Why We need to prepare Financial Statements when we have our Management Accounts?

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Why We need to prepare Financial Statements when we have our Management Accounts?

You need to prepare financial statements simply because it is required by the law to do so:

  • The Companies Act states in S201 that the directors of the company need to prepare the accounts that complies with the “Accounting Standards”. Accounting Standards is interpreted in the Act as “made or formulated by the Accounting Standards Council under Part III of the Accounting Standards Act 2007”. Therefore, the Accounts mentioned in the Act means Accounts prepared in accordance to the Financial Reporting Standards of Singapore, that is, the Financial Statements.

  • IRAS requires you to prepare financial statements and tax computation for submission of corporate tax every year. In recent years, you do not need to submit your financial statements to IRAS if your Company is eligible to file for Form C-S filing. However IRAS has explicitly mentioned that you will still be required to continue to maintain your accounting records and tax computation even if you need not submit them together with the Form C-S.

  • If your company is not exempt, or is exempt but insolvent, you will need to submit your financial statements to ACRA during the Annual Return filing period.

  • Financial statements are in essence, a report card of the financial performance of the company and the information presented will be extremely valuable to the owners of the Company, as well as directors of the company, when assessing the future plans of the Company.

  • Whenever you intend to sell shares of your company to another investor, stamp duties need to be paid and a part of the stamp duty computation requires the use of financial statements to derive the net asset value of the Company.

  • If you have taken up business or property loan, a copy of your financial statements may be required in your refinancing procedures.