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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:

Get involved in the consultation on the Addendum Exposure Draft

On 28 March 2024, the IASB published the Addendum Exposure Draft which supplements the 2022 Exposure Draft.

The Addendum Exposure Draft is open for comment until 31 July 2024. Please submit your comments on the Addendum Exposure Draft electronically, either via comment letter or using the comment template.

The IASB will consider feedback on the Addendum Exposure Draft in its redeliberations in finalising the third edition of the IFRS for SMEs Accounting Standard (the Standard).

In the Addendum Exposure Draft, the IASB is proposing to supplement its proposals in the 2022 Exposure Draft with two groups of proposals:

  • Supplier Finance Arrangements—the proposed amendments to Section 7 Statement of Cash Flows respond to users’ concerns that information about some supplier finance arrangements is not sufficiently transparent in SMEs’ financial statements, hindering analysis by users; and
  • Lack of Exchangeability—the proposed amendments to Section 30 Foreign Currency Translation respond to stakeholder concerns about diversity of practice in determining whether a currency can be exchanged into another currency and estimating the exchange rate to use when a currency cannot be exchanged into another currency.

The April 2024 IFRS for SMEs Accounting Standards Update provided a more detailed overview of the proposals in the Addendum Exposure Draft, including highlighting which SMEs are likely to be affected.

Upcoming SMEIG meeting

A virtual SMEIG meeting will take place on 3 September 2024. The SMEIG is an advisory body to the IASB with the mission to support the international adoption, implementation and application of the IFRS for SMEs Accounting Standard.

At this meeting, the SMEIG will:

  • discuss the tentative decisions the IASB has made during its redeliberations of the proposals in the 2022 Exposure Draft; and
  • provide input to the IASB on responding to feedback on:
    • the Addendum Exposure Draft; and
    • the catch-up exposure draft on IFRS 19 Subsidiaries without Public Accountability: Disclosures.

Agenda papers will be made available closer to the date from the meeting page and from the ‘Meetings’ tab on the SMEIG page. The meeting will be webcast and a recording will be available afterwards.

Redeliberation of proposals in the 2022 Exposure Draft

At the IASB June 2023 meeting, the IASB started redeliberating the proposals in the 2022 Exposure Draft.

The December 2023 IFRS for SMEs Accounting Standard Update summarised the IASB’s tentative decisions on the 2022 Exposure Draft at its meetings between June and December 2023. Similarly, the April 2024 IFRS for SMEs Accounting Standards Update summarised the IASB’s tentative decisions on the 2022 Exposure Draft at its meetings between January and March 2024.

Table 1 and Table 2 summarise the IASB’s tentative decisions in April and May 2024.

Table 1—IASB tentative decisions confirming proposals in the 2022 Exposure Draft

Topic IASB meeting Tentative Decision
Revenue from Contracts with Customers April 2024 To confirm its proposals to require an SME to disclose:
  • the opening and closing balances of receivables, contract assets and contract liabilities from contracts with customers;
  • revenue recognised in the reporting period that was included in the contract liability balance at the beginning of the period; and
  • the closing balances of assets recognised from the costs incurred to fulfil a contract with a customer, by main category of asset.
Consolidated and Separate Financial Statements May 2024 To confirm its proposed amendment in the 2022 Exposure Draft that would require an SME to disclose the portion of the gain or loss resulting from the measurement of any investment retained in a former subsidiary at its fair value at the date when control is lost.
Transition to the Third edition of the Standard
 May 2024
  • To proceed with the transition requirements proposed in the 2022 Exposure Draft.
  • To add a relief from retrospective application for SMEs applying the amended paragraph 28.19 in Section 28 of the Standard. An SME applying the relief would not be required to adjust the carrying amount of assets covered by other sections of the Standard for changes in employee benefit costs that were included in the carrying amount before the date of initial application.

 

Table 2—IASB Tentative decisions to amend its proposals in the 2022 Exposure Draft

Topic IASB meeting Tentative Decision
Revenue from Contracts with Customers April 2024
  • To include: 
    • a requirement that an SME disclose revenue disaggregated into categories that depict its financial performance; and
    • examples of disaggregation categories that might be appropriate for SMEs to use.
  • To require an SME to disclose a description of the nature of the goods or services that the SME has promised to transfer to customers, highlighting any promises to arrange for another party to transfer goods or services to the customer. 
  • To require an SME to explain the judgements that had a significant effect on the amounts the SME recognised in its financial statements that it made when: 
    • determining the transaction price; and
    • allocating the transaction price to the promises identified in the contract.
  • To amend paragraph 4.11(b) of the Standard to remove the requirement for an SME to subclassify trade and other receivables to show separately receivables arising from accrued income not yet billed.
Fair Value Measurement April 2024 To include in the proposed new Section 12 Fair Value Measurement of the Standard the definition of ‘highest and best use’ used in IFRS 13 Fair Value Measurement. 
Revenue from Contracts with Customers

May 2024
  • To change the requirement proposed in paragraph 23.14(a)(ii) of the 2022 Exposure Draft to match paragraph 21(a)(ii) of IFRS 15 Revenue from Contracts with Customers.
  • Not to add the first sentence of paragraph 19 of IFRS 15 to the revised Section 23 proposed in the 2022 Exposure Draft.
  • To specify in the revised Section 23 that an SME accounts for a contract with renewal options based on the contract’s expected term for only the purpose of allocating the transaction price.
  • To change the requirements proposed in paragraph 23.11 of the 2022 Exposure Draft to match the last sentence of paragraph 11 of IFRS 15.
  • To change the requirements proposed in paragraph 23.42 of the 2022 Exposure Draft to match paragraph 49 of IFRS 15.
  • To change the requirement proposed in paragraph 23.110 of the 2022 Exposure Draft to match the first sentence of paragraph 99 of IFRS 15.
  • To change the requirements for accounting for refund liabilities proposed in the 2022 Exposure Draft to use the same level of confidence (highly probable) used in the requirements for accounting for variable consideration and sale with a right of return.
  • To add to the revised Section 23 the notion of a transformative relationship, as explained in paragraph BC116K of the Basis for Conclusions on IFRS 15.
Disclosure requirements  May 2024
  • To add a requirement to Section 11 Financial Instruments of the Standard for an SME to disclose a maturity analysis for financial liabilities (based on paragraph 39 of IFRS 7 Financial Instruments: Disclosures). 
  • To withdraw paragraph 6.3A of the 2022 Exposure Draft, which proposed to require an SME to disclose dividends paid (in aggregate or per share) separately for ordinary shares and other shares. 
  • To add a requirement for an SME to disclose (based on paragraph 137 of IAS 1 Presentation of Financial Statements):
    • the amount of dividends proposed or declared before the financial statements were authorised for issue, but not recognised as a distribution to owners during the period, and the related amount per share; and 
    • the amount of any cumulative preference dividends not recognised.
  • To add a requirement to Section 28 Employee Benefits of the Standard for an SME to disclose expected contributions to a defined benefit plan for the next annual reporting period (based on paragraph 147(b) of IAS 19 Employee Benefits).

Next steps

In January 2024 the IASB tentatively decided to require SMEs that provide financing to customers as one of their primary businesses to apply an expected credit loss model. At a future meeting the IASB will discuss the findings from the fieldwork performed to assess possible effects of incorporating this model in the Standard and decide how to proceed. 

The IASB will also discuss the feedback on the Addendum Exposure Draft.

More information is available from the Second Comprehensive Review of the IFRS for SMEs Accounting Standard project page.