If you’ve been hearing the term “FRS 118” pop up more often in conversations with your accountant or auditor lately, you’re not imagining things. This is the most significant change to financial statement presentation Singapore has seen in years, and it’s going to touch every company that prepares financial statements under the Singapore Financial Reporting Standards.
This is Part 1 of a three-part series where we break FRS 118 down into manageable, practical pieces. In this article, we’ll cover the fundamentals what FRS 118 actually is, why it was introduced, and the timeline your business needs to work towards. In Parts 2 and 3, we’ll go deeper into the technical classification rules, disclosure requirements, and what your finance team should actually be doing about it.
We work with SMEs, startups, and growing businesses across the island every day, and we want this transition to feel less like a compliance burden and more like an opportunity to sharpen how your business tells its financial story. Let’s start with the basics.
What Is FRS 118?
FRS 118 Presentation and Disclosure in Financial Statements is the Singapore-specific version of the international accounting standard IFRS 18, issued by the Accounting Standards Council (ASC) in Singapore. It replaces the long-standing FRS 1, which has governed how companies present their financial statements for decades.
The core focus of FRS 118 is the statement of profit or loss the document most business owners simply call the “income statement” or “P&L.” Historically, companies had a lot of flexibility in how they structured this statement. Different businesses labelled things differently, grouped expenses differently, and created their own subtotals with little consistency across industries or even within the same sector.
That flexibility made storytelling easy, but it made comparability hard. Two companies selling similar products, of similar size, in the same industry, could present financial statements that looked completely different in structure making it genuinely difficult for banks, investors, and even business owners themselves to compare performance meaningfully.
FRS 118 was designed to fix that. It doesn’t change how much profit your company earns, and it doesn’t change your underlying accounting policies for revenue or expenses. What it changes is how that profit is organised and explained on the page.
The Big Picture: What’s Actually Changing
At a high level, FRS 118 introduces:
- Three mandatory categories operating, investing, and financing that every income or expense item must be sorted into
- Two new required subtotals that didn’t previously exist as mandatory line items
- Tighter rules around how companies report “adjusted” or non-standard performance metrics
- Clearer principles for how information should be grouped together or broken apart, so important details aren’t hidden inside vague catch-all line items like “other income”
We’ll unpack each of these in detail across this series. For now, the key thing to understand is that this is fundamentally a presentation and disclosure standard it’s about clarity and comparability, not about changing your company’s actual financial performance.
Why Was FRS 118 Introduced?
It’s worth understanding the “why” here, because it makes the new rules feel a lot less arbitrary once you see the problem they’re solving.
Under the old standard, income statements often contained large, loosely defined line items such as “other income” or “other operating expenses” that could bundle together very different types of items anything from foreign exchange gains, to investment property revaluations, to one-off gains on asset sales. Two analysts looking at two different companies’ “other income” lines had no real way of knowing whether they were comparing similar things.
There was also growing concern globally about non-GAAP or “adjusted” performance metrics company-specific figures like “adjusted EBITDA” that appeared in investor presentations and press releases, but sat outside the audited financial statements entirely. This created a gap between the polished number a company promoted publicly and the number that was actually audited and verified.
FRS 118 addresses both issues directly: it standardises the “buckets” income and expenses fall into, and it brings management-defined performance measures into the audited financial statements, with proper reconciliation. We’ll cover that particular change in detail in Part 3 of this series, since it’s one of the more surprising elements of the new standard for many businesses.
Who Does FRS 118 Apply To?
If your company prepares financial statements under Singapore Financial Reporting Standards (SFRS), FRS 118 will apply to you there’s no exemption based on company size alone. That said, the practical impact will vary quite a bit depending on your business:
- Straightforward trading, retail, F&B, and service businesses will likely find that most of their income statement still sits comfortably within the “operating” category, with relatively modest presentation changes.
- Holding companies, property investment entities, and businesses with significant investment portfolios will need to think more carefully about classification, particularly around the investing category and the concept of “specified main business activities” (more on this in Part 2).
- Companies that report adjusted or non-standard performance metrics publicly even informally, in investor updates or board packs will have new disclosure and audit obligations to plan for.
- Group structures with multiple subsidiaries will need to assess classification at each entity level, which can create some interesting complexity on consolidation.
If you’re a founder or finance lead unsure which category your business falls into, that’s a completely normal place to be at this stage and exactly the kind of question our team helps clients work through.
When Does FRS 118 Take Effect?
This is the part that catches people off guard, because the effective date and the date you actually need to start preparing are not the same thing.
FRS 118 applies to annual reporting periods beginning on or after 1 January 2027, with earlier adoption permitted for companies that want to get ahead of the curve.
Here’s how that plays out on a typical timeline for a company with a 31 December financial year-end:
| Date | What Happens |
|---|---|
| 31 December 2025 | Business-as-usual under the current standard (FRS 1) |
| 1 January 2026 – 31 December 2026 | This becomes your FRS 118 comparative period the numbers you report for this year will need to be restated under FRS 118 when your 2027 financial statements are issued |
| 31 December 2027 | Your first full set of FRS 118-compliant financial statements, including comparatives |
| 30 June 2027 onwards | Companies preparing interim financial reports will need their first interim report conformed to FRS 118 requirements |
Notice something important here: because 2026 becomes your comparative year, your systems, chart of accounts, and reporting processes effectively need to be ready to capture FRS 118-compliant information from 1 January 2026 a full year before the standard technically becomes mandatory. If you wait until early 2027 to start thinking about this, you may find yourself needing to reconstruct an entire year of financial data retrospectively, which is a much harder (and more expensive) exercise than building it in from the start.
Why Singapore SMEs Shouldn’t Wait to Start Planning
We get it with everything else on a founder’s or finance team’s plate, a standard that technically takes effect in 2027 can feel like a “later” problem. But there are a few reasons it pays to start the conversation now rather than later:
- The comparative period requirement means “later” is actually 2026, not 2027. Waiting until the year before the deadline leaves very little room to fix systems or data gaps.
- Chart of accounts changes take time. If your current accounting system lumps together items that now need to be classified separately (for example, foreign exchange differences on receivables versus borrowings), restructuring that takes planning, not a last-minute fix.
- Auditors and lenders will start asking questions early. As more companies begin early adoption or start their transition planning, expect your bank relationship managers and auditors to start raising FRS 118 readiness in routine conversations well before 2027.
- It’s a natural opportunity to clean up your reporting. Many SMEs use this kind of standard change as a prompt to tidy up messy or inconsistent chart of accounts structures that have accumulated over years of ad-hoc bookkeeping.
What’s Next in This Series
In Part 2, we’ll go deep into the technical heart of FRS 118 exactly how to classify income and expenses into the operating, investing, and financing categories, what “specified main business activities” means for holding companies and investment entities, and how to handle tricky items like foreign exchange differences and derivatives.
In Part 3, we’ll cover the two new mandatory subtotals, the rules around management-defined performance measures (which come with a genuine audit obligation many businesses aren’t expecting), and a practical, no-nonsense readiness checklist your finance team can start working through today.
Let’s Get Your Business Ready, Together
FRS 118 might sound intimidating on paper, but with the right guidance, it’s a very manageable transition and honestly, a good excuse to build cleaner, more insightful financial reporting for your business going forward.
We specialise in helping SMEs and startups navigate exactly this kind of regulatory change, without the jargon and without the overwhelm. If you’d like a clear, practical view of how FRS 118 will affect your specific business, get in touch with our team today to speak with our Singapore FRS specialists the earlier we start, the smoother your 2027 transition will be.
Continue to Part 2: Classifying Income and Expenses Under FRS 118 →