Financial Reporting

ISCA Issues FRG 5 Accounting For Refundable Investment Credit (RIC)

To address the potential impact of BEPS 2.0, the RIC scheme was introduced in 2024 to encourage companies to make significant new or expanded investments in substantive economic activities in Singapore in key economic sectors and new growth areas.

To aid entities in accounting for the RIC, FRG 5 was developed and issued after a one-month public consultation. FRG 5 outlines the background of the RIC scheme and key accounting considerations under SFRS(I)s for entities. Illustrative examples are included to aid in the understanding of the principles being applied.

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ISCA Comments On IASB's ED Provisions - Targeted Improvements (Proposed Amendments To IAS 37)

To address stakeholders' feedback on challenges in applying certain aspects of IAS 37, the ED proposes targeted improvements to the following areas:

- Present obligation recognition criterion
- Costs to include in measuring a provision
- Rate used to 'discount' a provision

We are generally supportive of the proposals and have highlighted areas where further clarifications or enhancements could be made.

It should be noted that the proposals, once implemented, could result in significant changes to the current practice of measuring a provision, particularly for entities with significant long-term asset decommissioning obligations or are subject to levies and similar government-imposed charges.

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Pillar Two Legislation: Multinational Enterprise (Minimum Tax) Act and its Accounting Implications

As announced in Singapore Budget 2024, the Multinational Enterprise (Minimum Tax) Act and its subsidiary legislation, Multinational Enterprise (Minimum Tax) Regulations 2024 (“Pillar Two legislation”) are effective for financial years starting on or after 1 January 2025. Both tax legislation is applicable to constituent entities that are members of a Multinational Enterprise (“MNE”) Group that has annual revenue of EUR 750 million or more in the consolidated financial statements of the ultimate parent entity in at least two of the last four years.

As Singapore had enacted Pillar Two legislation before 31 December 2024, impacted MNE entities are required to comply with the applicable requirements in SFRS(I) 1-12 and FRS 12 for financial reporting periods ended 31 December 2024.

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ISCA Comments on IASB’s ED Equity Method of Accounting IAS 28 Investments in Associates and Joint Ventures (revised 202x)

The ED aims to reduce diversity in practice by answering application questions about the equity method of accounting and to improve the understandability of IAS 28. The proposed amendments are intended to clarify and amend the requirements of IAS 28, with new disclosure requirements to enhance the information companies provide about equity accounted investments. In addition, a reordering of the requirements is being proposed to improve the understandability of IAS 28.

We are supportive of the approach taken by IASB to address specific application questions which would provide solutions to long-standing application difficulties, reduce diversity in practice and lead to more comparable and understandable information for users. However, we note that further clarifications and guidance might be required to ensure consistent application of the proposed amendments. For example, the proposed definition of the cost of associate or joint venture is silent on the accounting of expenses directly attributable to the acquisition of the investment. Hence, we recommend IASB to provide clarity on whether such expenses should be included in the cost of associate or joint venture.

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ISCA Issues FRB 11 Accounting For Carbon Credits: From the perspective of a buyer / holder

Since Singapore’s implementation of the carbon tax regime, entities are increasingly looking to using carbon credits to reduce carbon emissions and/or meet sustainability targets. Questions have emerged regarding the definition of carbon credits and the appropriate accounting treatment and reporting of carbon credits.

ISCA, through its Financial Reporting Committee (FRC), has issued FRB 11 to aid entities in understanding what carbon credits are, and the key considerations that the entity should have in selecting the most appropriate accounting standard under SFRS(I) to apply for voluntary purchases of carbon credits.

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ISCA Issues Technical Bulletin 1 Addressing Climate-Related Risks in Financial Statements and Audits of such Financial Statements (TB 1)

Arising from the strong focus on climate globally and in Singapore, TB 1 provides guidance on climate-related risk considerations in financial reporting and audits of financial statements. It also includes an example of a Singapore entity in the transportation industry to illustrate how climate-related risks could affect how the principles of the financial reporting standards and auditing standards are applied.

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