In July 2009, the International Accounting Standards Board (IASB) issued the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs).
IFRS for SMEs is a self-contained, standalone standard of about 230 pages, organized by topic.
It is delivered with implementation guidance, consisting in illustrative financial statements and disclosure checklists, as well as training materials which are still under development (19 out of 35 modules are currently available).
IFRS for SMEs is separate from full IFRS. It does not contain any cross references to full IFRS, except for a single reference to IAS 39 Financial Instruments (that can be applied by SMEs instead of sections 11 and 12 of this standard).
IFRS for SMEs is a more stable platform than full IFRS. The IASB plans to update this standard approximately once every three years only.
Irrespective of its title, the standard does not contain any reference to size criteria when it comes to defining what SMEs are.
In section 1, SMEs are defined as entities that do not have public accountability but do publish general purpose financial statements for external users. An entity has public accountability if its debt or equity instruments are traded in a public market or if it holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses (e.g. a Banking or an Insurance company).
The IASB leaves it up to legislative and regulatory authorities and standard-setters in individual jurisdictions to decide whether entities are required or permitted to use the IFRS for SMEs (provided that the conditions above are met which exclude listed companies and financial institutions).
Surprising as it is, U.S. private companies are among the first to be able to use the IFRS for SMEs. Indeed, the AICPA (American Institute of CPAs) recognized in 2008 the IASB as an accounting standard-setting body. Thus, U.S. private companies can use either full IFRS or IFRS for SMEs instead of US GAAP.
At least 35 countries - many from developing and emerging economies - have said they will use the IFRS for SMEs within three years.
On the other hand, no decision has been taken yet in the European Union (EU). The public consultation lead by the EU Commission revealed that opinions are divided about the opportunity to use this standard. As long as IFRS for SMEs has not been endorsed, companies within the EU cannot apply the standard.
First of all, the following topics are not addressed in the IFRS for SMEs:
Secondly, many of the principles for recognizing and measuring assets, liabilities, income and expenses have been simplified. Furthermore, where full IFRS allow accounting policy choices, the IFRS for SMEs only allows the easiest option.
The key simplifications are summarized below:
3 methods are permitted (equity method, at cost or at fair value through P&L), whereas full IFRS require:
On disposal of a foreign operation, any cumulative exchange differences previously recognized in other comprehensive income are not reclassified to P&L (recycling applies in full IFRS)
Last but not least, substantially fewer disclosures are required: about 10% of the number required by full IFRS.
To consult the comprehensive presentation about IFRS 2010, including the potential impacts on SAP BusinessObjects Financial Consolidation Starter Kit for IFRS, please click here.
Your comments about the contents are very welcome. Let us know what you wish to write about.
You must be a registered user to add a comment. If you've already registered, sign in. Otherwise, register and sign in.
User | Count |
---|---|
7 | |
5 | |
4 | |
3 | |
3 | |
3 | |
3 | |
2 | |
2 | |
2 |