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Accounting for Cryptocurrencies

As businesses in Singapore and globally explore new frontiers in digital finance, cryptocurrencies have increasingly appeared on corporate balance sheets. From technology firms like Tesla to financial institutions like DBS Bank, cryptoassets are no longer fringe investments. This shift raises an important question: How should cryptocurrencies and other digital tokens be accounted for under Singapore Financial Reporting Standards (International) [SFRS(I)]?

Cryptocurrency ≠ Cash or Financial Asset

Although often referred to as “digital money,” cryptocurrencies like Bitcoin or Ethereum do not meet the definition of cash or cash equivalents under SFRS(I) 1-7, as they are not legal tender and lack universal acceptance. Similarly, they are not financial assets under SFRS(I) 9, as they do not give holders contractual rights to receive cash or another financial asset.

Beyond Cryptocurrency: 4 Types of Cryptoassets

Cryptocurrency is just one category in the growing universe of digital tokens. The ISCA Financial Reporting Guidance (FRG) 2, titled “Accounting for Cryptoassets from a Holder’s Perspective”, classifies cryptoassets into four types, each with different accounting treatments:

Type of CryptoassetNature and Description
CryptocurrencyUsed as a medium of exchange or store of value; does not represent ownership rights or entitlements.
Utility TokenGrants access to specific services or products on a blockchain platform.
Asset TokenRepresents ownership of a physical or financial asset (e.g., real estate, commodities).
Security TokenRepresents equity or debt interests with associated contractual rights (e.g., dividends, repayment).

Accounting Treatment by Type

Type Applicable StandardsCommon Measurement Basis
Cryptocurrency- SFRS(I) 1-38 (Intangible Assets)- At cost less impairment
- SFRS(I) 2 (Inventories) - At cost less impairment or fair value less costs to sell (For broker-trader)
Utility Token- SFRS(I) 2 (Inventories)- At cost less impairment or fair value less costs to sell (For broker-trader)
- SFRS(I) 9 (Financial Instruments) - Fair value or amortised cost based on classification
- SFRS(I) 1-16 (Leases)- At cost less impairment
- SFRS(I) 1-38 (Intangible Assets)- At cost less impairment
- Prepayment- At amortised cost
Asset Token- Based on underlying assets
Security Token- SFRS(I) 9 (Financial Instruments) - Fair value or amortised cost based on classification

Conclusion

While cryptocurrencies are leading the headlines, companies should be aware that there are multiple types of cryptoassets, each with distinct accounting implications. The ISCA’s FRG 2 provides a structured framework to ensure that cryptoasset holdings are properly classified and presented under SFRS(I).

If your company holds or plans to invest in cryptoassets, it’s crucial to assess their nature and ensure compliance with the appropriate accounting standard. Our advisory team can help navigate this evolving space with clarity and accuracy.

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新加坡公司指南

想在新加坡创业？我们帮您搞定！🚀

我们的团队精心准备了一份全面指南，帮助未来的企业主轻松完成公司注册流程。

无论您是本地企业家还是外国投资者，本指南都涵盖了您需要了解的一切——从商业结构和注册流程到税务合规和营业执照申请。

✅ 公司注册的逐步流程
✅ 关键要求和合规义务
✅ 实用见解，助您顺利创业

这份资源旨在为您节省时间，确保创业过程无忧无虑。立即下载指南，自信开启您的创业之旅！

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Guide to starting a company in Singapore

Starting a business in Singapore? We’ve got you covered! 🚀

Our team has prepared a comprehensive guide to help future business owners navigate the company incorporation process with ease.

Whether you’re a local entrepreneur or a foreign investor, this guide covers everything you need to know—from business structures and registration to tax compliance and licensing.

✅ Step-by-step incorporation process
✅ Key requirements and compliance obligations
✅ Practical insights for a smooth startup journey

This resource is designed to save you time and ensure a hassle-free experience as you embark on your business journey. Download the guide now and start your business with confidence!

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Extent of Penalty for Non-Compliance and the Importance of Accounting Records

Case: Former CEO, CFO and Independent Directors of Hyflux Ltd charged with offences under the Securities And Futures Act and the Companies Act

The former Chief Executive Officer of Hyflux Ltd (Hyflux), Ms Lum Ooi Lin, its former Chief Financial Officer, Mr Cho Wee Peng, and four independent directors of Hyflux at the material time were charged in court on 17 November 2022 for disclosure-related offences under the Securities and Futures Act (SFA). Ms Lum was further charged with an offence under the Companies Act (CA) for her failure in ensuring Hyflux’s compliance with accounting standards.

Against Lum Ooi Lin:

(a) One count of section 203(2) read with section 331(1) SFA, for consenting to Hyflux’s intentional failure to disclose information relating to the Tuaspring Integrated Water and Power Project (Tuaspring), when such disclosure was required under the Singapore Exchange Listing Rules (Listing Rules);

(b) One count of section 253(1)(b) read with sections 253(4)(b)(i) and 277(3) SFA for Hyflux’s omission to state the same information relating to Tuaspring in the 2011 Offer Information Statement (2011 OIS). The 2011OIS was issued for the offer of S$200 million, 6% preference shares on 13 April 2011; and

(c) One count of section 201(5) read with section 204(1) CA for failing to ensure that Hyflux made disclosures required under the accounting standards for its financial statements for the financial year ended 31 December 2017. This included the failure to disclose the breach of a subsidiary’s loan agreement that permitted its lenders to demand accelerated repayment.

Against Cho Wee Peng:

(a) One count of section 203(2) read with section 331(1) SFA for conniving in Hyflux’s intentional failure to disclose information relating to Tuaspring, when such disclosure was required under the Listing Rules.

Against four Independent Directors of Hyflux, namely Teo Kiang Kok, Gay Chee Chong, Murugasu Christopher and Rajskar Kuppuswami Mitta:

(a) One count each of section 203(2) read with section 331(1) SFA, for their neglect in connection with Hyflux’s intentional failure to disclose information relating to Tuaspring, when such disclosure was required under the Listing Rules; and

(b) One count each of section 253(1)(b) read with sections 253(4)(b)(i) and 277(3) SFA, for Hyflux’s omission to state the same information in the 2011 OIS.

In accordance with Section 199 of the Companies Act 1967, every company must cause to be kept such accounting and other records as will sufficiently explain the transactions and financial position of the company and enable true and fair financial statements and any documents required to be attached thereto to be prepared from time to time, and must cause those records to be kept in such manner as to enable them to be conveniently and properly audited.

If the default is made in complying with this section, the company and every officer of the company who is in default shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $5,000 or to imprisonment for a term not exceeding 12 months and also to a default penalty.

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Different Business Structures in Singapore

There are a lot of factors needed to be considered when it comes to choosing a business structure as there are various types of it and each has its own advantages and disadvantages. There are five different types of business entities in Singapore which are:

1) Sole Proprietorship
2) Partnership
3) Limited Partnership
4) Limited Liability Partnership
5) Company

This guide will cater an overview of the numerous types of business entities in Singapore and the differences among them. 

1) Sole Proprietorship

A Sole Proprietorship, also known as a Sole Trader, is a business owned by one person.

Requirements:

He/She has to be either:

  • a Singapore Citizen
  • Singapore Permanent Resident
  • EntrePass Holder,
  • age 18 and above and
  • is not an undischarged bankrupt.
    •  

If a foreigner wishes to set up a business, he/she must designate a local representative.

The local representative must be:

  • A natural person
  • At least 18 years old
  • Of full legal capacity
  • Ordinarily resident in Singapore (i.e. has a Singapore residential address)
  •  

Closing a sole proprietorship

A sole proprietorship business will cease when the proprietor passes away or wishes to end the business. The Business Registration Act requires any person registered under it who has ceased to carry on business to notify the Registrar of this. Failing to do so is an offence and may result in the imposition of a fine.

If the sole-proprietorship is GST registered, the business owner has to apply for cancellation of GST registration with IRAS first.

Things to note

Sole proprietorship is ideal for those who are planning to start a one-person business and don’t expect the business to grow beyond yourself. It is the easiest and simplest to manage, yet the riskiest compared to the other business entities. Otherwise, one should consider this as a serious drawback and it is not recommended to inspiring entrepreneurs.

Profits are taxed at personal income tax rates ranges from 0% to 22%.

It is not a separate legal entity from the business owner and as such, the business owner is personally liable for all the debts and losses of the sole proprietorship, and the business owner can sue or be sued in his or her own name.

2) Partnership

Business partnerships are formed by the agreement between 2 or more individuals (maximum 20)  to carry on a business as co-owners.

Requirements

They has to be either:

  • a Singapore Citizen
  • Singapore Permanent Resident
  • EntrePass Holder
  • age 18 and above and
  • is not an undischarged bankrupt
  •  

 A local manager has to be appointed and is at least 18 years old and is not an undischarged bankrupt.

Closing a partnership

A partnership business will cease when one of the partners dies or when one of the partners wishes to terminate the business with the agreement of the other partners.

If the partnership is GST registered, the partners has to apply for cancellation of GST registration with IRAS first.

Tax Rates

Likewise, the tax rate imposed will be that of the partner, example; if the partner is an individual, the personal income tax rates will apply, if the partner is a company, corporate tax rates would apply. Personal tax rate ranges from 0% to 22%. The partnership income tax is paid by the partnership, but the profits and losses are divided among the partners, and paid by the partners, based on their agreement.

The risk of a partnership are similar to the Sole Proprietorship, thus it is not recommended for high-risk businesses and businesses with enthusiastic growth plans.

A partnership does not have its own separate legal identity from the partners. Therefore, unless otherwise agreed, the partnership will come to an end each time a partner leaves.

3) Limited Liability Partnership

Limited Liability Partnership is the most recent and most advanced business incorporation structure, as it combines the features of both partnerships and companies. It is a separate legal entity from their owners, which means that owners are not responsible for any debts or losses the business incurs.

Requirements

LLP have to have at least two partners who can be individuals (at least 18 years old) or body corporate (company or LLP) .

Every LLP must have at least one manager. He/She has to be who is an ordinary resident in Singapore and age 18 years and above.

Closing a LLP

An LLP will continue to exist until it is dissolved. Dissolution usually occurs after a process called “winding-up” has been completed.

Winding up begins after dissolution, where all partnership affairs will be settled. This includes the completion of unfinished transactions, payments to creditors, liquidation of assets and the distribution of proceeds to various partners.

Then will the partnership be terminated when all the partnership matters have been fully wrapped up.

Things to note

An LLP is capable of:

    • Suing and being sued in its name;
    • Acquiring and holding property in its name;
    • Having a common seal in its name and
    • Doing such other acts and things in its name, as bodies corporate may lawfully do and suffer.

The key features of a limited liability partnership are as follows:

Limitation of liabilities

The partners of the LLP will not be held personally liable for any business debts incurred by the LLP. A partner may, however, be held personally liable for claims from losses resulting from his own wrongful act or omission, but will not be held personally liable for such wrongful acts or omissions of any other partner of the LLP.

Declaration of solvency

LLP must submit to the Registrar an annual declaration of solvency or insolvency (i.e. being able or unable to pay its debts respectively) which will be made available to the public.

LLP gives owners the flexibility of operating as a partnership while having a separate legal identity like a private limited company.  It is mainly meant for carrying a profession (e.g. accountants, law firms, architects, etc.) where two or more professionals would like to build a joint practice in a common field, and is not suited for businesses that carry a trade. The owners must enter into detailed agreements about how the profits and management responsibilities are divided.

Perpetual Succession

The LLP has perpetual succession, which means that any change in the partners of a LLP will not affect its existence, rights or liabilities.

3) Company

A company is a separate legal entity and can incur debt, sue and be sued. A company’s business line depends on its structure, which can range from a partnership to a proprietorship, or even a corporation. 

Companies may be either be:

  • public; having 50 members or less, or
  • private; can have more than 50 members. 
  •  

Requirements

Likewise, a company must designate a local director that is at least 18 years old and is an undischarged bankrupt. 

Things to note:

A private limited company is the most common form of the company chosen by entrepreneurs and investors, mainly due to the tax incentives that can be applied for.

A company is considered as a separate legal entity which means that the members of the company will not be held personally liable for the debts or losses of the company. 

Unlike all the other business entities, a private limited company can qualify for tax exemption schemes and is taxed at the effective corporate tax rate of 17%.

Perpetual Succession

Members in a company may come and go but the company will still remain and proceed to continue its business forever or until it is closed down. This means that a company has the characteristics of perpetual succession, thus giving the company a safer and a more stable area for investors to invest their money on and enhance the chances of their investment being a success. 

Closing a Company

A company can cease to exist in one of the two options, either by;

  • winding up or,
  • striking off

Comparison

Sole Proprietorship

Partnership

Limited Liability Partnership

Company

  • It is easy to set up and the cost is minimal.
  • Owner has full control of the business.
  • All the profits generated by the business will belong to the sole-proprietor.
  • Profits are taxed at personal income tax rates
  • No separate legal entity.
  • Has unlimited liability.
  • It can sue or be sued in the owner’s name.
  • No perpetual succession.
  • No corporate tax incentives and benefits.
  • It is easy to set up and the cost is minimal.
  • Easier administration and management of the business.
  • Reduced compliance obligations.
  • No separate legal entity.
  • Has unlimited liability.
  • Flexibility of succession is variable.

  •  

  • It is easy to set up and the cost is minimal.
  • Easier administration and management of the business.
  • Reduced compliance obligations.
  • Separate legal entity.
  • Perpetual succession.
  • Flexibility of succession is variable.
  • Difficult to transfer ownership of business.
  • Higher registration cost and its costly to maintain due to more compliance obligations.
  • Limited liability.
  • Excellent tax benefits.
  • Perpetual Succession.
  • Separate legal entity.
  • Annual General Meeting has to be conducted.
  • Annual Return filing with the Authority.
  • Estimated Chargeable Income and Corporate Tax to be filed.