will have lodged their first quarterly financial reports as at 31 March 2018 with comparative as at 31 March 2017.

The challenge of adopting FRS 115 cannot be underestimated. The standard will change the pattern of revenue recognition for most entities. In a significant number of cases, adoption of FRS 115 will result in the recognition of revenue in a pattern that does not correspond to the amount invoiced to the customer.

 

FRS 109 & 115 KEY DATES FOR SGX LISTED ENTITIES (as at 30 Sept 2017)

 

FRS 116 LEASES

The mandatory adoption of FRS 116 ‘Leases’ is one year later than FRS 109 & 115. However, entities should consider whether to early adopt the standard in 2018 to provide a stable reporting platform going forward.

The accounting headlines of applying FRS 116 are:

  • There is no such thing as rental expense;
  • All leases come on balance sheet;
  • An entity’s net current assets will decrease; and
  • An entity’s EBITDA will improve.

Again, the implementation challenges should not be underestimated. One area of complexity is determining which contracts contain leases, as the requirements are pervasive and require a review of service contracts to see if they contain assets that are in scope of FRS 116. For contracts that contain leases, companies are required to set up a right of use asset register and calculate the lease liability for each leased asset. Systems and processes are required to calculate asset amortisation and the finance costs arising from leased assets.

 

FRS 116 KEY DATES FOR SGX LISTED ENTITIES (as at 30 Sept 2017)