Accounting Standards

The Council on Corporate Disclosure and Governance (CCDG) provides reporting standards for recognition and measurement of financial instruments (FRS 39). They closely follow international accounting standards. Adoption of fair value accounting standards for financial instruments began January 2005.

Financial instruments classified as held-for-trading and available-for-sale are measured at fair value; held-to-maturity investments are measured at amortized cost applying the effective interest method. Unrealized gains and losses on the fair value changes are reflected in the financial statements. A detailed description of classifying and recording securities on the balance sheets is at the FRS 39 link below.

Asset valuation of an insurance fund must comply with the accounting standards set by CCDG apart from a separate regulation administered by the Monetary Authority of Singapore. Refer to the regulations on Insurance Valuation and Capital linked below for details.

Investment Funds

Investment fund managers should value the units of a scheme each business day. The Net Asset Value (NAV) of assets is computed using market quotations and fair value. Quotes should be based on the official closing price or the last known transacted price on the securities exchange or the over- the-counter market on which the securities are traded. If prices are not representative or unavailable, the manager is responsible for determining the fair value of securities, which is the price that the scheme would reasonably expect to receive upon current sale of the asset.

Market practices for derivatives and hedging instruments are also detailed in the Code on Collective Investment Scheme.

Capital Adequacy Regulations

Financial institutions are subject to a capital adequacy requirement issued by the Monetary Authority of Singapore (MAS) under Notice 637, where banks must satisfy risk-based capital requirements that involve mark-to-market practices. Capital adequacy regulations issued in Singapore are moving towards compliance with Basel II standards.