ACRA Issues Review Focus for FY2023 Financial Statements

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ACRA’s FY2023 Review Focus for Statements

As per the Financial Reporting Surveillance Programme framework, the Accounting and Corporate Regulatory Authority (ACRA) reviews the financial statements (FS) of Singapore-incorporated companies to ensure compliance with the specified accounting standards in the country. On 6th November 2023, ACRA issued practice guidance for the audit committee (AC) on reviewing focus areas for FY2023 financial statements.

In the fiscal year 2023, financial reporting remains significantly influenced by macroeconomic and geopolitical uncertainties, while the impact of climate change is more pronounced than before. Considering these influences, the review focuses on FY2023 financial statements, including accounting impact from macroeconomic uncertainties, climate change movements, and geopolitical uncertainties.

Accounting Impact from Macroeconomic Uncertainties

Macroeconomic uncertainties significantly impact a company’s position and financial performance. Directors should focus on the following accounting considerations:

Seek insight from management regarding any significant events that occurred on or after the reporting date up to the authorisation of the financial statements.
Avoid solely relying on historical trends. Reevaluate the validity and supportability of inputs and assumptions used in cash flow projections.
Initiate early collaboration with the external auditor to ensure the adequacy and appropriateness of management’s assessment of the going concern.

Accounting Impact from Climate Change Movements

Climate change effects have become increasingly pronounced. There is an urgent need to combat this climate change.

Directors must understand the potential influence of climate-related risks on financial statements.
Audit committees (ACs) should remain watchful for greenwashing attempts. This is particularly true in cases where ambitious commitments have been made. These commitments may include achieving carbon neutrality or zero emissions in a short period.
Given the growing demand for climate reporting, ACs should ensure consistency between financial and non-financial reporting, specifically concerning key climate-related assumptions, risks, and opportunities.

Accounting Impact from Geopolitical Uncertainties

Geopolitical uncertainties, escalated by conflicts like the recent Israel-Hamas war, continue to significantly impact companies globally in FY2023. It affects not only those in war zones but also businesses worldwide, susceptible to the repercussions of recent developments. Directors and auditors should focus on the following aspects concerning geopolitical uncertainties.

Companies should evaluate the possibility of production disruptions and the potential for significant deterioration in the company’s net working capital position.
Companies should evaluate the recoverability of the carrying amount of a Cash Generating Unit (CGU) or asset.
In cases where inventory movement is slow due to imposed trade sanctions or physical damage has been incurred from the war, they should be written down to the lower of their costs and net realisable values.

For detailed information about the review focus for FY2023 financial statements, click here.

Bottom Line

A quality audit contributes to improved financial reporting for a company. Therefore, we recommend that audit committees stay informed about ACRA’s audit regulatory activities. These include Quality Control (QC) reviews and audit inspections through publicly available reports.

To stay abreast with ACRA updates and regulations, visit the DataTracks blog @https://www.datatracks.com/sg/blog/. You can also talk to an expert at DataTracks @ +65-31-582-850 or email enquiry@datatracks.com.sg.