The International Accounting Standards Board (Board) has published a Request for Information asking for comments on its approach to updating the IFRS for SMEs® Standard—the simplified accounting standard for small and medium-sized entities.
The objective of the Request for Information is to seek views on whether and how to align the IFRS for SMEs Standard with full IFRS Standards, which are the Standards developed for publicly accountable entities and currently required in more than 140 jurisdictions.
What is the IFRS for SMEs Standard?
The IFRS for SMEs Standard is intended for entities that are not publicly accountable and publish general-purpose financial statements for external users. It is based on IFRS Standards with modifications to reflect the needs of users of SMEs’ financial statements and cost-benefit considerations. The IFRS for SMEs Standard is required or permitted in more than 80 countries and is used by millions of companies.
An entity is publicly accountable if:
(a) its debt or equity instruments are traded in a public market or it is in the process of issuing such instruments for trading in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets); or
(b) it holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses—most banks, credit unions, insurance companies, securities brokers or dealers and mutual funds and investment banks would meet this second criterion.
Future direction of the IFRS for SMEs Standard
The Board is asking whether the IFRS for SMEs Standard should remain aligned with IFRS Standards. Some stakeholders think it should, whereas others believe it should be updated only for the explicit and specific requirements of SMEs.
The Board’s approach to the review is to treat alignment as the starting point. In adopting this approach, the Board has applied three principles to decide whether and how to align the IFRS for SMEs Standard with IFRS Standards:
- Is the topic relevant to SMEs?
- Can the requirements of full IFRS Standards be simplified?
Do the outcomes faithfully represent the transaction in words and numbers?
The fact the Board is undertaking a comprehensive review does not necessarily mean that it will make significant changes. The Board will consider all changes to the IFRS for SMEs Standard on their merits within the context of the capabilities of SMEs and the needs of users of their financial statements.
These principles have guided the Board on the questions it has asked in its Request for Information, published in January 2020. The Request for Information seeks views on whether the principles provide the Board with a useful framework.
The Board has asked for:
- views on aligning the IFRS for SMEs Standard with IFRS Standards in the scope of the review;
- views on leaving the IFRS for SMEs Standard unchanged; or
- further information.
Aligning the IFRS for SMEs Standard with IFRS Standards
What the Board is asking for views on
2018 Conceptual Framework for Financial Reporting
IFRS 10 Consolidated Financial Statements
IFRS 9 Financial Instruments
IFRS 11 Joint Arrangements
IFRS 3 Business Combinations
IFRS 16 Leases
IFRS 15 Revenue from Contracts with Customers
IAS 19 Employee Benefits
IFRS 13 Fair Value Measurement
The Board is also seeking views on whether and how to align the IFRS for SMEs Standard with the amendments to IFRS Standards and IFRIC Interpretations set out in the Request for Information.
Whether and how to align the IFRS for SMEs Standard with amendments to IFRS Standards and IFRIC® Interpretations
Questions on new topics and other matters
Finally, the Board is seeking views on topics that are not addressed in the IFRS for SMEs Standard and whether the Standard should be aligned with IFRS Standards on these subjects. It is also asking about specific topics that stakeholders have raised.
IFRS Standard or Topic
The Board is asking for …
IFRS 14 Regulatory Deferral Accounts
Simplifications when measuring a defined benefit obligation
Other topics not addressed by the IFRS for SMEsStandard
The Request for Information can be accessed on the IFRS Foundation’s website .
Responding to the Request for Information
Stakeholders can submit responses to the Request for Information in one of three ways :
The deadline for responses is 27 October 2020.
What happens next?
When the Board has received all feedback and discussed recommendations, it will decide whether to issue an exposure draft that sets out the details of all proposed changes. An exposure draft will also be open for public comment.
The IFRS Foundation provides resources to support implementation of the IFRS for SMEs Standard including training modules, presentations, Q&As and guidance for micro-sized entities. All materials are available on the IFRS Foundation’s website. A list of helpful links is provided below:
- IFRS for SMEs Standard home page
- IFRS for SMEs Standard in English and 27 other languages
- Q&As issued by the SME Implementation Group
- Training material (35 modules, self-study PDFs with many examples, annotations, quizzes, comparisons with full IFRS Standards)
- Guidance for micro-sized entities in English and Spanish
- Guide to the IFRS for SMEs Standard