The Companies Amendment Act enacted into law in 2014 revised the criteria for audit assurance requirements and introduced the small company concept, offering audit exemptions for registered private limited companies in Singapore.
What is the Effective Date of the Act?
The Accounting and Corporate Regulatory Authority (ACRA) began implementing key changes enforced by the law in two phases: in July 2015 and January 2016 respectively.
What Does an Audit Exemption for Small Companies Mean?
Being exempted from statutory audit means that a small business will not be required to present audited financial statements to ACRA. The purpose behind this amendment is to relieve these small entities from having to pay audit fees, considering they have a limited budget and that their market reach is not large enough to affect the transparency and credibility of the Singaporean business environment.
What is the Definition of a Small Company Now?
According to the 2014 Act, an entity will be considered a small company if it meets at least 2 of the following requirements:
- The business total annual revenue amounts to less than SGD10,000,000.
- The business total assets are less than SGD10,000,000.
- The business employs less than 50 people.
On the other hand, if a small company is part of a group of small companies, it must comply with these two additional requirements:
- The individual company must qualify as a small business, based on the criteria outlined above.
- The group itself must qualify as a small group. This means that the group as a whole (its consolidated financial statements) must meet 2 of the 3 criteria described above.
When Do the Amendments Take Full Effect?
According to ACRA’s two-phase implementation schedule, Section 128 and 184 covering the new definition of a small company and audit exemptions applies to financial years beginning from 1 July 2015 onwards.
How Does a Small Company Account for Its Total Assets or Total Revenues?
A company’s total assets and total revenues must be recorded in compliance with ACRA’s fiscal reporting regulations. For this reason, even though small companies are exempted from filing audited financial statements, they are still obligated to maintain organized and accurate financial records that allow them to present accurate tax reports. This means that a small business may still be subject to penalties if it is found that its financial statements are inaccurate due to a lack of adequately organized financial records.
How Does a Small Company Account for Its Total Employees?
A company’s total employees result from the sum of all its adequately compensated full-time active staff. Considering the regulation applies for financial reports issued from 1 July 2015, and forward, the number of employees that must be considered to determine if a company qualifies for a small company audit exemption should be based on the number of active employees from that date and forward.