12 Accounting Terms Every Singapore Investor Must Understand (But Nobody Explains Clearly)

12 Accounting Terms Every Singapore Investor Must Understand — Explained in Plain English

A practical guide to decode annual reports and SGX announcements with confidence — without getting trapped by jargon, “paper profits”, or misleading headline numbers.

Published: 7 December 2025 | Category: Investor Education / Earnings Analysis

If you’re a Singapore investor trying to read annual reports or SGX company announcements, you’ve probably seen terms like fair value adjustments, negative operating cash flow, going-concern uncertainty, or financial assets at amortised cost.

Most of these phrases sound “technical”. But the truth is simple:

Explaining it like you’re 11:

You don’t need to be an accountant to understand financial statements. You just need clear explanations — without confusing words.

This guide breaks down 12 important accounting concepts that show up frequently in SGX financial statements. Once you master these, you’ll read reports with much more confidence — and avoid many common traps.

Key Takeaways (If You Only Have 30 Seconds)

• “Fair value gains” are often non-cash — they can make weak businesses look healthy on paper.
• Unrealised gains do not pay dividends; operating cash flow and free cash flow keep a company alive.
• Going-concern warnings are rare on SGX and should be treated as a serious alarm bell.
• Receivables and concentration risk can quietly destroy shareholder value when cash is not collected.
• Amortised cost and FVTPL tell you whether profits may swing due to valuation marks rather than operations.
• Accumulated losses + repeated dilution often mean shareholders keep funding a business that can’t self-sustain.
• One formula beats most jargon: cash flow > profit (for survivability and dividend sustainability).

Contents

1. Big Picture
2. Results Summary
3. Income Statement
4. Margins & Profitability
5. Balance Sheet
6. Cash Flow
7. Dividends
8. Management Commentary
9. A Simple Analyst Framework
10. Common Red Flags
11. My Overall Take
12. FAQ

Big Picture: Why These 12 Terms Matter for SGX Investing

Accounting terms are not just vocabulary. They are often signals. They tell you whether a company’s reported profit is driven by real business activity — or by revaluations, assumptions, and temporary items.

For long-term investing, the goal is not to “sound smart”. The goal is to avoid permanent loss by spotting fragile business models early.

Analyst insight:

• Many SGX blow-ups are not “black swans”; the warning signs often appear in plain sight.
• Accounting language can hide risk — but it can also reveal it if you know where to look.
• When in doubt, come back to cash flow, balance sheet survivability, and incentives.

Results Summary: The 12 Terms (Mapped to What They Really Mean)

Here are the 12 concepts we’ll cover. Think of this as your “decoder ring” for annual reports and SGX announcements.

1. Operating business vs non-operating shell
2. Fair value adjustments
3. Unrealised gains vs real cash flow
4. Going-concern warning
5. Receivables
6. Concentration risk
7. Financial assets at amortised cost
8. FVTPL (fair value through profit or loss)
9. Accumulated losses
10. Rights issues and dilution
11. Impairments
12. The core formula: cash flow > profit

Now let’s break them down in plain language, with a Singapore investor lens.

Income Statement: When “Profit” Doesn’t Mean What You Think

1) Operating Business vs Non-Operating “Shell” Company

Most SGX companies earn revenue from operations: selling products, providing services, renting properties, or operating infrastructure. But some companies report zero revenue year after year and rely on investment gains, interest from loans, or one-off fair value movements.

Why this matters:

• there is often no real business model
• no customers
• no recurring operating income

As an investor, start with this question: “Is this a real operating business with customers and revenue — or a listed shell surviving on asset revaluations?”

Explaining it like you’re 11:

If a shop has no customers but still says it “made money”, you should ask: where did the money come from?

Analyst insight:

• Companies with no operating revenue are often fragile long-term investments, even if they look “cheap”.
• When operating reality is weak, management has more incentive to rely on accounting optics.

2) Fair Value Adjustments — and Why They Can Be Misleading

A fair value adjustment is an accounting entry where the company changes the reported value of an asset to match its estimated market value. This can apply to investment properties, quoted or unquoted investments, loans, and other financial assets.

When an asset is marked up, the company records a fair value gain. When it’s marked down, it records a fair value loss.

The key point for investors:

• non-cash (no money actually enters or leaves the business)
• reversible (it can swing back next year)
• subjective (based on assumptions and valuation models)

Explaining it like you’re 11:

If you say your toy is worth $100 today because you “think so”, you didn’t actually get $100 cash. It’s just a label — until someone pays you.

High-risk signal:

If fair value gains are the main source of profit, treat the company as high risk until you understand what those assets are and how realistic the valuations are.

8) FVTPL — Fair Value Through Profit or Loss

“Financial assets at fair value through profit or loss (FVTPL)” are investments revalued at each reporting date, with the gain or loss flowing directly through the income statement. This can make reported profit more volatile and less predictable.

• a company can show profit because its FVTPL assets went up in value on paper
• it can swing into loss because those same assets went down in value

Analyst insight:

• When FVTPL is large, focus more on cash flow, leverage, and the nature of the underlying assets — not just headline profit.
• Valuation marks can flatter results in good markets and punish results in bad markets.

Margins & Profitability: Revenue Quality Matters More Than Revenue Quantity

6) Concentration Risk — Too Much Depending on One Customer

Many weaker companies are heavily dependent on a single customer, supplier, or related party. If one customer contributes more than 30–40% of annual revenue — or a very large portion of receivables — the business is not diversified.

Why it matters:

• if the customer delays payment, cuts orders, or defaults, cash flow can deteriorate quickly
• reported revenue can look stable right before a sudden drop

A strong business model should not be built on the financial health of just one or two relationships.

Explaining it like you’re 11:

If your lemonade stand only has one buyer — your best friend — your “business” disappears the moment they stop buying.

Analyst insight:

• Concentration risk amplifies downside risk because a single event can break the income statement and the cash flow statement at the same time.
• For SGX investing, watch whether concentration is paired with slow collection of receivables.

Balance Sheet: Where “Assets” Can Be Real — or Illusions

5) Receivables — Money Owed (But Not Yet Collected)

Receivables are amounts owed to the company by customers, borrowers, or other counterparties. They sit on the balance sheet as assets because the company expects to be paid in future.

Receivables can be healthy when:

• customers are reputable and financially strong
• payment terms are normal (e.g., 30–90 days)
• amounts are consistently collected on time

Receivables become dangerous when you see:

• receivables larger than annual revenue
• receivables not collected for a long time
• receivables concentrated in one or two parties
• repeated impairment losses on receivables

Receivables that never turn into cash are, in reality, fake assets.

7) Financial Assets at Amortised Cost — Loans and Debt Instruments

You may see a line such as “financial assets at amortised cost”. These are usually loans given out, debt securities held to collect interest and principal, or other receivables that behave like loans.

Problems arise when:

• borrowers are financially weak or opaque
• payment terms keep getting extended without clear reasons
• interest is accrued on paper but cash is not collected

When a company with no real operating business holds a large pile of these assets, ask: “Will these loans ever be fully repaid in cash?”

9) Accumulated Losses — The Company’s Long-Term Scorecard

Accumulated losses show how much money the company has lost over its entire history (net of any past profits and distributions). Large and growing accumulated losses often indicate the business has been structurally unprofitable for years, with little room to pay dividends.

Analyst insight:

• Accumulated losses are a reminder that “turnaround stories” need evidence, not hope.
• A decade of losses with no credible improvement in operating cash flow is rarely a foundation for compounding.

11) Impairments — When the Company Admits Assets Are Worth Less

An impairment occurs when the company writes down an asset because it is no longer worth what was previously recorded. This can happen to goodwill and intangibles, investments and loans, or property, plant and equipment.

One-off vs recurring matters:

• a one-off impairment can happen during a severe downturn
• recurring impairments may signal poor acquisitions, aggressive past valuations, or weak risk management

Impairments wipe out shareholder equity. When they show up repeatedly over several years, it often means capital has been deployed poorly.

Cash Flow: The Fastest Way to Separate Reality from Optics

3) Unrealised Gains vs Real Cash Flow

Unrealised gains can affect profit, but they do not bring in cash. Real cash flow is what pays salaries and suppliers, repays bank loans, funds new projects, and supports dividends.

A company can report accounting profit due to fair value gains or one-off items and still have negative operating cash flow. When you see “profit” but operating cash flow is negative year after year, that’s a serious warning sign.

The simple takeaway: if the cash doesn’t come in, the profit isn’t real for you as a shareholder.

Explaining it like you’re 11:

If someone says, “I’ll pay you later,” you don’t actually have the money yet. Cash flow is the money that has truly arrived.

12) The Most Important Formula: Cash Flow > Profit

If you remember only one idea from this guide, let it be this:

Cash flow is reality. Profit is an opinion.

Every SGX stock you evaluate should be able to answer a few basic questions clearly.

Dividends: Why “Headline Yield” Can Mislead Singapore Investors

Dividends are popular in Singapore — but dividend safety depends on cash flow, not accounting profit. If cash flow is weak, dividends are often funded by debt, asset sales, or new equity.

Analyst insight:

• Dividend sustainability is a survivability question: can the business fund payouts after operating needs?
• When cash flow is weak, the probability of dilution and dividend cuts rises over time.

Management Commentary: Where the Real Clues Often Hide

Many of the terms above are clarified in the notes and commentary, not the headlines. When you see unfamiliar line items, don’t stop at the face of the statements — go to the footnotes and ask what is driving the number.

This is especially important for “fair value”, “other receivables/assets”, loans at amortised cost, and impairment assessments.

A Simple Analyst Framework: The Questions I Want Every Company to Pass

Here is a simple checklist you can use when reading any annual report or SGX announcement. The goal is not perfection — the goal is to avoid obvious fragility.

Question	Healthy Company	High-Risk Company
Is revenue recurring?	Yes — from real customers	No revenue / irregular
Is operating cash flow positive?	Consistently positive	Mostly negative
Do profits come from core operations?	Yes — business-driven	Fair value gains, one-offs
Are receivables reasonable?	Normal levels, collected on time	Large, slow-moving, concentrated
Any going-concern warning?	No	Yes — serious red flag
Is share count stable?	Roughly unchanged	Rising sharply over time
Are asset values reliable?	Supported by cash and operations	Heavily dependent on valuations

Explaining it like you’re 11:

You don’t need to know everything about a car to avoid one with leaking oil, worn tyres, and a flashing warning light. This checklist is your “warning light” system.

Common Red Flags: The Patterns That Hurt Shareholders

4) Going-Concern Warning — The Auditor’s Serious Alarm Bell

Financial statements are prepared on a going-concern basis — meaning everyone assumes the company can continue operating for at least the next 12 months. When auditors highlight a “material uncertainty” about going concern, it is not routine.

It usually means:

• the company may run out of cash within the next year
• it may struggle to pay debts as they fall due
• it may need urgent fund-raising, often at the expense of shareholders
• asset values may not be realisable as stated

For a retail investor, a going-concern warning is one of the biggest red flags you can see in an annual report.

10) Rights Issues and Dilution — When Shareholders Keep Funding the Business

A company that can’t generate enough cash from operations often raises money by issuing new shares: rights issues, private placements, or convertible instruments. Each time new shares are issued, existing shareholders are diluted unless they put in more money.

A simple check is to look at the number of shares outstanding over the last 5–10 years. If the share count has increased dramatically while profits and cash flow have not, the business may be sustained by fresh equity rather than real value creation.

Analyst insight:

• Dilution is a “quiet tax” on long-term investors.
• Repeated fund-raising often follows weak operating cash flow and weak balance sheet flexibility.

My Overall Take as an Accounting-Trained Investor

Explaining it like you’re 11:

The safest investors are not the smartest guessers. They are the best “risk spotters”. They look for where money is real (cash) and where money is just words (paper profit).

• What matters most: real operating business, cash collection, balance sheet survivability, and sensible capital allocation.
• What to ignore: profits driven mainly by fair value marks, recurring “one-offs”, and impressive-sounding terms without cash behind them.
• How this improves decision-making: you’ll avoid many common traps before they become permanent loss.
• Why consistency beats prediction: a repeatable way to read statements beats reacting to headlines.

Most retail investors never learn these basics — which is why “obvious in hindsight” losses keep repeating. If you understand these 12 terms, you are already ahead of the crowd.

FAQ

Do I need accounting training to understand SGX financial statements?
No. You need clear explanations and a disciplined way to think: what is real cash, what is an estimate, and what is driven by assumptions.

Are fair value gains always bad?
Not always. The risk is when fair value gains become the main driver of profit, or when valuations rely on subjective assumptions that may not be realised in cash.

What is the single most important warning sign for long-term investors?
Persistent weak operating cash flow (especially when profit looks fine) is one of the strongest warning signs. Cash keeps a company alive.

How should SGX dividend investors use this guide?
Use it to test dividend sustainability. Focus on operating cash flow and whether the company can fund dividends without borrowing, asset sales, or repeated dilution.

What should I do when I see unfamiliar accounting terms in an annual report?
Go to the notes. Identify what drives the number, whether it is cash or non-cash, and whether it can reverse. When disclosures are thin, assume risk is higher until proven otherwise.

About the Author
HenryT is a Fellow Chartered Accountant (FCA) based in Singapore and the writer behind The Accounting Investor. He combines professional accounting training, corporate finance experience and personal dividend investing to help everyday investors read financial statements with confidence.

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Disclaimer

This article is for education and general information only. It does not constitute investment, legal, tax or any other form of professional advice, and it is not a recommendation to buy, sell or hold any securities mentioned.

My sole intent is to help readers learn how to read financial statements and think more clearly about businesses. Please do your own research or consult a licensed financial adviser before making any investment decisions. I may or may not hold positions in the securities discussed at the time of writing and am under no obligation to update this article.