Group Financials

Adopting International Accounting Standards

In 2018, Temasek adopted the International Financial Reporting Standards (IFRS), in line with Singapore's convergence with IFRS. This included the adoption of IFRS 9: Financial Instruments in 2018 and IFRS 16: Leases in 2019.

Adoption of IFRS 16 Leases in 2019

The IFRS 16 accounting standard requires lessees to record all lease liabilities and right-of-use assets on the balance sheet. Prior to IFRS 16, operating leases were only required to be disclosed as off-balance sheet lease commitments.

Adoption of IFRS 9 Financial Instruments in 2018

The IFRS 9 accounting standard affects investments where we hold stakes of less than 20%.

Prior to IFRS 9, our income statements accounted for any realised gains or losses over the life cycle of our investments whenever we sold any of them. Year-to-year changes in market values of our sub-20% investments were captured in our balance sheet and had no impact on the reported profits or losses in our income statements.

With IFRS 9, year-to-year changes in the market value of all our sub-20% investments are now accounted as profits or losses in our income statements, even when no sale has occurred.

Sub-20% stakes comprise more than 40% of our portfolio. Thus, the adoption of IFRS 9 will lead to material fluctuations in our reported profits or losses in our income statements due to the year-to-year paper gains or losses. Such market fluctuations do not reflect the potential gains or losses upon a sale.

With IFRS 9, Temasek’s Group net profit now includes:

All Realised Gains or Losses

Unrealised Gains or Losses
of sub-20% Investments

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Unrealised Gains or Losses

Share price movements in the market can result in changes in value. These are also known as paper gains or losses, or mark to market gains or losses.

Sub-20% Investments

These are minority investments where we have less than 20% shareholding.

Simulated Impact on Temasek’s Group Financials

The solid blue line in the chart below provides the audited Group net profit, under the Singapore Financial Reporting Standards which does not include mark to market gains or losses.

The dotted pink line provides the simulated Group net profit to include unrealised gains or losses of our sub-20% investments in a simple way.

The dark purple dots of 2021, 2020 and 2019 audited data include unrealised gains or losses of our sub-20% investments, based on the IFRS 9 accounting standard.

(for year ended 31 March)

Simulation of Group Net Profit 2009-2018 (S$b)
with and without Unrealised Gains or Losses of sub-20% Investments

Audited Group net profit without unrealised gains or losses of sub-20% investments
Simulated Group net profit with unrealised gains or losses of sub-20% investments
Group net profit without unrealised gains or losses of sub-20% investments
Audited Group net profit based on IFRS

Providing Additional Disclosures

To facilitate comparisons with past years’ Group net profits before the adoption of IFRS 9, we have provided additional disclosures in our Group Financial Summary:

Unrealised gains or losses of sub-20% investments; and
Group net profit, without unrealised gains or losses of sub-20% investments.

No Impact on Other Measures

IFRS 9 does not impact the following:

As an investor, we aim to deliver sustainable value over the long term. Hence, we focus on the performance of our portfolio over the longer time horizon, and the corresponding overall risk-adjusted cost of capital. We do not manage for year-to-year accounting profitability.

Adopting Accounting Standards Over the Years

Temasek adopts and complies with all applicable accounting standards in the preparation of group financials each year. The table below provides a snapshot of key accounting standards that we have adopted in our group financials since our inaugural issue of Temasek Review 2004:

International Financial Reporting Standards (IFRS) or Singapore Financial Reporting Standards (SFRS)		How it impacts Temasek Group financials	Sectors in our portfolio impacted	Adoption by Temasek Group for financial year ended

IFRS 16	Leases	Requires lessees to record all lease liabilities and right-of-use assets on the balance sheet	All sectors	31 Mar 2020
IFRS 9	Financial Instruments	Requires unrealised mark to market gains or losses of sub-20% investments to be included in the income statements	Financial services	31 Mar 2019
IFRS 1	First-time Adoption of IFRS	Adopted IFRS, in line with Singapore’s convergence with IFRS to align with international accounting standards	Singapore-incorporated listed companies. Available for adoption by unlisted companies.	31 Mar 2019
IFRS 15	Revenue from Contracts with Customers	Requires revenue to be recognised either over time or upon completion, according to when various promises in the sales contract are fulfilled. Impacts mainly long term construction and bundled contracts	Telecommunications, Industrials	31 Mar 2019
SFRS 41	Agriculture	Upon acquisition of an agribusiness subsidiary, the Group adopted fair value accounting for biological assets (e.g. cattle and fruit trees), with changes in fair value included in the income statements	Agri-Food	31 Mar 2015
SFRS 40	Investment Property	Adopted fair value accounting for investment properties, with changes in fair value included in the income statements	Real estate	31 Mar 2008
SFRS 39	Financial Instruments: Recognition and Measurement	Introduced fair value accounting for sub-20% investments	Financial services	31 Mar 2006