The International Federation of Accountants (IFAC) has released a new information paper that explores the needs of users and preparers of the financial reports of micro-entities. Entitled Micro-Entity Financial Reporting: Perspectives of Preparers and Users, the paper comprises a review of the existing research on the topic, a survey of the legal status of micro-entities in different countries, and the various definitions that exist in different jurisdictions.The International Federation of Accountants (IFAC) has released a new information paper that explores the needs of users and preparers of the financial reports of micro-entities. Entitled Micro-Entity Financial Reporting: Perspectives of Preparers and Users, the paper comprises a review of the existing research on the topic, a survey of the legal status of micro-entities in different countries, and the various definitions that exist in different jurisdictions.

The research was prompted by a concern that the International Accounting Standards Board's (IASB) proposed accounting standard for SMEs, International Financial Reporting Standard for Small and Medium-Sized Entities (IFRS for SMEs)*, may not be suited to micro-entities, which for the purpose of this study are defined as those with less than ten employees. The IASB's proposed IFRS for SMEs is expected to be released as an exposure draft in late December 2006 or January 2007.

Key challenges and findings with respect to micro-entities include the following:

• The cost/burden implications of new regulation on the smallest entities;
• The issue of enforcing such regulations;
• The increasing demands of users of micro-entity reports; and
• Issues of literacy and training in some developing countries.

The research contained in the paper was undertaken by Dr. Suki Sian of the Cardiff Business School, Wales and Professor Clare Roberts of the University of Aberdeen, Scotland. In their findings, the researchers state, "Very little research has been previously conducted looking specifically at micro-entities as these tend to be subsumed in the term SME. Furthermore much of the published literature is restricted to studies conducted in developed countries and does not reflect the very different environment in which micro-entities operate in developing, emerging or transition economies." They conclude that "This gap in the literature indicates that this is an area that is ripe for further in-depth examination and research."

IFAC is considering undertaking further research in this area, in particular, to investigate whether the proposed IFRS for SMEs is likely to meet the needs of users of financial reports of micro-entities. IFAC is also encouraging its member bodies and regional accountancy organizations to respond to the IASB's exposure draft on IFRS for SMEs.

Micro-Entity Financial Reporting: Perspectives of Preparers and Users may be downloaded free-of-charge from the IFAC website.

IFAC is the worldwide organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 155 members and associates in 118 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. IFAC, through its independent standard-setting boards, sets standards on auditing and assurance, ethics, education, and public sector accounting. It also issues guidance to encourage high quality performance by professional accountants in business.

* Note to Editors: For more information on the IASB's International Financial Reporting Standard for Small and Medium-Sized Entities, see the IFRS Foundation website.

This information paper considers the experiences of the United States of America in its movement to accrual accounting. It outlines the development of administrative arrangements for formal standards setting over 70 years at the local, state and federal government levels in the US and highlights key factors shaping the standards setting structure.

Thank you Walter, and ladies and gentlemen, for your warm welcome. It is my pleasure to be here today. Clearly, there is increased interest in XBRL and a growing recognition of the important role it can play in enhancing the integrity and the credibility of financial reporting and auditing. This is evidenced by the attendance here today of all of you and of the participation in this conference of leaders of the accountancy profession, the private sector and government. This historic city of Philadelphia was the site of many important events in the founding of the United States. And this week, Philadelphia again plays host to a revolution - this one, a quiet revolution in the way that we report and audit financial information.

Thank you very much for your kind introduction. I am delighted and honored to speak before this FEE Assembly, among so many leaders of our profession. Your President David Devlin and your Secretary General Henri Olivier have been great supporters of IFAC and its work and for that I am very grateful for this. The more we collaborate, the more we can achieve. I am very much looking forward to working with your incoming President, Jacques Potdevin, and with your new Chief Executive, Olivier Boutellis-Taft.

This information paper presents the findings of research into the preparers, users, and user information needs of micro-entity financial reports. The Small and Medium Practices Committee hopes the paper will inform the debate on whether the proposed International Financial Reporting Standard for Small and Medium-Sized Entities will suit micro-entities.

The International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) has issued an exposure draft (ED) designed to strengthen the disclosure of financial information about external assistance, such as emergency assistance and development aid received by governments and government agencies in developing and other countries.

ED 32, Financial Reporting under the Cash Basis of Accounting - Disclosure Requirements for Recipients of External Assistance, proposes that the financial statements of recipients of external assistance disclose the total amount of external assistance received, used, and available during the reporting period. These disclosures will increase the transparency of the financial statements of recipients and contribute to greater accountability by the recipients of such assistance. ED 32 also encourages a range of additional disclosures which will further enhance the usefulness of the financial statements in the assessment of the financial position of recipients and of their use of external assistance.

"ED 32 reflects an approach that enhances the accountability of financial statements, does not impose an inappropriate burden on reporting entities, and can be justified on a cost-benefit basis across a wide range of jurisdictions. While establishing basic accountability requirements, it is also responsive to the ability of individual recipients to comply with the proposed requirements," emphasizes IPSASB Chair Philippe Adhémar.

ED 32 was developed following consideration of responses that the IPSASB received to a previous exposure draft, ED 24, a document with the same title which was issued in February 2005. ED 32 proposes amendments to address constituents' concerns regarding the previous exposure draft.

"Respondents to the previous exposure draft, ED 24, expressed concern that many recipients of external assistance would find compliance with the proposed requirements onerous. ED 32 responds to those concerns by establishing an appropriate balance between required components and those which are encouraged. It has been developed after extensive consultation with our Consultative Group and other constituents," explains Mr. Adhémar.

Before a final International Public Sector Accounting Standard is approved, ED 32 will be field tested. The IPSASB has secured the support of key regional and international organizations for this testing.

How to Comment

Comments on the ED are requested by March 31, 2007. The ED may be viewed by going to https://www.ifac.org/EDs. Comments may be submitted by email to publicsectorpubs@ifac.org. They can also be faxed to the attention of the IPSASB Technical Director at +1 (212) 286-9570 or mailed to IFAC, 545 Fifth Avenue, 14th Floor, New York, NY 10017, USA. All comments will be considered a matter of public record and will ultimately be posted on IFAC's website.

About IFAC

IFAC is the worldwide 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's current membership consists of approximately 160 professional accountancy bodies in 120 countries, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international public sector financial reporting standards through the IPSASB, IFAC, through its independent standard-setting boards, sets ethics, auditing and assurance, and education standards. It also issues guidance to encourage high-quality performance by professional accountants in business.