The International Financial Reporting Standards (IFRS) Foundation has announced the publication of supporting materials for the “IFRS for SMEs Accounting Standard” for small and medium-sized enterprises (SMEs) around the world.
It is a self-contained standard of fewer than 330 pages, designed specifically to address the needs and capabilities of SMEs, which represent more than 95% of companies globally.
Certain topics have been removed from the standard, including earnings per share, interim financial reporting, and segment reporting, areas typically not relevant for SMEs.
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The processes for recognising and measuring assets, liabilities, income, and expenses have also been simplified when compared with full IFRS Accounting Standards.
Key differences include amortisation of goodwill ; immediate expense recognition for all borrowing and development costs; the availability of the cost model option for associates and jointly-controlled entities; and exemptions for undue cost or effort relating to specific requirements.
Disclosure obligations are reduced by around 90%.
The language of the standard is written in straightforward terms to make it easier to read and translate internationally.
Updates to the standard are scheduled once every three years, which aims to limit the effort required from SMEs to adapt to changes.
Jurisdictions are free to adopt the IFRS for SMEs Accounting Standard regardless of whether they use full IFRS.
Each jurisdiction decides which entities may apply the standard. The board restricts its use only by those with public accountability.
Each module within the new supporting materials provides an overview of requirements, outlines significant estimates and judgements, compares procedures with those found in full IFRS standards, includes practical examples, and features knowledge checks.
Recently, the IFRS Foundation initiated the search process for finding a new managing director to succeed Michel Madelain, whose two-year term is ending soon.
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