New IFAC Paper Examines Suitability of Proposed IFRS For SMEs to Micro-Entities

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    Jan 07, 2008
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    New IFAC Paper Examines Suitability of Proposed IFRS For SMEs to Micro-Entities

    The International Federation of Accountants (IFAC) Small and Medium Practices (SMP) Committee has released a report on research into whether the proposed International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs), developed by the International Accounting Standards Board (IASB), is suitable for micro-entity financial reporting. The paper, Micro-Entity Financial Reporting: Some Empirical Evidence on the Perspectives of Preparers and Users, presents the findings of focus group interviews of users and preparers of micro-entity financial reports in Italy, Kenya, Poland, Uruguay, and the United Kingdom.

    Focus group participants indicated that the current exposure draft of the IFRS for SMEs appears to be too complex for micro-entities - defined as entities with fewer than 10 employees - and suggested that relatively minor changes to the current draft might not be sufficient to address this concern. Participants who supported the development of a separate set of accounting guidance for micro-entities generally felt that two levels should be developed: a concise version that would be easy for business owners to follow and understand and a more technical version for preparers of financial statements. In addition, there was general support for some form of attestation, such as a statement made by the professional accountant, to be attached to the financial reports of micro-entities.

    "The research offers some interesting insights into the views of preparers and users drawn from a small but diverse range of countries," states Sylvie Voghel, Chair of the IFAC SMP Committee. "While these countries do not constitute a globally representative sample, the research does question the suitability of the proposed IFRS for SMEs to micro-entities."

    The paper was developed as part of the second phase of the SMP Committee's project on micro-entity financial reporting and follows the release in December 2006 of an information paper entitled Micro-Entity Financial Reporting: Perspectives of Preparers and Users. The findings in the new paper were considered in the development of the IFAC comment letter on the proposed IFRS for SMEs, which can be viewed at

    The following IFAC member bodies assisted in organizing focus groups: Accountants Association in Poland, Association of Chartered Certified Accountants, Colegio de Contadores Economistas y Administradores del Uruguay, Consiglio Nazionale Dottori Commercialisti, and the Institute of Certified Public Accountants of Kenya. The research was undertaken by Dr. Suki Sian of Cardiff Business School, Wales and Professor Clare Roberts of the University of Aberdeen, Scotland.

    The information paper can be downloaded free-of-charge from the SMP section of the IFAC online bookstore ( Further information on IFAC's work to support SMPs and SMEs is available at

    For more information on the development of an IFRS for SMEs, visit the IASB's website at

    IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 158 members and associates in 118 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. Through its independent standard-setting boards, IFAC establishes international standards on ethics, auditing and assurance, education, and public sector accounting. It also issues guidance to encourage high quality performance by professional accountants in business and those working in small and medium practices.


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