Jurisdiction - Singapore
Singapore – New FRS 110 Reporting Standard Effective 2014.

31 October, 2013


Legal News & Analysis – Asia Pacific – Singapore  Capital Markets


The Singapore Exchange Securities Trading Limited has, on 22 October 2013, released a statement highlighting to investors a new financial reporting standard (FRS 110). FRS 110 is effective for annual periods beginning on or after 1 January 2014.

The FRS 110 redefines the principle of control and establishes control as the basis for determining which entities are consolidated in the consolidated financial statements of a parent entity.

Under FRS 110, an investor controls an investee if the investor has (a) power over the investee, (b) exposure or rights to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. 

(a) Power Over The Investee

An investor has ‘power’ over an investee when it has existing rights that give it the current ability to direct activities that significantly affect the investee’s returns. This can arise from the voting rights of the investor, or from one or more contractual arrangements. An investor with the current ability to direct the relevant activities has power over the investee even if such ability has yet to be exercised.

(b) Rights To Variable Returns

An investor is exposed, or has rights, to variable returns from its involvement with the investee when the investor’s returns from its involvement have the potential to vary as a result of the investee’s performance. Although more than one party can share in the returns of an investee, only one investor can control an investee.

(c) Ability To Use Power To Affect Returns

An investor that is an agent does not control an investee when it exercises decision-making rights delegated to it. Control over an investee only arises when the investor has not only power over the investee and rights to variable returns, but also the ability to use its power to affect its returns from its involvement with the investee.

Consolidation of an investee shall begin form the date the investor obtains control of the investee and cease when the investor loses control of the investee.

Prior to the introduction of FRS 110, control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than half the voting power of an entity, and where the parent owns half or less of the voting power of the entity when there is (a) power over more than half of the voting rights by virtue of an agreement with other investors, (b) power to govern the financial and operating policies of the entity under a statute/agreement, (c) power to appoint/remove the majority of the members of the board of directors; or (d) power to cast the majority of votes at meetings of the board of directors. The introduction of FRS 110 provides wider circumstances for which control may arise, other than the specific circumstances as set out in the previous financial reporting standard.

Hence, an issuer on the SGX-ST ma be seen to ‘control’ its investee companies even if it holds less than the majority of the voting rights of the investee. If so, the assets and liabilities of these investee companies will be reflected in the consolidated financial statements of the issuer and affect the final figures that are disclosed to shareholders.


ATMD Bird & Bird


For further information, please contact:


Jolie Giouw, Bird & Bird
[email protected]


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