A Step-by-Step Guide for Companies Navigating the Financial Year-End Process

Financial Year-End: A Quick Overview

A financial year-end marks the conclusion of a 12-month accounting period for an organisation. It signifies the end of the financial reporting period, during which a company evaluates its performance and prepares financial statements.

This date does not always align with the calendar year-end (January 1 to December 31). Many organisations select different financial year-end dates based on business needs or legal requirements.For instance, some may align with the calendar year, while others may choose dates like the end of March, June, or September. In Singapore, companies can determine their financial year-end based on business cycles, industry standards, and administrative ease. This date also dictates when tax filing obligations arise. If unsure of your financial year-end date, consult your corporate service provider or check your ACRA details.

During the financial year-end, businesses undertake various activities to close their books and compile accurate financial statements. These activities typically include:

1. Financial Statement Preparation
2. Account Reconciliation
3. Financial Year-End Audit and Review
4. Tax Reporting
5. Financial Planning (Optional)

Financial Statement Preparation

Financial statements, including the income statement, balance sheet, and cash flow statement, offer a clear view of an organisation’s financial health and performance over a specific period. They are essential for assessing accounts, tax filing, and auditing, making accuracy crucial. Even if not required, preparing these statements is a good practice.

For companies with efficient accounting systems that automate transaction recording, preparing financial statements is a straightforward process. In contrast, those relying on manual methods may face challenges in calculating and categorising data. Transitioning to an online accounting system can simplify this process.

Not all companies are required to include financial statements in their tax submissions. Entities exempt from filing with ACRA include:

1. Small non-publicly accountable companies with total assets and revenue below SGD 500,000, not listed on a securities exchange.
2. Sole proprietorships, partnerships, limited liability partnerships, or limited partnerships.
3. Dormant companies that have been inactive since establishment or the end of the previous financial year, with total assets not exceeding SGD 500,000.
4. Exempt private companies in Singapore that are solvent, with fewer than 20 employees and no corporate shareholders, or those owned by the Government and declared exempt in the Government Gazette.

Account Reconciliation

Reconciles various accounts to ensure that the records accurately reflect the financial transactions and balances. This process involves comparing the information in the general ledger with supporting documents and external statements.

1. Gather Statements and Compare Balances: Collect the relevant statements and documents for each account, such as bank statements and invoices. Compare the balances recorded in your accounting system with the balances shown on the external statements.
2. Investigate and Correct Discrepancies: Identify any discrepancies or differences between the recorded balances and the external statements. Investigate the reasons behind these discrepancies and make necessary adjustments or corrections to ensure the balances align.
3. Document and Review: Document the reconciliation process, including the steps taken, adjustments made, and reasons for discrepancies. Have the reconciliations reviewed and approved by a qualified person to ensure accuracy and accountability.

Financial Year-End Audit and Review

Not all companies in Singapore need to be audited. In Singapore, the requirement for a company to undergo an audit depends on its size, nature, and other factors. Here are the key types of companies and their audit requirements:

Even if a company is exempt from a statutory audit, it must still prepare and file unaudited financial statements in line with Singapore Financial Reporting Standards (SFRS). To clarify your specific audit requirements, please contact us for guidance based on your company’s circumstances.

To ensure a smooth experience with an auditor, companies should:

1. Financial Statements and Documentation: Prepare accurate financial statements, including the income statement, balance sheet, and cash flow statement. Collect supporting documents like invoices and bank statements.
2. Internal Controls and Policies: Document accounting policies and procedures, assess internal controls, and ensure proper authorisation and asset safeguarding.
3. Compliance and Review: Review applicable regulatory requirements and address any previous audit findings. Conduct reconciliations and analyses to ensure accuracy and identify significant transactions.

Focusing on these areas will help companies prepare effectively for the audit process and ensure compliance with relevant regulations.

Tax Reporting

The Inland Revenue Authority of Singapore (IRAS) requires corporate income tax filing for:

1. Companies: Entities incorporated under the Companies Act 1967 or relevant Singaporean laws, typically with ‘Pte Ltd’ or ‘Ltd’ in their names.
2. Foreign Companies Registered in Singapore: Foreign entities with a registered branch or representative office in Singapore.
3. Foreign Companies Incorporated Outside Singapore: Foreign entities registered outside Singapore that conduct business within the country.

Sole proprietorships and partnerships are not classified as companies and are subject to individual income tax rates. Companies in the above categories must file corporate income tax returns as per IRAS requirements.

Filing Estimated Chargeable Income (ECI) with IRAS

In Singapore, companies must estimate and report their chargeable income (ECI) to IRAS within three months of their financial year-end. This filing provides an early estimate of taxable income, enabling IRAS to conduct an initial tax assessment and issue a Notice of Assessment (NOA). ECI filing helps ensure compliance with tax obligations.

Calculating ECI

When filing the Estimated Chargeable Income (ECI) in Singapore, the Inland Revenue Authority of Singapore (IRAS) typically requires the following broad categories of details. Before calculating your ECI on the IRAS portal, you should have this information available:

It’s essential to recognise that the details and forms for ECI filing may differ based on a company’s situation and IRAS requirements. For accurate and current information, refer to IRAS guidance or consult a tax professional.

In addition to the Estimated Chargeable Income (ECI), companies in Singapore must also prepare:

1. Corporate Income Tax Return (Form C-S or Form C)
2. Supporting Documents: Retain records of income, expenses, deductions, and transactions.
3. Other Statutory Forms, such as Form IR8A
4. Tax Exemptions and Incentives: Determine eligibility for exemptions like Partial Tax Exemption (PTE) or Tax Exemption for New Start-Up Companies (SUTE) and include relevant details in tax filings.

Engaging an experienced tax professional can simplify the preparation of these documents.

Ensure a Smooth Financial Year-End Preparation

By keeping accurate financial records, filing necessary documents, and engaging in strategic tax planning, your company can effectively manage the year-end process and foster ongoing growth.

Disclaimer: The information provided in this article is intended for general guidance only and reflects regulations as of the publication date. Given that compliance requirements, processes, and fees may change over time, readers are advised to consult official sources such as ACRA for the most up-to-date information or seek professional guidance from our team.