Illustrative Financial Statements - Deloitte

[Pages:252]Illustrative Financial Statements 2020

GAAP Singapore Ltd and its subsidiaries

(Registration No. 200001999A)

Directors' statement and financial statements

Year ended December 31, 2020

Preface

Scope

This publication provides a set of sample financial statements of a fictitious group of companies. GAAP Singapore Ltd is a company incorporated in Singapore and its shares are listed on the Main Board of the Singapore Exchange Securities Trading Limited ("SGX-ST"). The names of people and entities included in this publication are fictitious. Any resemblance to a person or entity is purely coincidental.

GAAP Singapore Ltd presented its consolidated financial statements in accordance with Singapore Financial Reporting Standards (International) ("SFRS(I)").

Effective date

The illustrative financial statements include the disclosures required by the Singapore Companies Act, SGX-ST Listing Manual, and SFRS(I)s and SFRS(I) Interpretations ("SFRS(I) INTs") that are issued as at November 30, 2020.

Standards issued, but not yet effective, as at December 31, 2020 have not been early adopted in these illustrative financial statements except for the amendment to SFRS(I) 16 which has been applied by the group in advance of its effective date.

Illustrative in nature

The sample disclosures in this set of illustrative financial statements should not be considered to be the only acceptable form of presentation. The form and content of each reporting entity's financial statements are the responsibility of the entity's directors and management, and other forms of presentation which are equally acceptable may be preferred and adopted, provided they include the specific disclosures prescribed in the Singapore Companies Act, SGX-ST Listing Manual, SFRS(I)s and SFRS(I) INTs.

For the purposes of presenting the statement of profit or loss and other comprehensive income, and statement of cash flows, the alternatives allowed under SFRS(I)s for those statements have been illustrated. Preparers of financial statements should select the alternatives most appropriate to their circumstances and apply the chosen presentation method consistently.

Note that in this set of illustrative financial statements, line items that are not applicable to GAAP Singapore Ltd have been included so as to illustrate items that are commonly encountered in practice. This does not mean that all possible disclosures have been illustrated, nor should it be taken to mean that entities are required to display such line items in practice.

The illustrative financial statements contain general information and are not intended to be a substitute for reading the legislation or accounting standards themselves, or for professional judgement as to adequacy of disclosures and fairness of presentation. They do not encompass all possible disclosures required by the Singapore Companies Act, SGX-ST Listing Manual, SFRS(I)s and SFRS(I) INTs. Depending on the circumstances, further specific information may be required in order to ensure fair presentation and compliance with laws and accounting standards and securities exchange regulations in Singapore.

Illustrative Financial Statements 2020

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Preface

Guidance notes

Direct references to the source of disclosure requirements are included in the reference column on each page of the illustrative financial statements. Guidance notes are provided where additional matters may need to be considered in relation to a particular disclosure. These notes are inserted within the relevant section or note.

The illustrative financial statements are prepared by the Professional Practice Department of Deloitte & Touche LLP in Singapore ("Deloitte Singapore") for the use of clients and staff and are written in general terms. Accordingly, we recommend that readers seek appropriate professional advice regarding the application of its contents to their specific situations and circumstances. The illustrative financial statements should not be relied on as a substitute for such professional advice. Partners and professional staff of Deloitte Singapore would be pleased to advise you. While all reasonable care has been taken in the preparation of these illustrative financial statements, Deloitte Singapore accepts no responsibility for any errors it might contain, whether caused by negligence or otherwise, or for any loss, howsoever caused, incurred by any person as a result of relying on it.

Abbreviations used

References are made in this publication to the Singapore Companies Act, Singapore accounting pronouncements, guidelines and SGX-ST listing rules that require a particular disclosure or accounting treatment. The abbreviations used to identify the source of authority are as follows:

Alt App CA CCG IAS IFRIC

IFRS

LM

RAP Sch SFRS(I)

SFRS(I) INT

SSA

Alternative Appendix Singapore Companies Act, Chapter 50 Code of Corporate Governance International Accounting Standards Interpretation of International Financial Reporting Standards International Financial Reporting Standards Singapore Exchange Securities Trading (SGX-ST) Listing Manual Recommended Accounting Practice Schedule Singapore Financial Reporting Standards (International) Interpretation of Singapore Financial Reporting Standards (International) Singapore Standards on Auditing

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Summary of key changes from the 2019 version of the Illustrative Financial Statements

This section covers:

an overview of new and revised SFRS(I)s that are mandatorily effective for the year ending December 31, 2020; and

an overview of new and revised SFRS(I)s that are not yet mandatorily effective but allow early application for the year ending December 31, 2020.

For this purpose, the discussion below reflects a cut-off date of November 30, 2020. The potential impact of the application of any new and revised SFRS(I)s and SFRS(I) INTs issued after November 30, 2020 but before the financial statements are issued should also be considered and disclosed.

Mandatorily effective for the year ending December 31, 2020

The following is the list of new and revised SFRS(I)s that are mandatorily effective for the annual period beginning on or after January 1, 2020.

Amendments to SFRS(I) 1-1 Presentation of Financial Statements and SFRS(I) 1-8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Material

Amendments to SFRS(I) 3 Business Combinations: Definition of a Business

Amendments to References to the Conceptual Framework in SFRS(I) Standards

Amendments to SFRS(I) 9 Financial Instruments, SFRS(I) 1-39 Financial Instruments: Recognition and Measurement and SFRS(I) 7 Financial Instruments : Disclosures: Interest Rate Benchmark Reform

Amendments to SFRS(I) 1-1 Presentation of Financial Statements and SFRS(I) 1-8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Material

The amendments make the definition of material in SFRS(I) 1-1 easier to understand and are not intended to alter the underlying concept of materiality in SFRS(I) Standards. The concept of 'obscuring' material information with immaterial information has been included as part of the new definition.

The threshold for materiality influencing users has been changed from 'could influence' to 'could reasonably be expected to influence'.

The definition of material in SFRS(I) 1-8 has been replaced by a reference to the definition of material in SFRS(I) 11. In addition, the ASC amended other Standards and the Conceptual Framework that contain a definition of 'material' or refer to the term `material' to ensure consistency.

Amendments to SFRS(I) 3 Business Combinations: Definition of a Business

The amendments clarify that while businesses usually have outputs, outputs are not required for an integrated set of activities and assets to qualify as a business. To be considered a business an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.

The amendments remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs. The amendments also introduce additional guidance that helps to determine whether a substantive process has been acquired.

The amendments introduce an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. Under the optional concentration test, the acquired set of activities and assets is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets.

The amendments are applied prospectively to all business combinations and asset acquisitions for which the acquisition date is on or after January 1, 2020.

Illustrative Financial Statements 2020

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Summary of key changes from the 2019 version of the Illustrative Financial Statements

Amendments to References to the Conceptual Framework in SFRS(I) Standards

The amendments include consequential amendments to affected Standards so that they refer to the new Framework. Not all amendments, however, update those pronouncements with regard to references to and quotes from the Framework so that they refer to the revised Conceptual Framework. Some pronouncements are only updated to indicate which version of the Framework they are referencing to (the IASC Framework adopted by the IASB in 2001, the IASB Framework of 2010, or the Conceptual Framework issued together with the first volume of SFRS(I) Standards).

The Standards which are amended are SFRS(I) 2, SFRS(I) 3, SFRS(I) 6, SFRS(I) 14, SFRS(I) 1-1, SFRS(I) 1-8, SFRS(I) 1-34, SFRS(I) 1-37, SFRS(I) 1-38, SFRS(I) INT 12, SFRS(I) INT 19, SFRS(I) INT 20, SFRS(I) INT 22, and SFRS(I) INT 1-32.

Amendments to SFRS(I) 9 Financial Instruments, SFRS(I) 1-39 Financial Instruments: Recognition and Measurement and SFRS(I) 7 Financial Instruments: Disclosures: Interest Rate Benchmark Reform

The amendments to SFRS(I) 9, SFRS(I) 1-39 and SFRS(I) 7 provide certain temporary reliefs in relation to the interest rate benchmark reforms that modify specific hedge accounting requirements to allow hedge accounting to continue assuming that the interest rate benchmark on which the hedged cash flows and cash flows from the hedging instrument are based will not be altered as a result of interest rate benchmark reform.

The amendments to SFRS(I) 9 and SFRS(I) 1-39 will affect entities that apply the hedge accounting requirements of SFRS(I) 9 and SFRS(I) 1-39. The changes will mandatorily apply to all hedging relationships directly affected by the interest rate benchmark reform. The amendments are not intended to provide relief from any other consequences arising from the interest rate benchmark reform. If a hedging relationship no longer meets the requirements for hedge accounting for reasons other than those specified by the amended Standards, then discontinuation of hedge accounting is still required.

The amendments to SFRS(I) 9 and SFRS(I) 1-39 clarify the following:

when determining the highly probable requirement for a forecast transaction (or a component thereof), an entity shall assume that the interest rate benchmark on which the hedged cash flows (contractually or noncontractually specified) are based is not altered as a result of interest rate benchmark reform;

when determining the amount of hedged future cash flows are expected to occur for the reclassification of the amount accumulated in the cash flow hedge reserve to profit or loss upon discontinuance of hedge accounting for a cash flow hedge, an entity shall assume that the interest rate benchmark on which the hedged cash flows (contractually or non-contractually specified) are based is not altered as a result of interest rate benchmark reform;

when assessing the economic relationship between the hedged item and hedging instrument for SFRS(I) 9, an entity shall assume that the interest rate benchmark on which the hedged cash flows and/or the hedged risk are based, or the interest rate benchmark on which the cash flows of the hedging instrument are based, are not altered as a result of the interest rate benchmark reform;

when performing the prospective and retrospective assessment for SFRS(I) 1-39, an entity shall assume that the interest rate benchmark on which the hedged cash flows and/or hedged risk are based, or the interest rate benchmark on which the cash flows of the hedging instrument are based, is not altered as a result of the interest rate benchmark reform; and

when determining whether a non-contractually specified risk component is separately identifiable, an entity is only required to apply the separately identifiable requirement only at the inception of the hedging relationship.

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Summary of key changes from the 2019 version of the Illustrative Financial Statements

The entity shall cease applying the above temporary reliefs when: the uncertainty arising from the interest rate benchmark reform is no longer present with respect to the timing

and the amount of the interest rate benchmark-based cash flows; or the hedging relationship is discontinued. The end of application of the reliefs provided above does not apply to the relief for separately identifiable risk components, which will instead end on termination of the hedging relationship. An entity shall apply these amendments retrospectively to those hedging relationships that existed at the beginning of the reporting period in which the entity first applies the amendments or were designated thereafter, and to the gain or loss recognised in other comprehensive income that existed at the beginning of the reporting period in which an entity first applies these amendments. The amendments to SFRS(I) 7 sets out the disclosure requirements for the hedging relationships affected by the above amendments. An entity shall disclose: the significant interest rate benchmarks to which the entity's hedging relationships are exposed; the extent of the risk exposure the entity manages that is directly affected by the interest rate benchmark

reform; how the entity is managing the process to transition to alternative benchmark rates; a description of significant assumptions or judgements the entity made in applying these paragraphs (for

example, assumptions or judgements about when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows); and the nominal amount of the hedging instruments in those hedging relationships. Guidance notes See Note 2 for the illustrative disclosures on the effects of the adoption of the new and revised SFRS(I) pronouncements that are mandatorily effective for the year ending December 31, 2020.

Illustrative Financial Statements 2020

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Summary of key changes from the 2019 version of the Illustrative Financial Statements

Not yet mandatorily effective but early application allowed for the year ending December 31, 2020 The following is the list of new and revised SFRS(I)s that are not yet mandatorily effective for the year ending December 31, 2020 but early application is permitted. SFRS(I) 17 Insurance Contracts Amendments to SFRS(I) 10 Consolidated Financial Statements and SFRS(I) 1-28 Investments in Associates and

Joint Ventures: Sale or Contribution of Assets between Investor and its Associate or Joint Venture Amendment to SFRS(I) 16 Leases: Covid-19-Related Rent Concessions Amendments to SFRS(I) 1-1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-

current Amendments to SFRS(I) 3 Business Combinations: Reference to the Conceptual Framework Amendments to SFRS(I) 1-16 Property, Plant and Equipment?Proceeds before Intended Use Amendments to SFRS(I) 1-37 Onerous Contracts?Cost of Fulfilling a Contract Annual Improvements to SFRS(I)s 2018-2020 Amendments to SFRS(I) 9 Financial Instruments, SFRS(I) 1-39 Financial Instruments: Recognition and

Measurement, SFRS(I) 7 Financial Instruments: Disclosures, SFRS(I) 4 Insurance Contracts, SFRS(I) 16 Leases: Interest Rate Benchmark Reform ? Phase 2 Amendments to SFRS(I) 17 Insurance Contracts

Guidance notes See Note 58 for the illustrative disclosures on the effects of the new SFRS(I)s, SFRS(I) INTs and amendments to SFRS(I) that are issued but not effective at the date of authorisation of financial statements. The list is updated up to November 30, 2020. The group has applied the amendment to SFRS(I) 16: Covid-19-Related Rent Concessions in advance of its effective date. The disclosures on the effects of the early application are illustrated in Note 2. COVID-19 In an environment of heightened uncertainty, it is important that financial reporting includes disclosures that provide an adequate level of transparency and is entity-specific regarding uncertainties inherent in judgments and estimates. Entity should not limit disclosures to boilerplate discussion on COVID-19 itself. Financial statement disclosures should convey the material effects of the COVID-19 pandemic on specific assets, liabilities, liquidity, solvency and going concern issues as relevant and any significant uncertainties, assumptions, sensitivities, underlying drivers of results, strategies, risks and future prospects. Entity should also consider the need for disclosures not explicitly prescribed by SFRS(I) to enable user of financial statements to understand the impact of events and conditions on its financial position and performance as required under SFRS(I) 1-1:31 as well as any additional expectations relating to disclosure of these matters that have been articulated by regulators in the jurisdictions. Areas in this set of illustrative financial statements that could be impacted by the effects of the COVID-19 pandemic are marked with a symbol as shown in the margin column. The table in Appendix A gives an overview of possible areas impacted by COVID-19. Please also refer to our IFRS in Focus 'Accounting considerations related to the Coronavirus 2019 Disease' for further discussions.

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