The IFRS for SMEs Accounting Standard is a self-contained Standard (fewer than 330 pages) designed to meet the needs and capabilities of small and medium-sized entities (SMEs), which are estimated to account for more than 95% of companies worldwide.
Compared with full IFRS Accounting Standards (and many national GAAPs), the IFRS for SMEs Accounting Standard is less complex in a number of ways, namely:
- topics not relevant to SMEs are omitted, such as earnings per share, interim financial reporting and segment reporting.
- many principles for recognising and measuring assets, liabilities, income and expenses in full IFRS Accounting Standards are simplified. For example:
- goodwill is amortised;
- all borrowing and development costs are recognised as expenses;
- the cost model is available for associates and jointly-controlled entities; and
- undue cost or effort exemptions for specific requirements are available.
- significantly fewer disclosures are required (roughly a 90% reduction).
- the text is written in ‘plain English’, so it is easier to understand and translate.
- revisions are expected to be limited to once every three years, to reduce the burden for SMEs of having to adjust to any changes.
The IFRS for SMEs Accounting Standard is available for any jurisdiction to adopt, whether it has adopted full IFRS Accounting Standards, or not. Each jurisdiction must determine which entities should use the Standard. The only restriction set by the International Accounting Standards Board is that entities that have public accountability should not use the Standard.
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Small companies and other interested parties can submit implementation issues on the IFRS for SMEs Accounting Standard for consideration. Submitted issues will be dealt with by staff in one of two ways:
- Staff will refer the issue for consideration by the SME Implementation Group (SMEIG) if they think the issue is likely to meet the criteria in paragraph 20 of the Terms of Reference and Operating Procedures for the SMEIG. For these issues the SMEIG will then consider whether to develop non-mandatory implementation guidance to address the issue in the form of questions and answers (Q&As).
- Other issues will be considered by the staff when updating our education material or held for consideration during the next periodic review of the IFRS for SMEs Accounting Standard, as applicable.
The paragraph 20 criteria referred to above sets out that an issue should be pervasive, that unintended or inconsistent implementation has or is likely to occur because of lack of clarity in the Standard, and that the SMEIG can reach a consensus on the appropriate treatment on a timely basis.
