The IFRS for SMEs Accounting Standard Update is a staff summary of news, events and other information about the IFRS for SMEs® Accounting Standard and related SME activities. The staff summary has not been reviewed by the International Accounting Standards Board (IASB).
This edition of the IFRS for SMEs Accounting Standard Update includes:
- an update on the IASB redeliberations of proposals in the Exposure Draft Third edition of the IFRS for SMEs Accounting Standard (Exposure Draft);
- an overview of the forthcoming addendum to the Exposure Draft;
- an update on the December 2023 meeting of the SME Implementation Group (SMEIG); and
- an overview of the prospective IFRS Accounting Standard for subsidiaries without public accountability.
Redeliberation of proposals in the Exposure Draft
In its meetings from June to November 2023, the IASB considered feedback from stakeholders and further deliberated proposals in the Exposure Draft. These meetings are part of the second comprehensive review of the IFRS for SMEs Accounting Standard (the Standard).
Tables 1 and 2 summarise the main decisions from these meetings.
Table 1—Tentative decisions by the IASB confirming proposals in the Exposure Draft
| Topic | IASB meeting | Tentative Decision |
|---|---|---|
| Definition of public accountability | June 2023 | To amend paragraph 1.3(b) of the Standard to list banks, credit unions, insurance companies, securities brokers/dealers, mutual funds and investment banks as examples of entities that often meet the second criterion of public accountability. |
| Revenue from contracts with customers | October 2023 | To revise Section 23 Revenue, to reflect the principles in IFRS 15 Revenue from Contracts with Customers. |
| Application of the control model | October 2023 | To retain the rebuttable presumption and to clarify how it is applied. |
| Recognition of development and borrowing costs | October 2023 | To retain the requirements in the Standard for recognising development and borrowing costs. |
| Accounting for joint arrangements | November 2023 |
|
| Measuring defined benefit obligations | November 2023 | To retain paragraph 28.19 of the Standard and to clarify how it is applied. |
Table 2—Tentative decisions by the IASB changing and adding to proposals in the Exposure Draft
| Topic | IASB meeting | Tentative Decision |
|---|---|---|
| Definition of public accountability | June 2023 | To withdraw the clarifying guidance in paragraph 1.3A of the Exposure Draft from the Standard. |
| Alignment with recent amendments to full IFRS Accounting Standards | October 2023 | To propose amendments to align the Standard with the amendments to full IFRS Accounting Standards issued in May 2023 (Supplier Finance Arrangements) and August 2023 (Lack of Exchangeability)—to be published as Addendum to the Exposure Draft. |
More detail on the IASB’s tentative decisions on the proposals in the Exposure Draft is available in the appendix to staff paper AP30 for the December 2023 IASB meeting.
At its December 2023 meeting, the IASB discussed possible changes to the proposals in the Exposure Draft for the following topics:
- fair value measurement;
- requirements for investment entities;
- presentation of equity instruments issued before an entity receives cash; and
- supplier finance arrangements and lack of exchangeability (see ‘Addendum to the Exposure Draft’).
The IASB’s tentative decisions at the December 2023 meeting are reported in the December edition of IASB Update.
More information about the project is available on the project page.
Addendum to the Exposure Draft
At its October 2023 meeting the IASB tentatively decided to include the amendments to full IFRS Accounting Standards for supplier finance arrangements and lack of exchangeability in the scope of the second comprehensive review.
The IASB tentatively decided to expose for public comment proposals to align:
- Section 7 Statement of Cash Flows of the Standard with Supplier Finance Arrangements, which amended IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures; and
- Section 30 Foreign Currency Translation of the Standard with Lack of Exchangeability, which amended IAS 21 The Effects of Changes in Foreign Exchange Rates.
The IASB discussed these proposals at its December 2023 meeting.
The IASB aims to publish the addendum to the Exposure Draft in H1 2024 and include the amendments to Section 7 and Section 30 in the third edition of the Standard which is expected to be published in H2 2024. Further information about the addendum to the Exposure Draft is available on the Addendum project page.
Update on the December 2023 SMEIG meeting
The SMEIG met on 5 December 2023 to discuss:
- proposed revised Section 23—SMEIG members were asked their views on staff suggestions to restructure Section 23 of the Exposure Draft to make it easy to navigate for SMEs with contracts with simple terms and conditions, and to omit requirements for topics that are not considered relevant to SMEs. These suggestions are based on feedback on the Exposure Draft and fieldwork with accounting practitioners. SMEIG members generally supported the staff suggestions.
- impairment of financial assets—SMEIG members were asked their views on staff research on the extent of SMEs with significant exposure to credit risk and implications for the proposals in the Exposure Draft for impairment of financial assets. Findings from the research indicate that it is difficult to estimate the number of SMEs that could have significant exposure to credit risk in a particular jurisdiction.
- supplier finance arrangements and lack of exchangeability—SMEIG members were asked their views on the staff recommendations in the December IASB papers for aligning the Standard with the requirements in full IFRS Accounting Standards on supplier finance arrangements and lack of exchangeability (see ‘Addendum to the Exposure Draft’). SMEIG members generally supported the staff recommendations.
The advice received from SMEIG members will be considered by the IASB in redeliberating the proposals in the Exposure Draft and developing the addendum to the Exposure Draft.
The agenda papers for the meeting are available under the meetings tab on the SMEIG group page. A meeting summary will be added to this page in the coming weeks.
Webcast on the prospective disclosure Standard for subsidiaries
The IASB has produced a new webcast that explains the requirements in the prospective reduced-disclosure IFRS Accounting Standard for subsidiaries.
SMEs that are subsidiaries would be eligible to apply this new IFRS Accounting Standard if they have a parent entity that prepares consolidated financial statements available for public use that comply with IFRS Accounting Standards.
The webcast is the first of a series of webcasts about the new Accounting Standard. It provides an overview of the new Standard, explains why the IASB developed the new Standard and explains who are the subsidiaries eligible to apply the new Standard.
The new Accounting Standard is expected to be issued in the first half of 2024, effective for annual reporting periods beginning on or after 1 January 2027 and early application is permitted. It is the result of the IASB’s Subsidiaries without Public Accountability: Disclosures project.
