Learning IFRS for SMEs from PwC Publications

On July 9, 2009 the IASB published the International Financial Reporting Standard for Small and Medium-size Entities (IFRS for SMEs). The IFRS for SMEs applies to all entities that do not have public accountability. An entity has public accountability if it files its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instrument in a public market, or if it holds assets in a fiduciary capacity for a broad group of outsiders – for example, a bank, insurance entity, pension fund, securities broker/dealer.

The definition of an SME is therefore based on the nature of an entity rather than on its size.

The IASB developed this standard in recognition of the difficulty and cost to private companies of preparing full compliant IFRS information. It also recognised that users of private entity financial statements have a different focus from those interested in publically listed companies. IFRS for SMEs attempts to meet the user’s needs while balancing the costs and benefits to preparers.

IFRS for SMEs is a stand-alone standard; it does not require preparers of private entity financial statements to cross-refer to full IFRS.

One of the big four accounting firms, PricewaterhouseCoopers (PWC) has published several materials to help familiarise accounting practices with the requirement of this standards.

There are four downloadable IFRS for SMEs publications as listed below. Just click the link to download directly from the source pages :

1. Similarities and Differences : A Comparison of 'Full IFRS' and IFRS for SMEs 
2. IFRS for SMEs : Pocket Guide 2009
3. IFRS for SMEs - Illustrative Consolidated Financial Statements 2010
4. IFRS for SMEs: A Less Taxing Standard ?

Source : PwC - IFRS for SMEs

IFRS for SMEs, who can use this standard ?

Previously, on July 09, 2009 the IASB has published IFRS for SMEs.

This IFRS was designed for use by small and medium-sized entities (SMEs). Within this of about 230 pages tailored standards, many of the principles in full version of 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.

So, what is the criteria of small and medium-sized entities 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.

Related articles :

1. New Option for Private Companies in Streamlined IFRS (JofA)
2. Private Companies Get IFRS Made Easy (CFO.com)

Download from here : Deloitte - IFRS for SMEs in your pocket

AICPA IFRS for SMEs-US GAAP Comparison Tool

The American Institute of CPAs (AICPA) staff have developed an IFRS for SMEs–US GAAP Comparison Tool, which is being added to collaboratively by those who use the tool. AICPA technical staff monitor and review the additions. Here is an excerpt of the AICPA's description:

The purpose of this Wiki is to provide a detailed and comprehensive comparison of the International Accounting Standards Board's International Financial Reporting Standard for Small-and Medium-Sized Entities ('IFRS for SMEs') with corresponding requirements of United States generally accepted accounting principles ('US GAAP'). But this is more than just a comparison resource, it is a Wiki. That means it is a collaborative, ongoing work in progress for anyone to contribute and use.

You can access the AICPA IFRS for SMEs – US GAAP Comparison Tool at http://wiki.ifrs.com/

Where to obtain IFRS for SMEs materials

• The standard online
  (English, Spanish, Italian and Romanian)
• The standard in hard copy
• Presentations at 'Train the Trainers' Workshops
• Training materials in PDF format
• Past issues of the IFRS for SMEs Update

Source : IFRS for SMEs Update – Issue 2010-2, 14 April 2010

Recent adoptions of the IFRS for SMEs

We try to keep track of jurisdictions that have adopted, or are planning to adopt, the IFRS for SMEs. Our list currently includes 60 jurisdictions. In a future Update we will include a summary. Meanwhile, in the past few weeks we have become aware of the following adoptions:

Argentina. On 19 March 2010, the Federación Argentina de Consejos Profesionales de Ciencias Económicas (the national professional accounting body in Argentina) issued an exposure draft proposing to adopt the IFRS for SMEs as an option for all entities not required to use full IFRSs. The SME exposure draft proposes that those private entities should also be permitted to use accounting standards that the Federation has issued or may issue in the future. Full IFRSs will be required in Argentina for all companies that publicly offer equity or debt securities starting in 2012, with an option to use IFRSs in 2011 or, in some cases, 2010.

Brazil. In December 2009, the Brazilian Accounting Pronouncements Committee (Comitê de Pronunciamentos Contábeis, or CPC) adopted a Portuguese version of the IFRS for SMEs as an option for SMEs in Brazil. By Resolution 1255 of 2009, the CPC's SME standard was endorsed by the Brazilian Federal Accounting Council (Conselho Federal de Contabilidade, or CFC), the national professional body. The standard is a temporary and unofficial translation of the IFRS for SMEs that is available on the CPC website pending completion of the official translation by the IFRS Foundation. It is anticipated that auditors will be able to report that financial statements that comply with the CPC's SME standard are in conformity with the IFRS for SMEs because there are no substantive differences between the unofficial Portuguese translation and the IFRS for SMEs. The estimated number of SMEs in Brazil (January 2009) was 5.9 million, representing 99 per cent of Brazilian enterprises. While many of them are expected to continue to follow a very simple accounting system permitted under the Brazilian SMEs law, many others are expected to switch to the Brazilian IFRS for SMEs equivalent. For example, the Brazilian National Development Bank (Banco Nacional de Desenvolvimento Econômico e Social, or BNDES) is expected to encourage or even require all of its borrowers (approximately 250,000 SMEs) to use the new standard.

Costa Rica. The Costa Rican Institute of Certified Public Accountants Colegio de Contadores Publicos de Costa Rica is, by law, the accounting standard setter in Costa Rica. Currently, all companies follow IFRSs with the exception of some regulated entities (banks and finance entities, stockbrokers, and pension funds), which follow accounting policies adopted by the regulators. The Institute has adopted the IFRS for SMEs, to be effective for financial years beginning 1 January 2010. However, the Institute is still deliberating which entities will qualify as SMEs, and are therefore eligible to use the IFRS for SMEs.

Dominican Republic. In the Dominican Republic, the Instituto de Contadores Publicos Autorizados de la Republica Dominicana (Institute of CPAs of the Dominican Republic, or ICPARD) has had the legal power to establish accounting standards in accordance with article 31 of Law 479-08 since July 2009. In February 2010 the ICPARD adopted two resolutions:

• Listed companies. Resolution 001 requires the use of full IFRSs for companies whose shares are quoted on the Stock Exchange of the Dominican Republic starting in 2014 (some individual IFRSs will be mandatory starting in 2010).
• Other companies. Resolution 002 requires the use of the IFRS for SMEs for all companies whose shares are not quoted on the stock exchange (other than government-regulated companies). The resolution provides for a two-step implementation of the IFRS for SMEs, requiring some sections as mandatory starting in 2010, while the remaining sections become mandatory in 2014. In addition, the resolution allows unlisted companies that currently prepare financial statements in accordance with US GAAP to continue to do so up to 2014, when they will need to switch to the IFRS for SMEs. If the IFRSs for SMEs does not address an accounting question, Resolution 002 requires companies to follow full IFRSs and then US GAAP.

Namibia. By Resolution of its Council, the Institute of Chartered Accountants of Namibia has adopted the IFRS for SMEs for use in Namibia for financial statements authorised for issue after 17 February 2010. Applicability is as follows:

1. The Council of the Institute has decided that the IFRS for SMEs may be applied by: a 'public company' or a 'private company', as defined in the Companies Act, 1973, if it does not have public accountability as defined in Section 1 of the IFRS for SMEs.
2. For entities other than companies where the founding document or other regulation requires compliance with a 'fair presentation framework' as contemplated by the International Federation of Accountants ('IFAC') the IFRS for SMEs may be applied, if the entity does not have public accountability as defined in Section 1 of the IFRS for SMEs, except in the circumstances described in 4 below.
3. For entities where legal provisions or other regulations require compliance with a specific financial reporting framework (other than the IFRS for SMEs), such an entity may not apply the IFRS for SMEs even if it does not have public accountability as defined in Section 1 of the Statement of IFRS for SMEs.
4. For entities whose financial reporting framework is not set out by legal provisions, the founding statement or other regulations, if such an entity does not have public accountability, as defined in Section 1 of the Statement of IFRS for SMEs, it should assess whether it is appropriate to apply the IFRS for SMEs.

Philippines. The IFRS for SMEs has been adopted in the Republic of the Philippines effective 1 January 2010. It is known as the Philippine Financial Reporting Standard for SMEs (PFRS for SMEs). In the Philippines, listed companies, large unlisted companies, financial institutions, and public utilities are all required to use full PFRSs, which are nearly identical to full IFRSs. The PFRS for SMEs must be used by any other entity that has total assets of between P3,000,000 and P350,000,000 (US$70,000 to $8,000,000) or total liabilities of between P3 million and P250 million (US$70,000 to $5,500,000). Entities below those thresholds (so-called 'micro entities') may use the PFRS for SMEs or 'another acceptable basis of accounting'.

Source : IFRS for SMEs Update – Issue 2010-2, 14 April 2010)

Deloitte’s IFRS for SMEs in Your Pocket

Deloitte's IFRS Global Office has published the Global Edition of IFRS for SMEs in Your Pocket. This 45-page guide to the IFRS for SMEs is similar to Deloitte's very popular IFRSs in Your Pocket guide to full IFRSs. IFRS for SMEs in Your Pocket takes each section of the IFRS for SMEs, summarises its requirements, and highlights differences with full IFRS requirements. There is also a chronology of the development of the IFRS for SMEs and a discussion of how the IFRS for SMEs differs from full IFRSs. Click to download : IFRS for SMEs in Your Pocket (PDF 406k).

Source : IAS Plus Home Page

IASC Foundation publishes second batch of training material for the IFRS for SMEs

This was an email alert from eFIRS on March 3, 2010 :

The International Accounting Standards Committee (IASC) Foundation published today the second batch of training material for the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs).

Access the training material online:

The free-to-download training material can be accessed here.

More information:

• Read the press release
• Access the IFRS for SME pages to learn more about the standard

NEW - IFRS for SMEs Alert:
The IASC Foundation has introduced an IFRS for SMEs email alert to allow interested parties to keep up to date on developments related to the standard.

• To receive news relating to the IFRS for SMEs, register your interest here.

IFRS for SMEs Training Material

The International Accounting Standards Committee Foundation (IASC Foundation) today published the first part of its comprehensive set of training materials for the IFRS for SMEs. The free-to-download training material forms part of a range of initiatives undertaken by the IASC Foundation and the International Accounting Standards Board (IASB) to support the widespread adoption of the IFRS for SMEs.

The IFRS for SMEs was published by the IASB in July 2009 following an extensive development programme, including widespread consultation with interested parties. The standard is designed for use by small and medium-sized entities (SMEs), which are estimated to constitute more than 95 per cent of all companies.

The training material is designed to assist companies and accounting practitioners in applying the standard. It will also assist educators in teaching how to apply the IFRS for SMEs. Once completed, the training material will comprise 35 separate modules—one for each section of the IFRS for SMEs. The first twelve modules are now available for download from the IASB website (http://www.iasb.org/IFRS+for+SMEs/Training+material.htm). The remaining modules will be published in the course of this year as they are completed. Each module guides the learner through the official text, develops the learner’s understanding of the requirements through the use of examples, and points out where significant judgements are required. It also includes questions designed to test the learner’s knowledge of the requirements as well as case studies to develop the learner’s ability to apply the IFRS for SMEs.

The training material is part of a range of measures taken by the IASC Foundation and the IASB to support and facilitate the implementation of the IFRS for SMEs around the world. In particular:

(a) The IASB developed implementation guidance to accompany the IFRS for SMEs, consisting of illustrative financial statements and a presentation and disclosure checklist.

(b) This year, in co operation with regional professional associations and the world’s development agencies, the IASC Foundation will begin a series of regional ‘train the trainers’ workshops. These workshops will focus on building capacity for the implementation of the IFRS for SMEs, particularly in developing and emerging economies. The first series of workshops, which has been organised jointly with the Confederation of Asian Pacific Accountants, will take place in India and Malaysia in January 2010. Further workshops are being planned jointly with regional professional associations in Africa, the Caribbean and elsewhere.

(c) The Trustees of the IASC Foundation will finalise, later this month, the terms of reference and operating procedures of the SME Implementation Group.

Source : www.iasb.org

IASB Publishes IFRS for Small and Medium-sized Entities

On Thursday, 9 July 2009, IASB has published the IFRS for SMEs. Following is the Press Release which was posted from the IASB website :

The International Accounting Standards Board (IASB) issued today an International Financial Reporting Standard (IFRS) designed for use by small and medium-sized entities (SMEs), which are estimated to represent more than 95 per cent of all companies*. The standard is a result of a five-year development process with extensive consultation of SMEs worldwide.

The IFRS for SMEs is a self-contained standard of about 230 pages tailored for the needs and capabilities of smaller businesses. 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.

Benefits

The IFRS for SMEs responds to strong international demand from both developed and emerging economies for a rigorous and common set of accounting standards for smaller and medium-sized businesses that is much simpler than full IFRSs. 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.

Rigorous development

In developing the IFRS for SMEs the IASB consulted extensively worldwide. A 40-member Working Group of SME experts advised the IASB on the structure and content of the IFRS at various stages in its development. The exposure draft of the IFRS, published in 2007, was translated into five languages to assist SMEs in responding to the proposals. More than 50 round-table meetings and seminars were held to receive direct feedback, and the draft IFRS was field-tested by over 100 small companies in 20 countries. As a result, further simplifications have been achieved in the final document.

Paul Pacter, Director of Standards for SMEs for the IASB, has agreed to lead a group to support international adoption of the standard. Further details of this group will be announced shortly.

Global education initiative

To support the implementation of the IFRS for SMEs the IASC Foundation is developing comprehensive training material. The Foundation is also working with international development agencies to provide instructors for regional workshops to ‘train the trainers’ in the use of the training material, particularly within developing and emerging economies. The training material will be published in a number of languages. The English language material will be downloadable free of charge from the IASB’s website in late 2009.

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 http://go.iasb.org/IFRSforSMEs from today.

Introducing the IFRS for SMEs, Sir David Tweedie, IASB Chairman, said:

The publication of IFRS for SMEs is a major breakthrough for companies throughout the world. For the first time, SMEs will have a common high quality and internationally respected set of accounting requirements. We believe the benefits will be felt in both developed and emerging economies.
I thank Paul Pacter for his tireless efforts in leading the project, as well as the hundreds of people and SMEs worldwide who have assisted in the development of the IFRS.

Commenting on the announcement, Paul Pacter, Director of Standards for SMEs, said:

The IFRS for SMEs will provide businesses with a passport to raise capital on a national or an international basis.

Journal of Accountancy on July 9, 2009 has commented the release of this IFRS for SMEs standard through its article titled “New Option for Private Companies in Streamlined IFRS.”

U.S. private companies have a new choice for accounting and financial reporting—a slimmed-down version of IFRS tailored more to their needs. IFRS for SMEs (small- and medium-size entities) is a simplification of full IFRS. The International Accounting Standards Board (IASB), which released the standard Thursday after five years of work on the project, defines SMEs as businesses that publish general-purpose financial statements for external users and do not have public accountability. Many U.S. private companies would fit that definition.

Read further in here >>. And another related article from CFO.com in here >>