In this report, we present findings from our research into the impact of the use of estimates (including “fair value” estimates) on the financial statements of Singapore listed entities. In particular, we looked at the published financial statements of 200 listed companies on SGX to assess the amount of estimates used to derive asset values. The key findings include:
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- 82 percent of total asset values must be re-estimated to derive amounts carried forward. This indicates that a significant proportion of the total asset value in the financial statements analysed, were subject to judgement calls.
- Based on the aggregate incomes and total asset values of the companies analysed, a one percent fluctuation in the total asset value can result in as much as a 38 percent change in net profit and up to a 50 percent change in comprehensive income.
- Although fair value estimates for financial instruments were a key concern during the global financial crisis, it appears they are less of a concern for companies in Singapore, as less than one percent of total assets on average use unobservable inputs (known as 'level three inputs' and subjected to level three fair value measurements).
- In contrast to the results for total assets, estimates (excluding fair value estimates) make up on average less than 10 percent of the total liabilities of the companies surveyed.