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REGULATOR’S COLUMN: What SGX RegCo Expects of Financial Reports Amid COVID-19

Singapore Exchange (SGX) - COVID-19The interim financial reports for the period ended 30 June 2020 may be the first reports on issuers’ financial performance since COVID-19 took hold and brought on various challenges and restrictions. Significant uncertainty, or even threats to business prospects, have hit issuers across various sectors.

High quality and reliable financial statements, including interim reports, are fundamental to the integrity of Singapore’s capital markets. Singapore Exchange Regulation‘s (SGX RegCo) 22 April 2020 Regulator’s Column emphasises immediate disclosure by issuers of material developments brought about by COVID-19. Issuers are also expected to increase scrutiny of high-risk areas such as cash balances and accounts receivables and other areas that require significant estimates like impairment.

In consultation with the Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA), SGX RegCo is issuing this Column to assist issuers in the preparation of financial statements given the practical challenges they face at this time. ACRA[1] and the Institute of Singapore Chartered Accountants (ISCA)[2] have also published guidance to help issuers in this regard.

Negative assurance confirmation

Underscoring the reliability of interim financial reports is Listing Rule 705(5). This rule requires issuers to confirm that to the best of their knowledge, nothing has come to the attention of the board of directors which may render the interim financial statements to be false or misleading in any material aspect. This confirmation provides the board’s assurance that all material information has been assessed to ensure the reliability of the issuer’s interim financial statements.

Complying with Rule 705(5) requires boards to provide a negative assurance confirmation about the interim financials without any attempt to carve out caveats or exceptions. While this may be difficult under current conditions, it is precisely in these circumstances that investors need reliable financial information to make informed investment decisions.

In providing the negative assurance confirmation, boards should consider whether the interim financial statements provide a balanced and fair view of any material factors that have affected the issuer’s business conditions and financial position, including the impact of COVID-19.

Asset valuations

Boards and management should carefully assess if asset values are appropriately reported in the interim financial statements. They should review whether the effects of COVID-19 present any indication that the asset values as at the previous financial year-end have changed significantly. The assessment of the impact and its associated uncertainties should be clearly explained so that investors can better appreciate the significance of the numbers.

Issuers may decide on the best way to conduct a valuation assessment – whether internally; with the assistance of an external valuer; or by performing an assessment of certain assets which are materially impacted. If in doubt, issuers should consider whether expert advice is needed.

Where adjustments to the inputs of the valuation models are made to reflect material changes in business conditions, issuers should disclose the key assumptions used, such as forward-looking information on earnings growth rates, as well as management’s basis for selecting those assumptions. Material uncertainties on the asset valuations should also be disclosed.

If helpful, issuers can also consider providing illustrations on the potential impact a change in valuation will have on relevant financial metrics, such as net asset value, net tangible assets or leverage ratio.

We understand the present challenges faced by issuers in making significant judgements and estimates on asset valuation. Issuers should rely on the best available information in making well-reasoned and supported judgements and estimates. Boards should use best endeavours to ensure that the fair value of assets is not overstated, and engage management closely and question the appropriateness of key assumptions made in asset valuations. In the rare circumstances that the board is unable to quantify the impact to asset valuation, it should clearly explain why.

Going concern

Where there is a deterioration in business conditions, issuers should undertake an assessment of the ability to operate as a going concern and disclose these uncertainties and their plans to address such uncertainties. Where issuers are unable to continue as a going concern, they should make a request for trading suspension pursuant to Listing Rule 1303.


Disclosures are expected to be entity-specific, relevant and useful to investors. Issuers must eschew boilerplate disclosures, such as broad or generic statements that COVID-19 have negatively impacted the valuation measurements, without elaborating on the effects on each business segment. Disclosures must also be balanced and fair and avoid omission of important unfavourable facts.

Deterioration of financial performance that existed prior to the pandemic should clearly be disclosed as such and not characterised as COVID-19 related if this is untrue.

Alternative performance measures (APMs)

APMs, such as EBIT, EBITDA and free cash flows, can be useful to investors when they provide additional insight into the financial performance and condition of issuers and are often used to supplement information provided under relevant accounting standards.

APMs if used, should be presented consistently between periods with clear explanations on how they are calculated. Issuers must ensure that the APMs do not mislead investors and in particular, should not be used to present a more favourable view or to avoid presenting a less favourable view of the issuer’s performance.

COVID-19 and its far-reaching impact have led to discussions on whether EBITDAC, or earnings before interest, taxes, depreciation, amortisation and COVID-19 should be considered as a possible APM. SGX RegCo cautions issuers against presenting such a hypothetical APM that attempts to recast earnings as if the effects of the pandemic had not occurred. Such hypothetical APMs are unreliable and present a misleading picture of financial performance to investors.


Financial statements should provide comparable and relevant information that adequately reflects the impact of COVID-19 on the issuer. Timely disclosure of any changed circumstances will enable investors to make an informed investment decision. SGX RegCo will continue to review if further enhancements to our Listing Rules should be made to strengthen disclosures.