On 9 July 2009, the IASB issued an IFRS designed for use by small and medium-sized entities (SMEs).
The IFRS for SMEs is a self-contained standard of about 230 pages tailored for the needs and capabilities of smaller businesses, which are estimated to account for over 95% of all companies around the world.
As disclosed in the Press Release announced on 9 July 2009, within the IFRS for SMEs, many of the principles in full IFRSs for recognising and measuring assets, liabilities, income and expenses have been simplified, topics not relevant to SMEs have been omitted, and the number of required disclosures has been significantly reduced. To further reduce the reporting burden for SMEs revisions to the IFRS will be limited to once every three years.
In particular, the IFRS for SMEs will :
(a) provide improved comparability for users of accounts
(b) enhance the overall confidence in the accounts of SMEs, and
(c) reduce the significant costs involved of maintaining standards on a national basis
The IFRS for SMEs will also provide a platform for growing businesses that are preparing to enter public capital markets, where application of full IFRSs is required.
The IFRS for SMEs is separate from full IFRSs and is therefore available for any jurisdiction to adopt whether or not it has adopted the full IFRSs. It is also for each jurisdiction to determine which entities should use the standard. It is effective immediately on issue.
Who can use this IFRS for SMEs ?
What is the criteria of Small and Medium-sized Entities (SMEs) who this standards applicable to ?
The definition of Small and medium-sized entities (SMEs) based on this standard are entities that :
(a) do not have public accountability, and
(b) publish general purpose financial statements for external users. Examples of external users include owners who are not involved in managing the business, existing and potential creditors, and credit rating agencies.
An entity has public accountability if :
(a) its debt or equity instruments are traded in a public market or it is in the process of issuing such intruments for trading in a public market (a domestic or foreign stock exchange or an over-the counter market, including local and regional markets), or
(b) it holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses. This is typically the case for banks, credit unions, insurance companies, securities brokers/dealers, mutual funds and investment banks.
Some entities may also hold assets in a fiduciary capacity for a broad group of outsiders because they hold and manage financial resources entrusted to them by clients, customers or members not involved in the management of the entity. However, if they do so for reasons incidental to a primary business (as, for example, may be the case for travel or real estate agents, schools, charitable organisations, co-operative enterprises requiring a nominal membership deposit, and sellers that receive payment in advance of delivery of the goods or services such as utility companies), that does not make them publicly accountable.
If a publicly accountable entity uses this IFRS, its financial statements shall not be described as conforming to the IFRS for SMEs - even if law or regulation in its jurisdiction permits or requires this IFRS to be used by publicly accountable entities.
A subsidiary whose parent uses full IFRSs, or that is part of a consolidated group that uses full IFRSs, is not prohibited from using this IFRS in its own financial statements if that subsidiary by itself does not have public accountability. If its financial statements are described as conforming to the IFRS for SMEs, it must comply with all of the provisions of this IFRS.
The complete IFRS for SMEs (together with the basis for conclusions, illustrative financial statements, and a presentation and disclosure checklist) can be downloaded free of charge from here : http://go.iasb.org/IFRSforSMEs.