ACCOUNTANTS FOR BUSINESS IMPACT OF NEW/ REVISED …...ACCOUNTANTS FOR BUSINESS: IMPACT OF NEW/REVISED IFRS/FRS ON SINGAPORE LISTED COMPANIES KEY FINDINGS 3 Key Findings 1. Overall,

IMPACT OF NEW/ REVISED IFRS / FRS ON SINGAPORE LISTED COMPANIES A JOINT REPORT BY ACCA AND DELOITTE SINGAPORE

ACCOUNTANTS FOR BUSINESS

ACKNOWLEDGEMENTS ACCA and Deloitte Singapore thank the respondents of this online survey for providing their responses. CONFIDENTIALITY This survey was conducted on a confidential basis. Accordingly, we do not provide information on individual survey responses.

The information contained in this publication is provided for general purposes only. While every effort has been made to ensure that the information is accurate and up to date at the time of going to press, ACCA and Deloitte Singapore accept no responsibility for any loss which may arise from information contained in this publication. No part of this publication may be reproduced, in any format, without prior written permission of ACCA and/or Deloitte. © ACCA, Deloitte February 2012

CONTACT

For any queries regarding the content of this report, please contact:

ACCA SingaporeMichelle Seth-Langbein Head, Marketing Contact number: +65 6637 8178Email address: [email protected]

ABOUT ACCA

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Content

Purpose of Survey ...................................................................................................................... 2 Key Findings ............................................................................................................................. 3 Terms of Reference .................................................................................................................... 4 Findings: Overall Readiness ............................................................................................................... 5 Impact - IFRS/FRS .........................................................................................................6-10 Impact - Sustainability Reporting ...................................................................................11-13 Profile of Respondents ........................................................................................................14-16

Summary & Conclusion ........................................................................................................... 17

ACCA and Deloitte Singapore strongly support the establishment and operation of a global set of reporting standards. To be realistic, however, we are aware that we can approach our destination only with incremental advances. Furthermore, we realize that the continued growth and acceptance of the International Financial Reporting Standards (IFRS) across the world will depend on how well companies are able to understand and implement the IFRS in a way that is ultimately beneficial to businesses as a whole. This survey explores issues, which when addressed, is expected to ensure that the corporate reporting environment, while being robust, remains business friendly.

In 2011, the International Accounting Standards Board (IASB) issued a number of new/revised financial reporting standards and exposure drafts which are effective as early as January 2013. With the exception of IFRS 9, the Accounting Standards Council (ASC) in Singapore has adopted the new/revised Standards issued by IASB in their entirety. In the same year, the Singapore Exchange (SGX) issued guidance on sustainability reporting encouraging all listed companies in Singapore to include environmental, social and governance issues in their annual reports.

The implementation of these pronouncements could have a significant impact on reporting entities, not only with respect to the numbers appearing in their annual reports but also on various processes, systems and resources; and perhaps even changes to their business model. These may require the re-training of staff and revamping reporting systems to capture different data; to potentially changing remuneration and other policies to avoid adverse reactions from stakeholders and unintended impacts on the results reported. Changes may also require modifications to the company’s internal reporting framework and information generated for tax purposes.

CEOs, CFOs and other executives will need to inform the market and media as to what the different numbers in the annual report mean and prepare investors and analysts for any significant changes ahead. Differences between old and new accounting policies and treatments will need to be explained with care. This is especially true in the current economic climate which anticipates slow growth and is rife with uncertainties.

The objective of this survey is to gather information on the impact of the various new/revised pronouncements on listed corporations and explore the implications of the findings. In particular, we were interested in the state of readiness of listed companies to implement these changes and their overall assessment of the impact of the required changes. Which standards are most likely to result in the greatest impacts on the annual report? What challenges do companies face in implementing these changes within their companies? What degree or types of assistance should be given to companies by regulators, standard-setters, professional accounting bodies and accounting firms to ensure smooth transition and a high degree of compliance with international standards?

Purpose of Survey

Overall, the survey shows that companies are generally lukewarm about the upcoming changes as they face various challenges within their organisations. This includes a lack of organisational motivation and budgets to implement the various changes. While this is true for the implementation of new or revised IFRS/FRS, the case is more acute for sustainability reporting. The survey feedback shows that this may partly be due to the non-mandatory framework for sustainability reporting. The main challenge pointed to concerns relating to the retraining and development of staff to fully appreciate and implement these changes.

As the economy is entering into a phase of slower growth in 2012/13 and volume of transactions decrease, downtime is likely to increase. Businesses may take this as an opportunity to engage their accounting and finance staff in both internal and external courses to develop their understanding and appropriate skills in implementing the relevant IFRS/FRS and sustainability reporting. Training providers must also endeavor to offer training which are more specifically oriented towards these new standards and place a special emphasis on ensuring that trainees are genuinely able to understand and apply these increasingly sophisticated new/revised pronouncements. Based on feedback in this survey, it appears that accounting firms and professional accounting bodies play critical roles in updating and assisting companies to implement these changes. With the growing interest in Integrated Reporting, the apathy towards sustainability reporting will also need to be addressed.

The survey findings suggest that businesses are likely to need assistance from accounting firms, professional accounting bodies and other experts in the following areas:

Providing or facilitating comprehensive training and development for finance and accounting staff in businesses on the IFRS/FRS and sustainability reporting

Providing updates on these pronouncements, assessing their implications and highlighting the probable impacts of these pronouncements on businesses

Engaging CEOs and key decision makers in business on issues relating to these pronouncements so as to inculcate an appreciation of the relevant reporting issues at a strategic level.

A review of the key findings follows.

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ACCOUNTANTS FOR BUSINESS:

IMPACT OF NEW/REVISED IFRS/FRS ON SINGAPORE LISTED COMPANIES

KEY FINDINGS 3

Key Findings

1. Overall, there appears to be a relatively lower level of readiness with respect to changes that may be required to IT systems, human resources, the business model or strategy as a result of the impact of changes in the pronouncements. However, companies appear better prepared in terms of changes to business and accounting processes.

None of the respondents have yet to assess IFRS 12 / FRS 112: Disclosure of Interests in Other Entities although the standard was considered to have a significant impact to the Group.

2. Less than half (41%) of the respondents agreed with all the changes or expected changes required by the IFRS/FRS. The majority were neutral i.e. they neither agreed nor disagreed with the changes. It is possible that this is because they still have not reviewed completely or digested the implications of the various requirements.

3. Out of the new/revised standards, the majority of respondents expected significant impact from IFRS 9: Financial Instruments, IFRS 10 / FRS 110: Consolidated Financial Statements and IFRS 13 / FRS 113: Fair Value Measurements. IFRS 9 was considered to have the most impact on the financial statements/annual report, followed by IFRS 10 / FRS 110 and IFRS 13 / FRS 113.

4. More specifically, the main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities. Interestingly, the majority were neutral regarding hedge accounting. With regards to the preparation of consolidated financial statements, respondents generally agreed that the revised definition of control as set out in IFRS 10 / FRS 110 would not change their Group structures. The majority of respondents also generally do not expect the accounting treatment for investments in joint ventures to change in their Group’s financial statements with the adoption of IFRS 11 / FRS 111. (However, it has been noted above that IFRS 11 / FRS 111 has not yet been assessed by the majority of respondents in its entirety. Hence, a more complete assessment may be required.) 5. The majority of respondents relied to a significant extent on their external auditors and professional accounting bodies to provide them with updates on the IFRS/FRS. When it came to the actual implementation of the changes

or assessing the impact, one third of respondents, perhaps not unexpectedly, relied on the Big Four accounting firms and other external specialists. A significant proportion (28%) also relied on internal technical experts. A similar proportion (28%), however, said that they had no concrete plans and preferred to defer their assessments until the situation became clearer. Considering that the majority of companies responding were from the SGX Mainboard, this gives us some cause for reflection.

6. Practically all changes arising from new IFRS/FRS were expected to incur less than S$1 million in terms of their costs associated with changes in each of the following areas: processes, IT systems, human resources, the business model or strategy. For sustainability reporting, none of the respondents allocated any budget or expect to incur any incremental costs for its implementation.

7. Respondents identified training and development of staff as the main challenge to implementing the various changes arising from new/revised IFRS/FRS and sustainability reporting. A lack of an adequate budget (allocated time, costs and manpower resources) was also cited. This was probably related to a lack of ‘management buy-in’ and organisational motivation as perceived by some respondents. For sustainability reporting, the fact that it was not mandatory was cited as one of the reasons for the lack of motivation. 8. Generally, respondents assessed the impact of the Guide to Sustainability Reporting for Listed Companies on the annual report as low. The majority of respondents (63%) do not expect to include the consideration and performance of environmental, social and governance issues in their 2011/12 annual reports. The main reason for the less than enthusiastic take-up appears to be a lack of understanding or familiarity with sustainability reporting. A significant percentage felt that it was not relevant to their Group.

Terms of Reference

OBJECTIVE & SCOPE OF SURVEY

The objective of the survey was to gather information on the impact of the following pronouncements on listed corporations.

1. IFRS 9: Financial Instruments2. IFRS 10 / FRS 110: Consolidated Financial Statements3. IFRS 11 / FRS 111: Joint Arrangements4. IFRS 12 / FRS 112: Disclosure of Interests in Other Entities5. IFRS 13 / FRS 113: Fair Value Measurements6. ED on Revenue from Contracts with Customers7. ED on Leases8. Guide to Sustainability Reporting for Listed Companies (2010/11) issued by SGX.

(The Accounting Standards Council (ASC) had deliberated the adoption of IFRS 9 at its meeting in November 2009 and decided to defer its adoption in Singapore in view of further changes expected to the Standard. In December 2011, IASB deferred the mandatory effective date of IFRS 9 to annual periods beginning on or after 1 January 2015.) TERMINOLOGY

IFRS: International Financial Reporting Standard issued by the International Accounting Standards Board (IASB)

FRS: Financial Reporting Standards issued by the Accounting Standards Council (ASC).

ED: Exposure Draft on financial reporting issued by ASC/IASB. For the purposes of this report, the term IFRS/FRS will include all IFRS, FRS and EDs included in the scope above. The term pronouncements will include, additionally, the Guide to Sustainability Reporting for Listed Companies.

Integrated Reporting: Integrated Reporting refers to reporting which brings together material information about an organisation’s strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates. It provides a clear and concise representation of how an organization demonstrates stewardship and how it creates and sustains value.

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This report presents the findings of a survey conducted jointly by ACCA and Deloitte Singapore.

For more details on the pronouncements included in the Scope above and terminology, please visit these websites:

www.iasplus.com

www.iasb.org

www.asc.gov.sg

www.sgx.com

www.theiirc.org. METHODOLOGY Survey

The survey was conducted in November-December 2011 using an online questionnaire which was sent out to 570 companies listed on the Singapore Exchange (SGX).

As the respondents to the survey are allowed to pass over particular questions, the number of responses varies from question to question. The maximum number of responses received for a single question in this survey was 25. The relatively small number of respondents in this survey will have to be taken into account when interpreting the findings and extrapolating it to the whole population of listed companies.

Report

The responses were consolidated to highlight the main themes in this report and the actual survey question, where appropriate, are captioned in the relevant table/figure. As such, the referenced question numbers in this report do not necessarily run in sequence and not all questions are captioned. The report cites unattributed direct and paraphrased quotations, which respondents offered on a confidential basis, selectively, to illustrate various themes and opinions. PROFILE OF RESPONDENTS

The majority of respondents were CFOs from companies that were listed on the SGX Mainboard with annual group turnovers of less than S$500 million. A detailed analysis is given towards the end of this report.

The majority of respondents (13 out of 22) agreed (or strongly agreed) that they were ready for changes brought about by new or revised pronouncements with regards to changes in processes. These include all changes to information flows and work processes, both manual and automated, in anticipation of changes required at the effective dates of the relevant pronouncements, excluding significant overall changes to IT systems. In contrast, respondents were neutral about readiness with respect to changes in human resources. Overall, except for changes to processes, there appears to be a lower level of readiness with respect to modifications required to IT systems, human resources, the business model or strategy as a result of the impact of changes in the pronouncements. The relatively small number of respondents may also indicate an overall lower level of readiness. Companies who are on top of the changes are more likely to respond and report than those companies who may have to admit they are running behind. The majority of respondents (77%) have allocated less than 12 months to prepare for changes in the pronouncements.

Overall Readiness



OVERALL READINESS 5

Figure 2

Figure 1

Your Group is ready for the changes brought about by the new or revised Financial Reporting Standards and Sustainability Reporting, in terms of:

25

20

15

10

5

0

IT System change

Strongly disagree

Disagree

Neither agree nor disagree

Agree

Strongly agree

Human resource change

Process change Business model or strategy change

On average, how long did your Group spend or will spend in getting ready for the requirements set out in the relevant Financial Reporting Standards

and Sustainability Reporting?

More than 2 years 14% Less than 6 months

27%

1 to 2 years 9%

6 to 12 months 50%

Impact - IFRS/FRS

Less than half (41%) of the respondents agreed with all the changes or expected changes required by the IFRS/FRS. The majority were neutral i.e. they neither agreed nor disagreed with the changes. It is possible that this is because they still have not reviewed completely or digested the implications of the various requirements. IMPACT AS PERCEIVED BY RESPONDENTS

With regards to the expected impact on the Group’s financial statements/annual reports, the majority of respondents expected significant impact from IFRS 9: Financial Instruments, IFRS 10 / FRS 110: Consolidated Financial Statements and IFRS 13 / FRS 113: Fair Value Measurements. This is evidenced by the observation that these standards received the highest cumulative responses in the ‘Strongly agree’ or ‘Agree’ columns (see Table 1).

6

Figure 3

Table 1

The following Financial Reporting Standards / Exposure Drafts are expected to have significant impact to your Group financial statements / annual reports. Strongly

disagree Disagree Neither

agree nor disagree

Agree Strongly agree

Response Count

ED on Revenue from Contracts with Customers

3 2 6 7 0 18

ED on Leases 2 5 5 6 0 18 IFRS 9: Financial Instruments

0 1 5 9 3 18

IFRS 10 / FRS 110: Consolidated Financial Statements

0 0 6 12 0 18

IFRS 11 / FRS 111: Joint Arrangements

3 5 6 4 0 18

IFRS 12 / FRS 112: Disclosure of Interests in Other Entities

1 1 5 11 0 18

IFRS 13 / FRS 113: Fair Value Measurements

0 1 3 11 3 18

Agree 41%

Overall, your Group welcomes the changes as proposed or stated in the new or revised Financial Reporting Standards.

Disagree 14%

Neither agree nor disagree

45%



IMPACT - IFRS/FRS 7

Impact - IFRS/FRS

IFRS 9: Financial Instruments was considered to have the most impact on the financial statements/annual report (see Table 2), followed by IFRS 10 / FRS 110: Consolidated Financial Statements and IFRS 13 / FRS 113: Fair Value Measurements, based on the cumulative responses in the top four ranks (i.e. from ‘1’ to ‘4’). The Accounting Standards Council (ASC) has decided to defer the adoption of IFRS 9 while IFRS 10 / FRS 110 will be effective for annual periods beginning on or after 1 January 2013. Respondents have therefore IFRS 10 / FRS 110 in their immediate view while taking cognisance of the probable changes relating to IFRS 9. This explains the higher number of responses for IFRS 10 / FRS 110 in the top rank (designated ‘1’) as compared to IFRS 9, which received the highest number of responses in the next highest rank (designated ‘2’).

Interestingly, the ED on Revenue from Contracts with Customers and ED on Leases were expected to have only a moderate impact on the financial statements/annual report. This may be partly due to the fact that the final form of the corresponding standards have not been finalised and the full impact may therefore be difficult to ascertain at the date of this survey.

Rank the following Financial Reporting Standards / Exposure Draft (from 1 to 8; 1 - Most impact; 8 - Least impact) that have the most to least impact on your financial statements / annual reports. 1 2 3 4 5 6 7 8 Response

Count

ED on Revenue Contracts with Customers

2 1 3 2 3 1 1 4 17

ED on Leases 2 1 1 4 2 3 1 2 16 IFRS 9: Financial Instruments

1 9 4 1 0 0 0 1 16

IFRS 10 / FRS 110: Consolidated Financial Statements

6 0 2 3 1 3 2 0 17


1 1 1 1 3 4 3 3 17

IFRS 12 / FRS 112: Disclosure of Interests in Other Entities

0 0 2 5 4 3 1 1 16

IFRS 13 / FRS 113: Fair Value Measurements

3 3 3 0 1 2 5 0 17

Table 2

Impact - IFRS/FRS

FINANCIAL INSTRUMENTS

The main impact on financial instruments was seen to relate to impairment assessment, followed by the classification of assets and liabilities. Interestingly, the majority were neutral regarding hedge accounting. (see Table 3) CONSOLIDATED FINANCIAL STATEMENTS Except for one respondent (out of 16), all other respondents assessed that with the revised definition of control set out in IFRS 10 / FRS 110 Consolidated Financial Statements, they do NOT expect the Group structure to change as a result (for example, a situation where entities may need to be recognised/derecognised as subsidiaries/associates/joint arrangements.)

The majority of respondents (75%) assessed that with the adoption of IFRS 11 / FRS 111 Joint Arrangements, they do NOT expect the accounting treatment for investments in joint ventures to change in their Group’s financial statements (for example, a situation where the accounting treatment may be changed from proportionate shares of assets, liabilities, expenses and income to equity accounting; or vice versa). IMPLEMENTATION GUIDANCE AND SUPPORT

The majority of respondents relied considerably more on their external auditors and professional accounting bodies to provide them with updates on the IFRS/FRS, than getting direct updates from standard setters or internal technical experts. This observation is based on the cumulative responses in the top three ratings (i.e. from ‘1’ to ‘3’ in Table 4).

8

The following sections of IFRS 9: Financial Instruments are assessed to have significant impact on your Group financial statements: Strongly

disagree Disagree Neither

agree or disagree

Agree Strongly agree

Impact yet to be assessed

Response Count

Measurement and classification of financial assets

2 0 5 5 3 1 16

Measurement and classification of financial liabilities

0 0 6 6 2 2 16

ED on impairment

0 1 3 7 2 3 16

ED on hedging 0 2 7 2 2 3 16 ED on offsetting financial assets and financial liabilities

0 0 6 6 1 3 16

Table 3

To what extent do you depend on the following sources to provide you with updates on IFRS/FRS? (Please rate from 1 to 5; 1 - Significant extent; 5 - No relevance.) 1 2 3 4 5 Response

Count

Updates from standard setters (IASB/ASC)

4 3 5 4 2 18

Updates from external auditors

9 5 1 1 2 18

Updates from professional accounting bodies (ACCA,CPA Australia, ICAEW, ICPAS or others)

7 4 5 1 1 18

Internal technical expert 5 4 2 2 5 18

Table 4



IMPACT - IFRS/FRS 9

Impact - IFRS/FRS

In terms of assessing the impact of the changes and actual implementation, one third of respondents relied on the Big Four accounting firms and other external specialists. A slightly lower but still significant proportion (28%) relied on internal technical experts.

A similar proportion (28%), however, said that they have no concrete plans and prefer to defer their assessments until the situation becomes clearer. Considering that the majority of companies responding were from the SGX Mainboard, this gives us some cause for reflection. There could possibly be a combination of factors resulting in this attitude, some of which are reflected in the Challenges section below. The two main standards that respondents have started to assess the impact on are IFRS 10 / FRS 110: Consolidated Financial Statements and IFRS 13 / FRS 113: Fair Value Measurements. It is interesting to note that none of the respondents have started to assess IFRS 12 / FRS 112: Disclosure of Interests in Other Entities, although it was considered to have a significant impact to the Group (see Table 1, above). The majority have not yet begun assessing IFRS 11 / FRS 111: Joint Arrangements. IMPLEMENTATION COSTS

The expected cost of implementing the changes brought about by the IFRS/FRS were expected to be less than S$1 million for each identified area of impact (see Table 5). None of the respondents expected to incur more than S$1million for each identified area.

Figure 4

Figure 5

Less than S$ 1million (Number of responses)

IT System change 6 Human resource change 7 Process change 7

Business model or strategy change 6

Table 5

IFRS 9: Financial Instruments

How does your Group intend to implement the changes or assess the impact as set out in the new or revised Financial Reporting Standards?

Others11%

Use of internal technical experts

28%

Wait and see, no concrete plans as yet

28%

To engage external specialists (e.g.

Big-4. consulting firm) 33%

Please indicate which of the following Financial Reporting Standards has your Group started to assess the impact on the financial statements:

(please select all that apply):80%

70%

60%

50%

40%

30%

20%

10%

0%IFRS 10 / FRS 110:

Consolidated Financial Statements


IFRS 12 / FRS 112: Disclosure of Interests in Other

Entities

IFRS 13 / FRS 113:Fair Value

Measurements

Per

cent

Res

pons

e

Impact - IFRS/FRS

CHALLENGES – IFRS/FRS

The main challenge to implementing the various changes arising from new/revised IFRS/FRS related to the training and development of staff. A lack of an adequate budget (allocated time, costs and manpower resources) was also cited. This was probably related to a lack of ‘management buy-in’ perceived by some respondents. Several respondents, included in ‘Others’, expressed concerns over processes relating to the fair valuation of unquoted investments. Some were concerned about the standards not being sufficiently specific or localised. The image to the right shows the magnitude of the responses relative to the various concerns (as included in Figure 6, above); with the size of the font being proportionate to the degree of concern.

10

Figure 6

Figure 7

Others, 20%

Staff knowledge & Training 32%

Management Buy-in, 10%

Time & Costs, 18%System & Processes,

10% Manpower Resources,

10%

Impact - Sustainability Reporting

IMPACT ON FINANCIAL STATEMENTS/ANNUAL REPORT

No costs are expected to be incurred (or have been allocated) for any implementation of sustainability reporting. When respondents were asked to rank the pronouncements in terms of their perceived impact on the financial statements/annual report, the Guide to Sustainability Reporting for Listed Companies and IFRS 11 / FRS 111: Joint Arrangements were identified to have the least impact. In both cases, the highest number of responses was received in the lower half of the ranking i.e. from ranks ‘5’ to ‘8’. The table on the right shows the responses to the implementation of sustainability reporting. Furthermore, the majority of respondents (63%) do NOT expect to include the consideration and evaluation of relevant environmental, social and governance issues in their 2011/2012 annual reports. Nevertheless, a significant 37% responded that they will be including the consideration and performance of environmental, social and governance issues in the 2011/2012 annual reports.



IMPACT - SUSTAINABILITY REPORTING 11

Rank the following (from 1 to 8; 1 - Most impact; 8 - Least impact) that have the most to least impact on your financial statements / annual reports. Answer Options 1 2 3 4 5 6 7 8 Response

Count

Guide to Sustainability Reporting for Listed Companies

1 0 1 1 3 1 3 6 16

Table 6

Figure 8

Will your Group include the consideration and performance of environmental, social and governance issues in the 2011/2012 annual

report?

No 63%

Yes 37%


The main reason for the less than enthusiastic take-up appears to be a lack of understanding and availability of in-house expertise in the area of sustainability reporting. Other reasons cited by respondents include the perception that certain aspects of sustainability reporting are not relevant to their reporting entities, the fact that sustainability reporting is not compulsory, and the belief that costs in reporting outweigh any benefits such reporting will bring. CHALLENGES – SUSTAINABILITY REPORTING

The main challenge to implementing sustainability reporting, according to the respondents to the survey, is the lack of staff knowledge and training to develop the necessary expertise. Staff resources, time and costs allocated to sustainability reporting were also considered lacking. Respondents acknowledged that there was no push within the organisation to embark on sustainability reporting as it is not mandatory.

Figure 9

Figure 10

12

Hard to quantify the impact, 5%

Your Group is not planning to include sustainability reporting in the 2011/2012 annual report because

90%

80%

70 %

60%

50%

40%

30%

20%

10%

0%

Res

pons

e Pe

rcen

t

sustainability reporting is voluntary

certain areas, such as social and

environmental issues are not relevant to our

Group

the costs required to report on

sustainability issues outweigh the

benefits

our Group currently has limited expertise

in this area of reporting

our Group is in the process of developing a system to track and collate information for sustainability reporting and implementation is

not expected to be ready by 2012

others (please specify)

Others, 17%

Staff Knowledge & Training, 24%

Manpower Resources, 20%

Time & Costs, 17%

Lack of motivation (Not compulsory),

17%

Figure 11


The image to the right shows the magnitude of the responses relative to the various concerns (as included in Figure 10, above); with the size of the font being proportionate to the degree of concern.



IMPACT - SUSTAINABILITY REPORTING 13

Profile of Respondents

The majority of respondents were CFOs from mainboard listed corporations with group annual turnover of less than S$500 million.

(a) Job role

The respondents included 16 CFOs (or Financial Controllers) and 9 Finance Mangers (and Accountants) of listed corporations. (b) Market

Most of the respondents (88%) were from the SGX Mainboard. Specifically 20 were from SGX Mainboard (primary listing) and 2 from SGX Mainboard (secondary listing). 3 respondents were from the Catalist.

Figure 12

Figure 13

14

What is your role in your listed Company?

Finance Manager / Accountant 36%

CFO / Financial Controller

64%

Select the market which your company is listed on:

SGX Mainboard (secondary listing)

8%

Catalist 12%

SGX Mainboard (primary listing)

80%


(c) Sector

Most of the respondents were from the Finance and Services Sectors.

Figure 14

Table 7

Included below is the breakdown of the number of respondents from the various sectors:

Finance 7 Services 5 Manufacturing 4 Construction 4 Others 5



PROFILE OF RESPONDENTS 15

Transport/Storage/Communications

8%

Select the sector in which your listed company is operating in:

Agriculture 4%

Construction 16%

Services

20%

Finance 28%

Manufacturing 16%

Properties 4% Multi-Industry 4%


(d) Annual Turnover

The majority of the respondents were from listed corporations with group annual turnover of less than S$500 million.

Figure 15

16

Between S$500million and less than

S$1billion 8%

On average, what has been your Group’s annual turnover for the past 3 years?

Less than S$50million 28%

Between S$100million and less then S$500million

24% Between S$50million

and less than S$100million

40%

Summary & Conclusion

Overall Readiness

Overall, except for changes to processes, there appears to be a relatively lower level of readiness with respect to modifications that may be required to IT systems, human resources, the business model or strategy as a result of the impact of changes in the pronouncements. It would appear that accounting and other processes would be the immediate concern for most finance departments as they can be more easily and quickly modified. More strategic modifications relating to strategic management information systems and sensitive human resource decisions have been postponed or have been perceived to be not immediately required.

Less than half of the respondents agreed with all the changes or expected changes required by the IFRS/FRS. The majority were neutral i.e. they neither agreed nor disagreed with the changes. It is possible that this is because they still have not reviewed completely or digested the implications of the various requirements.

Impact on Financial Statements

The majority of respondents expected significant impact from IFRS 9: Financial Instruments, IFRS 10 / FRS 110: Consolidated Financial Statements and IFRS 13 / FRS 113: Fair Value Measurements. IFRS 9 was considered to have the most impact on the financial statements /annual report (see below), followed by IFRS 10 / FRS 110 and IFRS 13/ FRS 113. The main impact on financial instruments was seen to arise from issues relating to impairment assessments, followed by the classification of assets and liabilities. Interestingly, the majority were neutral regarding hedge accounting.

Impact on Costs

Practically all changes arising from new IFRS/FRS were expected to incur less than S$1 million in terms of their costs associated with changes in each of the following areas: processes, IT systems, human resources, the business model or strategy. No costs are expected to be incurred (or have been allocated) for any implementation of sustainability reporting.

Sustainability Reporting

Generally, respondents assessed the impact of the Guide to Sustainability Reporting for Listed Companies on the annual report as low. The majority of respondents do not expect to include the consideration and evaluation of relevant environmental, social and governance issues in their 2011/2012 annual reports. The main reason for the less than enthusiastic take-up appears to be a lack of understanding or familiarity with sustainability reporting. A significant percentage felt that it was not relevant to their Group. Nevertheless, it is heartening to note that a significant 37% of respondents said that they will be including the consideration and performance of environmental, social and governance issues in their 2011/2012 annual reports.

Challenges

The main challenge to implementing the various changes arising from new/revised IFRS/FRS and sustainability reporting related to the training and development of staff. A lack of an adequate budget (allocated time, costs and manpower resources) was also cited. This was probably related to a lack of ‘management buy-in’ and organisational motivation perceived by some respondents.

Several respondents expressed concerns over processes relating to the fair valuation of unquoted investments. Some were concerned about the standards not being sufficiently specific or localised. For sustainability reporting, the fact that it was not mandatory was cited as one of the reasons for the lack of motivation in its implementation.

Assistance and Support

The majority of respondents relied to a significant extent on their external auditors and professional accounting bodies to provide them with updates on the IFRS/FRS. When it came to the actual implementation of the changes or assessing the impact, one third of respondents relied on the Big Four accounting firms and other external specialists. Nevertheless, a significant proportion also relied on internal technical experts. A significant proportion, just less than a third, however, said that they had no concrete plans and preferred to defer their assessments until the situation became clearer.

Conclusion

The above findings indicate that there could be significant areas where businesses may require direction and assistance from accounting firms, professional accounting bodies and other experts to implement new/revised IFRS/FRS and sustainability reporting. They would also need adequate time to understand and interpret the pronouncements in a meaningful and comprehensive manner.



SUMMARY & CONCLUSION 17

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Documents

ACCOUNTANTS FOR BUSINESS IMPACT OF NEW/ REVISED …...ACCOUNTANTS FOR BUSINESS: IMPACT OF NEW/REVISED IFRS/FRS ON SINGAPORE LISTED COMPANIES KEY FINDINGS 3 Key Findings 1. Overall,