Introduction to Accounting

What is accounting?

Accounting is pertinent to all business owners. It is the process of recording, summarizing, analyzing, interpreting and reporting the financial information of an organization. This financial information gathered is key to assist managers and executives to make business decisions.

Importance of accounting

Information derived from the process of accounting help serve both internal and external stakeholders of a company.

1.Internal stakeholders

Internal stakeholders can be split into two major groups, which are the stewardship and decision-making process of a business. A steward is responsible for managing the economic resources of a business to ensure these resources are optimally utilized to maximize profitability.

For decision-making, senior management is dependent on the information summarized in financial reports to make decisions relating to the business. A show of growing revenue but stagnating profit would prod management to evaluate the expense components incurred by the company. Further analysis of the expenses might provide a clearer view of what are the specific cost drivers that are adversely affecting the firm’s profitability, allowing managers to pinpoint the source and resolve it.

2.External stakeholders

External stakeholders are individuals or entities that are situated outside of a company but are affected by the financial performance of it.

Shareholders and investors of the firm, who are considered the company’s owners, rely on the financial information from accounting to make their investment decisions. Investors would cleverly avoid companies having recurring losses or high debt ratios in case of the risk of bankruptcy.

Banks and other lenders would utilize financial information to assess the business’s ability to repay its loans.

Forms of business entities

When an individual incorporates a business, the business itself is considered an entity and its activities are separate from the personal activities of its owner. What forms of entity should one incorporate then? Forms of entities are dependent on a few factors, such as number of owners, how the businesses are managed, the amount of reward and the level of investment risk for the owners.

The three common form of entities are sole proprietorship, partnership and company, each with their own characteristics, advantages and disadvantages.

1.Sole proprietorship

Usually established only with one owner and it’s the least expensive and easiest to incorporate. The sole owner is entitled to all the profits of the company. Speaking of profits, any losses, debt incurred or liabilities are borne by the owner. This makes it risky for the owner as he is personally liable for all the debts that the company undertakes.


It can only be established with a minimum of two owners. These partners share the profits and losses of the business. However, if the business fails, some partners may have to pay all the debts.


A company is a legal entity on its own, separate from its shareholders. Articles of incorporation must first be filed with the state to establish a corporation. There is no limit to the number of owners and provides limited liability to shareholders, up to the amount of investment they have made.

Types of work pass and permits for foreign professionals

Types of work pass and permits for foreign professionals

Singapore is very dependent on foreign talents to help boost its economy. In June 2016, the total foreign workforce surmounted to 1,404,700 people. This is approximately a fifth of Singapore’s population. There are many debates on whether foreign talent is essential in Singapore’s economic growth or is hindering it instead but essentially, everyone knows that the Singapore government will no doubt still emphasize on the importance of foreign talent and will definitely continue bringing in foreigners in.

All foreigners are required to have a valid pass (work visa) before being able to work in Singapore. If you are engaging with foreigners to work in Singapore for you, they are also required to hold a valid pass before being eligible to work. Penalties will be issued to offenders if they do not comply with the rules and regulations set by Ministry of Manpower (MOM).

To start off, here is a list of common offences and penalties for each offence committed that you should be aware of:

Table 1: Offences and Penalties

There are three types of pass types for foreign professionals:

Table 2: Types of passes for foreign professionals

Foreign Professionals Employment Pass


The Foreign Professionals Employment Pass is for foreigners who:

  • Have a job offer in Singapore.
  • Work in a managerial, executive or specialised job.
  • Earn a fixed monthly salary of at least $3,600 (more experienced candidates need higher salaries).
  • Have acceptable qualifications, usually a good university degree, professional qualifications or specialist skills.

If foreign professionals fulfill these eligibility requirements, they are required to apply for the employment pass. Applicants who are young graduates from acknowledged institutions are required to earn $3,600 in order to qualify. More senior and experienced applicants require a higher salary before being eligible to apply. All nationalities are eligible to apply for the Employment Pass.

Each application is on a case by case basis. There is no proper list of approved institutions that applicants are required to be from. Instead, applicants are evaluated by their own merit which is based on a wide range of criteria. Hence, applicants who have acceptable qualifications does not necessarily result in approval. Likewise, applicants without acceptable qualifications are not necessarily rejected. Track-records and skill sets are taken into account as well which can result in the approval of the employment pass.

Employers may be required to advertise their job opening on the Jobs Bank before submitting an Employment Pass application. This advertisement has to be open to Singaporeans and run minimally for 14 days. The employer or an authorised third party is required to apply for the candidate’s application. However, if you are an overseas employer and you do not have a registered office in Singapore, you are required to:

  • Get a Singapore-registered company to act as a local sponsor and apply on your behalf.
  • The local sponsor must apply manually.
  • The candidate will still need to meet the Employment Pass criteria.


Submission of application is $70 for each pass. When the pass is approved and issued, it will cost $150 for each pass and $30 for each multiple journey visa. Online application will take approximately 7 working days to process. Complicated cases will require a longer time. Manual application will take approximately 5 weeks to process.

Required documents for application

The required documents needed prior to the application is as follows:

Table 3: Required documents for application

Other documents may also be requested when your application is being reviewed. For non-English documents, you must submit the original document and an English translation. The translation can be done by a translation service provider, embassy or notary public.

Additional documents are required for the following:

For regional representatives of overseas companies

You will need:

  • A copy of the approval letter from International Enterprise Singapore for setting up the representative office in Singapore.
  • A letter from the representative’s office headquarters stating:
    • The purpose of the application.
    • The duration of the candidate’s assignment.
    • A guarantee for the maintenance and repatriation of the candidate.

For healthcare professionals, lawyers, football players or coaches:

You will need supporting documents from the respective professional bodies:

Table 4: Supporting documents for professional bodies

For employees in a food establishment:

A copy of the licence issued by the National Environment Agency.

Duration of Employment Pass

The duration of first-time candidates is up to 2 years. Renewals of employment pass lasts up to 3 years.

Renewal of Employment Pass

Employment Pass can only be renewed 6 months prior of pass expiration date. You must apply before the expiry date.

For Employment Pass (sponsorship)

You can start applying to renew when you get the renewal forms in the mail, 3 months before the pass expires. Your application has to reach MOM at least 2 weeks before the pass expires.

It is important to know that not all renewals are guaranteed. Each application is reviewed and evaluated according to the current eligibility criteria. Always remember to apply for renewals early. If you miss the date line, you are required to apply for a new pass using the renewal forms for Employment Pass (sponsorship) holders. Renewing of pass does not result in you losing your remaining days. It will only take effect when your current pass is expired.

You can check up on the pass expiry date for your employment pass here

Existing EP holders whose passes expire on the dates stated below can expect a renewal of 1 to 3 years:

How to renew

Log in to EP Online to apply for renewal.

For Employment Pass (sponsorship): complete the renewal form and mail it to us. Remember to include all supporting documents mentioned in the form. The outcome letter will be mailed to you.

Upon renewal of Employment Pass

When you renewal application is successful, you will get an In-Principle Approval (IPA) letter which is valid for only 3 months. During this 3 months, you must get the pass issued. The duration of the renewed pass will start when the current pass expires.

Taking up secondary directorship

Eligible companies can appoint Employment Pass holders from another related company to their Board of Directors. the employer who intends to appoint EP holder to Board of Directors may apply directly. The process will be done within 5 weeks.

Directorship with related company

If you wish to appoint an Employment Pass holder from another company to your Board of Directors, you must first seek approval. If approved, the Employment Pass holder will be granted a Letter of Consent (LOC).

MOM will generally grant a LOC only if:

  • Your company is related by shareholding to the Employment Pass holder’s employer.
  • Employment Pass holder is taking up the secondary directorship for purposes related to their primary employment.

Self-Assessment Tool (SAT)

You are able to use this online Self-Assessment Tool provided by MOM to have a good indication of your eligibility. If the SAT states that you are eligible, there is a high chance of MOM approving your application. If it states that you are not eligible, do not apply as it will get rejected.

Use this list of standard occupations for filling out the Occupations field of the manual Employment Pass application form. Choose the closest match for the candidate’s occupation.

Steps to apply for pass, appeal a rejected pass, renew a pass, cancel a pass, replace a pass card can be found here

E-services and forms can be found here

For more information on family passes and informing MOM of necessary changes, click here


This pass is eligible to foreign entrepreneurs who want to start and operate a new business in Singapore. This new business has to meet certain requirements before you are eligible for an Entrepass.

You are eligible for an EntrePass if:

  • You have (or intend to start) a private limited company registered with the Accounting and Corporate Regulatory Authority (ACRA).
    • If registered, the company must be less than 6 months old on the date you apply.
    • If you have not registered, you can wait for the outcome of your application before registering.
  • Your company has at least $50,000 in paid-up-capital. You need to provide a bank statement that shows at least $50,000 in a Singapore-based company bank account.
  • You hold at least 30% of the shares in the company.

Application for an EntrePass is open to all nationalities.

Your company also needs to meet at least one of these requirements, which will be assessed based on merits:

1. Has funding from a Government-accredited VC or business angel

Your company receives funding or investment from a venture capitalist (VC) or business angel who is accredited by a Singapore Government agency.

Examples include:

  • Contact Singapore – Global Investor Programme (GIP)
  • Economic Development Board Investments (EDBI)
  • Infocomm Investment
  • National Research Foundation – Early Stage Venture Funding (ESVF)
  • SPRING Singapore – SPRING SEEDS, Business Angel Scheme (BAS)


  • The company must receive monetary funding of at least $100,000.
  • Submit a shareholder certificate and other relevant documentation to support your application.

2. Holds an intellectual property

Your company holds an intellectual property (IP) that is registered with an approved national IP institution


  • One of the shareholders must be the owner of the IP.
  • Expired IPs can be considered as long as one of the shareholders is the inventor of the IP.
  • The IP must be related to your proposed business.

3. Has research collaboration with A*STAR or a university

Your company has an ongoing research collaboration with a research institution recognised by the Agency for Science, Technology and Research (A*STAR) or institutes of higher learning in Singapore.

Examples include:

  • National Research Foundation – Campus for Research Excellence and Technological Enterprise, Research Centres of Excellence
  • National University of Singapore
  • Nanyang Technological University
  • A*STAR Research Institutes


  • The duration of the research collaboration is not essential.
  • The research institution needs to provide a contact person to verify the research collaboration details, which must be related to your proposed business.
  • You must be involved with ongoing research collaboration.
  • Contract of services is not considered to be research collaboration.

4. Is an incubatee at a Government-supported incubator

Your company is an incubatee at a Singapore Government-supported incubator, e.g. SPRING Singapore’s Incubator Development Programme.


  • You must be an existing incubatee.
  • Your incubatee work must be related to your proposed business.

Documents required for EntrePass

You need to submit documents such as a business plan and copies of your passport along with the EntrePass application.

You will need these documents to apply:

  • Copy of the personal particulars page of your passport.
  • Past employment testimonials in English.
  • A business plan in English (not more than 10 pages) with the following:
    • Business idea
    • Product or service offered
    • Market analysis
    • Market plan
    • Operation plan
    • Financial projections
    • Management team
    • Supporting documents – for example, licensing agreements, product certifications and endorsements
  • For businesses registered with the Accounting and Corporate Regulatory Authority:
    • Company’s latest business profile or instant information.
    • A bank statement of at least $50,000 from a Singapore-based company bank account.

Other documents may be required while reviewing the application.

Application of Entrepass

Submission of EntrePass application can be done at any SingPost branch. After applying, you may still need to register your business and submit additional documents before final approval.


There is a submission application fee of SGD $70 for each pass. When the pass is approved and issued, it will cost $150 for each pass and $30 for each multiple journey visa

How long it takes

It takes about 6 weeks for the process to be finalised.

Businesses that are not eligible

The following businesses are not eligible for an EntrePass:

  • Coffee shops, hawker centres, food courts
  • Bars, night clubs, karaoke lounges
  • Foot reflexology, massage parlours
  • Acupuncture, traditional Chinese medicine, herbal dispensing businesses
  • Employment agencies
  • Geomancy business

Applicants can apply directly for the Entrepass. There is no minimum salary requirement for this Entrepass. The Entrepass lasts for up to a year and it can be renewed only when the criteria for renewal is met.


The renewal is based on how well you meet your original business plan, the number of local full-time employees you hire and your total business spending, as shown in the table below:

Table 6: Basis of renewal for each catergory

If you had applied for the EntrePass before 28 September 2009, you need to meet all the renewal criteria starting from the first year. This applies to your EntrePass renewals from 1 September 2014 onwards.

If you had applied for the EntrePass on or after 28 September 2009, you need to meet the renewal criteria based on the number of years you have held the pass.

Things to Note

  • You need to inform MOM if you deviate from your original business plan.
  • Local jobs refer to full-time employees who are Singapore citizens or permanent residents. They need to have worked for at least 3 months, earn at least $1,000 and receive CPF contributions.
  • Total Business Spending (TBS) = [Total Operating Expenses – (Royalties/Franchise Fees/Know How Fees to Overseas Companies + Work Subcontracted to Overseas Companies + Remuneration to Applicant)].

How to renew

Complete the EntrePass renewal form. Post the form and the required documents

Work Pass Division
Ministry of Manpower
18 Havelock Road
Singapore 059764

Documents required

You need to submit the following documents with your application:

  • Latest audited accounts.
  • Central Provident Fund statements for your employees.
  • Office tenancy agreement.
  • Latest company registration information from the Accounting and Corporate Regulatory Authority.

You may also submit these optional documents to support your application:

  • Corporate bank statements for the past 3 months.
  • Referral letters from customers.
  • Recent invoices issued.
  • Contracts awarded

Upon renewal

When you renewal application is successful, you will get an In-Principle Approval (IPA) letter which is valid for only 3 months. During this 3 months, you must get the pass issued. The duration of the renewed pass will start when the current pass expires.

Steps to take for application for Entrepass can be found here

Passes for family members can be found here

Apply for pass, renew pass, cancel pass, replace pass card can be done here

E-services and forms can be found here

Personalised Employment Pass

The Personalised Employment Pass is for high-earning Employment Pass holders and overseas foreign professionals. It is not tied to an employer and offers greater flexibility than an Employment Pass.

You can apply for a Personalised Employment Pass (PEP) if you are:

  • An overseas foreign professional and your last drawn fixed monthly salary overseas was at least $18,000. Your last drawn salary should have been within 6 months before you apply.
  • An Employment Pass holder earning a fixed monthly salary of at least $12,000.

You are not eligible for the PEP if you are:

  • An Employment Pass holder under the sponsorship scheme.
  • A freelancer or foreigner who intends to work on a freelance-basis.
  • A sole proprietor, partner or director and shareholder in an ACRA-registered company.
  • A journalist, editor, sub-editor or producer.

Note: You are not allowed to start a business or conduct any form of entrepreneurial activity while on a PEP. If you intend to do so, you should apply for an EntrePass.

Pass Requirements

In order to keep holding a PEP, you must:

  • Not be unemployed in Singapore for more than 6 months at any time. Otherwise, you will need to cancel the pass.
  • Earn a fixed salary of at least $144,000 per calendar year, regardless of the number of months you are in employment.
  • Notify MOM of the following :
    • When you start or leave a job.
    • If you change your contact details, such as local contact person or address.
    • Your annual fixed salary. You need to declare it to us by 31 January of every year.

Benefits of the PEP

The PEP gives you greater job flexibility than other work passes:

  • You can generally hold a job in any sector. However, the PEP does not exempt you from complying with registration requirements to practise in Singapore for professions such as medicine, dentistry, pharmacy, architecture, law, etc.
  • You do not need to re-apply for a new pass if you change jobs; you only need to notify us.
  • You can stay in Singapore for a continuous period of up to 6 months without a job to search for new employment.


Candidates are able to apply for the PEP directly for themselves. Current EP holders will require to earn at least $12,000 a month. Overseas foreign professionals are required to earn at least $18,000 a month.


The PEP can last up to 3 year. There is no renewal of the PEP. It is only issued once.


There is an application fee of $70 for each pass.
When the pass is approved and issued, it will cost $150 for each pass and $30 for each multiple journey visa

How long it takes

It takes around 5 weeks to process your application.

Steps to take for application for PEP can be found at here

Passes for family members can be found here

Apply for pass, Renew of pass, Cancel a pass, Replace a pass card can be found here

E-services and forms can be found here

Source: Singapore’s Ministry of Manpower website

M&A Selection Criteria & Evaluation Process: Transaction Analysis

The final stage of the M&A evaluation is determining how much to pay for the Target. The greatest risk of any deal is paying too much. As such it is imperative to determine what is the fair value of the Target and whether the purchase price is fair and attractive to the Acquirer.

When performing a valuation on the Target, there are several methodologies that should be considered to determine what is a reasonable value. The common methods are the (1) discounted cash flow analysis, (2) internal rate of return analysis and (3) public comparables.

Discounted Cash Flow Analysis

Under the discounted cash flow (DCF) model, the target firm’s intrinsic value is estimated using the future cash flow that is available for distribution to investors of the firm. Free cash flow, as it is known, is derived from taking the operating cash flows and deducting reinvestment in long-term assets and working capital in the future. The free cash flow of the Target is discounted to the present value using the Target’s cost of capital, on the assumption that the firm will continue to operate into perpetuity by using a sustainable long term growth rate. A good estimation of future free cash flows will incorporate both the macroeconomic conditions and understanding of the drivers of the business.

Internal Rate of Return (IRR) Analysis

The concept of the IRR is to estimate what is the implied return on investment that the Target can generate to break even on the initial purchase consideration. This is done in conjunction with the forecasts of free cash flow. The rate of return calculated is compared to the cost of capital that the Acquirer incurs to raise the funds necessary to purchase the Target. The IRR should be equal or more than the cost of funds that the Acquirer incurs to be considered reasonable.

Public Comparables

Using this methodology, the fair value is derived from the trading multiples of listed companies that operate in the same industry as the Target. Common multiples include the Enterprise Value to EBITDA ratio and the Price to Earnings ratio. An industry average of the ratios is derived and compared with the Target to estimate how much the public stock market is valuing the Target.

The Acquisition Premium

Fair value represents the minimum price that a rational seller would accept in the exchange for the loss of the benefit of ownership of the firm. Although it is the starting point of a transaction, a premium above the fair value is usually paid by the Acquirer to entice the Target shareholders to relinquish their control.

To justify why the Acquirer would pay more than what the Target is worth, there must be an additional value that arises when the two firms combine. The additional value comes from either revenue or cost synergy. Revenue synergy is created when the combined firm can generate greater sales than if they were separate. This can be achieved through activities like cross-selling of products among the two firms or greater market power. Cost synergy is achieved by having better economies of scale due to a larger volume of activity.

As a rule of thumb, the additional price paid for the Target should not exceed the present value of the synergies of the combined firm. Otherwise, the Acquirer face overpayment which results in loss for their shareholders.

Transaction Comparables

One method to measure how much premium to pay for the Target is to make use of comparable multiples of previous M&A deals that are similar to the Target. Common multiples include the Transaction Value-to-EBITDA ratio and Offer Price-to-Earnings ratio. The process to derive the purchase price for the Target is similar to that of the public comparables method. However, the value derived here includes the premium paid to the Target.

With many methodologies to choose from and difficulty in forecasting a firm’s performance, executives should recognise that valuation is both an art and a science. After all, the true value of a firm lies in the eyes of the beholder as different managers can deploy the assets in unique ways to generate varying returns. The final purchase price decided is dependent upon the negotiation process which varies according to the needs of the parties involved.

M&A Selection Criteria & Evaluation Process: Company Analysis

After identifying a suitable market to enter, the next stage of evaluating a potential acquisition target is to conduct a detailed analysis into the target company to determine if it is investment worthy. Generally, we should consider a few criteria: (1) the commercial value of the Target’s business model, (2) the Target’s financial condition and (3) if the Target is subject to any material legal risks.

Is the Target’s business model commercially attractive?

The first step of the process is to understand the Target’s business model. It is imperative to fully understand how the business operates and if there is any potential for growth. We should study the Target in the context of the industry to assess if the business model is viable in the long run.

Next, we should consider the market position that the Target is in. It is important to study the value chain of the industry and assess where the target firm fit in. Furthermore, we should examine the dynamics of the industry and determine if the Target has a competitive positioning.

Following which, work should be done to assess the products and services offered by the Target. This is where potential revenue synergies between the Acquirer and the Target can be identified. Synergies can be harnessed from cross selling of products/services between the two firms, sharing of distributions channels or complementing the existing product/service portfolio.

Lastly, we should consider any technical expertise that the Target possesses. It could be in the form of intellectual property rights, research & development knowledge or certain trade secrets. There could be integration of the technical expertise with the Acquirer’s business to enhance the overall value of the combined firm.

Is the Target’s financial condition desirable?

A thorough analysis of the Target’s financial forecasts is a cornerstone in determining the desirability of any investment. After all, any purchase consideration for a firm must be compensated with the future returns that the Target can generate.

The first consideration for the Target’s forecast should be on the revenue. This is where we consider the Target’s business model and determine the factors that drive the revenue. We should consider the growth of the Target’s market and whether the firm is able to gain market share based on the strength of its competitive advantage. In addition, revenue projections should also account for the potential synergy between the two firms.

Next, we should consider how the operating margins of the Target will look like. We should understand the cost structure and if they are going to change to support any future strategic goals. Furthermore, projections on costs should account for any synergies of the combined entity. In addition, capital budgeting should be done to assess how much capital expenditure is needed for future expansion.

Lastly, we should decide on the optimal capital structure, in terms of both debt and equity, the Target firm should hold. This is to take advantage of any available debt headroom to lower the cost of financing the acquisition while avoiding taking on too much risky leverage.

Is the Target subjected to any material legal risks?

Under most circumstances, the Acquirer usually assumes all the liabilities of the Target after the acquisition is complete. Therefore, it is imperative to uncover all potential acquisition risks, hidden liabilities and problems that the Target may have. The due diligence process will cover the organizational structure, operating license, material contracts and any pending litigation that the Target is facing.

In order to increase the success of a M&A, a great deal of work has to be done to determine the risk and reward that a Target firm can provide. All these will help determine what is the fair purchase price of the Target and help with the overall integration process. If done well, the synergies of the merger will prove the attractiveness of the deal and generate superior returns for the investors of the combined firm.

M&A Selection Criteria & Evaluation Process: Macro Economic Factors

After deciding that M&A is the way forward in terms of achieving the company’s long-term strategic goal, the next step is to decide which market or country to look for potential targets to invest in. As part of a three-stage process, we will first explore how to evaluate the macroeconomic environment that a potential target firm is in. There are two key criteria to consider before a target is deemed suitable from a macro-level standpoint.

1. Commercially desirable market or industry

The first layer of evaluation comes from the study of the economic conditions that the target company operates in. Economic data such as GDP growth, population size and inflation rate should be extracted and studied in detail. These are key to evaluate the robustness of the economy and if it indicates a favourable environment for growth. Furthermore, certain key characteristics of the country, such as education level and condition of infrastructure should also be examined. This is to better make judgement of the long term economic prospects of the nation based on its level of development.

After establishing the state of the macroeconomic climate, the next crucial step is to zoom in on the industry and sub-sector that the target company operates in. Understanding the factors that drive the growth of the industry is key in identifying future opportunities. A common tool to think about the industry is to use Michael Porter’s “Five Forces” analysis. We should examine the level of competitiveness among existing firms, bargaining power of the customers and suppliers, threat of potential entrants as well as number of substitutes available. Industry benchmarking of key financials such as profit margins and returns on capital should also be reviewed. All these are to judge if the industry still has meaningful opportunities for growth and profitability.

2. Favourable regulatory conditions

There are many potential government and regulatory risks that need to be considered when evaluating an investment opportunity in a target company. Careful examination should be done for the relevant government policy directives and key regulations such as M&A laws and the Company’s Act to evaluate the business environment. It might even be worthwhile to consult professional legal advice for countries with a less developed legal system.

Some of the key risks to take note of are the possibility of an unstable government, poor industry regulation, difficulty in access to capital and an unfriendly legal framework. Although in principle, the acquirer should avoid investments with these risks, there are several factors to mitigate such factors. An effective way to test the market is to look for long-term partners in that country and leverage on their local knowledge before making a full acquisition. Having directors with connection to the local government can also be useful in establishing diplomatic relationships and trust.

In the next article, we will then explore the second stage of the process and that is to delve into a detailed company analysis of the target investment. This will require deep understanding of the business to evaluate the future performance of the target and how attractive it is as an investment.