IRAS seeks feedback on tax implications arising from adoption of FRS 109 – Financial Instruments

12 July 2016

The Inland Revenue Authority of Singapore (IRAS) is seeking public consultation on income tax implications arising from the adoption of FRS 109 – Financial Instruments.

FRS 109, issued by the Accounting Standards Council in December 2014, applies to entities for their annual periods beginning on or after 1 January 2018. Earlier application is permitted.

Unless the taxpayer opts out, the FRS 39 tax treatment is currently the default tax treatment for all taxpayers who adopt FRS 39 for accounting purposes. Similar to the approach taken for the adoption of FRS 39 for accounting purposes, if a taxpayer adopts FRS 109 for accounting purposes, the income tax treatment of its financial assets and financial liabilities will generally follow the accounting treatment, except where specific tax treatment has been established under case law or provided under the statutes or where accounting treatment deviates significantly from the tax principles (FRS 109 tax treatment). FRS 109 tax treatment does not apply to taxpayers that do not need to comply with FRS 109 for accounting purposes.

IRAS is seeking comments on the proposed FRS 109 tax treatment, specifically on the following areas:

Financial asset measured at FVOCI

  • To enable the business and CIT to determine the appropriate tax adjustments for equity instruments measured at ‘fair value through other comprehensive income (FVOCI)’, businesses are to furnish a list of such instruments on revenue and capital account, for the following YAs:

– the YA relating to the basis period in which the business is transiting from FRS 39 to FRS 109;

– the YA relating to the basis period in which there is acquisition or disposal of any equity instruments measured at FVOCI.

  • Feedback is sought on the ease of providing such a list to CIT as well as any other methods that may be used to identify the equity instruments on revenue and capital account for tax purposes.

Impairment under the ECL model

  • Challenges anticipated with regard to the tax adjustments and disclosure requirements for entities accounting for the credit loss provisions under the ECL model.
  • Bank or finance companies’ views on the credit loss provision under the ECL model vis-à-vis the requirement provided for under MAS Notices 612, 1005 and 811, which is expected to be higher than that under regulatory requirement, and if so, any specific issues arising should the deduction under section 14I of the ITA be discontinued with the adoption of FRS 109.

Transitional tax adjustments

  • Specific issues faced in respect of the tax adjustments to be made as a result of the transitional rules and with the proposed tax treatment adopted in the transitional year with respect to the impairment losses claimed under FRS 39 for equity instruments designated as measured at FVOCI under FRS 109.
  • The impact on an entity that has to move from the pre-FRS 39 tax treatment to the FRS 109 tax treatment if all the unrealised fair value gains or losses on revenue account are assessed to tax or are allowed in the transitional year.

Reclassification of debt instruments after FRS 109 is adopted

  • Adequacy in the coverage of likely scenarios where a debt instrument is reclassified from one measurement category to another, as well as the tax implications after the adoption of FRS 109 for accounting purposes.


  • Views on the sectors that would be most impacted by FRS 109 as well as any necessity for special tax rules to cater to the accounting changes for these sectors.
  • Any other tax implications relating to FRS 109 that have not been addressed.

Comments and suggestions should be directed by post or via email to

The consultation exercise will be run from 1 July 2016 till 1 August 2016.

For full details, please refer to the IRAS website.

Source: IRAS