A Comprehensive Guide to Consolidated & Audited Financial Statements in Singapore
In Singapore’s corporate landscape, businesses with multiple subsidiaries or a group structure are required to present a clear and accurate picture of their financial health through consolidated and audited financial statements. These statements not only ensure compliance with the Singapore Financial Reporting Standards (SFRS) but also foster transparency and investor confidence. In this article, we delve into what consolidated and audited financial statements entail, the legal and regulatory framework in Singapore, and why working with a reliable audit firm like https://www.auditservices.sg can make a significant difference.
What Are Consolidated Financial Statements?
Consolidated financial statements are financial reports that present the assets, liabilities, equity, income, expenses, and cash flows of a parent company and its subsidiaries as one single entity. Instead of providing individual reports for each company, consolidation allows stakeholders to assess the financial performance of the entire group as if it were one organisation.
This process involves:
- Combining the financials of the parent and subsidiaries
- Eliminating intercompany transactions and balances
- Adjusting for non-controlling interests
- Applying uniform accounting policies across entities
In Singapore, the preparation of consolidated financial statements is governed by SFRS 110 – Consolidated Financial Statements, which outlines when and how entities should consolidate.
Who Needs to Prepare Consolidated Financial Statements in Singapore?
Under the Singapore Companies Act (Cap. 50) and SFRS 110, a parent company must prepare consolidated financial statements unless it meets the exemption criteria. Typically, a parent is required to consolidate if it:
- Has control over one or more subsidiaries
- Derives benefits from its relationship with subsidiaries
- Is not itself a wholly-owned or partially-owned subsidiary that meets the exemption under SFRS 110
Companies that operate as investment holding companies, real estate groups, or multinational enterprises often fall under this requirement.
The Importance of Auditing Consolidated Financial Statements
Once consolidated financial statements are prepared, they are generally subject to statutory audit if the group or its entities meet any of the following criteria:
- Annual revenue exceeds S$10 million
- Total assets exceed S$10 million
- The group employs more than 50 employees
Auditing these consolidated statements ensures:
- Compliance with financial reporting standards
- Accuracy in financial presentation
- Reliability for stakeholders such as investors, creditors, and regulators
- Risk mitigation through detection of errors or fraud
Key Elements in Auditing Consolidated Financial Statements
Auditing consolidated financial statements in Singapore involves several complex steps. A professional auditor will focus on the following aspects:
1. Group Structure Assessment
Understanding the nature of the group, subsidiaries, associates, and joint ventures is crucial to determine the scope of consolidation.
2. Evaluation of Component Entities
Auditors assess whether component entities need to be audited separately or reviewed for consolidation. If overseas subsidiaries exist, coordination with foreign auditors may be required.
3. Review of Intercompany Transactions
Auditors ensure that intra-group sales, loans, receivables, and payables are correctly eliminated to prevent double-counting or misrepresentation.
4. Application of Uniform Accounting Policies
Uniformity across all entities is key. Auditors review if subsidiaries have applied accounting policies consistent with the parent entity.
5. Assessment of Non-Controlling Interests (NCI)
Proper calculation and presentation of NCI ensure fair disclosure of interests held by third parties in subsidiary entities.
Benefits of Consolidated & Audited Financial Statements
The preparation and audit of consolidated financial statements offer several strategic benefits:
✅ Holistic Financial Overview
They provide a complete picture of the financial health of the group, helping management and investors make better decisions.
✅ Compliance with Regulations
Meeting statutory requirements ensures the group avoids penalties and is able to access funding or enter into partnerships without legal hiccups.
✅ Improved Transparency and Trust
Audited consolidated reports build trust with investors, lenders, and regulatory bodies, reinforcing credibility in the marketplace.
✅ Support for Strategic Decisions
Group-level financial insights help identify underperforming subsidiaries, optimize tax planning, and support mergers or acquisitions.
When Are Consolidated Statements Not Required?
According to SFRS 110, a parent company may be exempted from preparing consolidated statements if:
- It is itself a wholly-owned or partially-owned subsidiary of another entity
- Its parent prepares consolidated financial statements in accordance with SFRS or equivalent standards
- The entity is not publicly traded and is not in the process of issuing equity or debt instruments
Even if consolidation is not mandatory, voluntary consolidation and audit can still be a good business practice, particularly when seeking funding or engaging international partners.
Choosing the Right Audit Firm for Group Consolidation
Conducting a group audit and consolidating financial statements requires a deep understanding of Singapore’s accounting framework and audit standards like SSA 600 (Special Considerations—Audits of Group Financial Statements).
At https://www.auditservices.sg, we specialise in:
- Preparing and auditing consolidated financial statements in compliance with SFRS
- Coordinating with component auditors for overseas subsidiaries
- Advising on elimination entries and non-controlling interest disclosures
- Ensuring a smooth and timely audit process for companies in various industries
Our team of experienced auditors has worked with SMEs, holding companies, and international groups across sectors like retail, manufacturing, construction, and technology.
Industries That Commonly Require Consolidated Audits
Certain industries frequently operate under group structures and are thus more likely to require consolidated financial statements and audits, including:
- Construction & Engineering Firms with multiple project SPVs
- Retail Chains operating under different corporate entities
- Investment Holdings with diverse portfolios
- Real Estate Developers managing properties through subsidiaries
- Tech Startups expanding rapidly with regional branches
Conclusion
In an era of growing corporate complexity and tighter regulatory oversight, consolidated and audited financial statements are essential tools for maintaining transparency, ensuring compliance, and building investor confidence. For businesses operating under a group structure, these reports go beyond fulfilling statutory obligations—they offer valuable insights into financial performance at a macro level.
Partnering with an experienced audit firm like https://www.auditservices.sg ensures that your consolidation is done accurately, your statements comply with SFRS, and your group audit is conducted efficiently.