With FRS 118 effective for annual periods beginning on or after 1 January 2027, the time for high-level awareness is over—it is time for execution. The Accounting Standards Committee (ASC) issued FRS 118 on 4 October 2024, aligning Singapore with IFRS 18 and replacing FRS 1 Presentation of Financial Statements. This represents one of the most significant changes to financial reporting in recent years. Here is a practical guide to navigate the transition.
1. Start with a Gap Assessment
Begin by mapping your current chart of accounts against FRS 118's five income and expense categories: Operating, Investing, Financing, Income Taxes, and Discontinued Operations. Pay particular attention to classification of items like interest income on operational cash balances or dividends from subsidiaries—these require careful assessment based on the entity's primary activities. Identify data gaps, particularly for items currently aggregated under broad labels like "Others". This baseline assessment will reveal where your current presentation falls short and what system changes are needed.
2. Redesign Your Chart of Accounts and Systems
The new structure requires system-level changes, not just reporting tweaks. Update your ERP to capture granular expense classifications and track unusual items. Ensure your reporting tools can produce FRS 118-compliant statement formats. As KPMG Singapore's Head of Professional Practice has noted, system and process considerations are a key area requiring attention. Early system assessment is critical to avoid bottlenecks close to adoption.
3. Prepare for Comparative Restatement
FRS 118 requires retrospective application—meaning your 2026 comparatives must also be restated. You effectively need to be ready one year earlier. Begin re-mapping 2024–2026 trial balances now and assess whether historical data is sufficiently granular for restatement. For entities with December year-ends, systems must be in place from 1 January 2026 to produce required comparative information.
4. Address Management-Defined Performance Measures (MPMs)
MPMs like EBITDA or "adjusted profit" must now be disclosed in a single note with a clear reconciliation to FRS-defined subtotals. The definition is narrow: a subtotal of income and expenses used in public communications outside financial statements to communicate management's view of performance. Review your KPIs and investor metrics to ensure they meet the new reconciliation requirements, including tax effects and impacts on non-controlling interests. For the first time, these measures become part of the audited financial statements.
5. Address Enhanced Disaggregation and "Unusual" Items
FRS 118 raises the threshold for disaggregation—broad line items will no longer suffice. Entities must provide more detailed breakdowns of income and expenses and separately disclose items not expected to recur in the near term. This requires granular data capture and careful classification of items like foreign exchange differences, which must be presented in the same category as the items that gave rise to them.
6. Train Your Team and Engage Stakeholders
Conduct training on the new P&L categories, disaggregation expectations, and MPM reconciliation disclosures. Engage auditors, banks, and investors early to manage expectations around changes to KPIs and covenants. The new required subtotals may affect bank covenants, investor reporting metrics, and management commentary.
7. Run a Dry Run
Perform mock restatements before 2026 to identify classification inconsistencies and data gaps. This early testing will ensure a smooth transition when the standard becomes mandatory. Entities like CapitaLand China Trust and CapitaLand Ascott Trust have already disclosed in their 2025 annual reports that they are in the process of assessing FRS 118's impact—your transition planning should begin now.
CorLeAcc Editorial
30 Jul 2026