Adopting International Accounting Standards

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 has led 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.

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 (MTM) 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 2023, 2022, 2021, 2020, and 2019 audited data include unrealised gains or losses of our sub-20% investments, based on the IFRS 9 accounting standard.

For the year ended 31 March 2023, Temasek Group recorded a Group net loss of S$7.3 billion, due to unrealised MTM losses of sub-20% investments of S$22.0 billion. Excluding the unrealised MTM losses, Temasek Group’s operating profits was S$14.7 billion, which reflects the profitability of Temasek and our portfolio companies.

(for year ended 31 March)

Group Net Profit/(Loss) (S$b)
with and without Unrealised Gains or Losses of Sub-20% Investments

Chart Notes

• Audited Group net profit without unrealised gains or losses of sub-20% investments
• Simulated Group net profit/(loss) 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/(loss) based on IFRS

Chart Notes

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:

• Net Portfolio Value
• Total Shareholder Return
• Credit Profile

As an investor, we aim to deliver sustainable returns 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: