The International Accounting Standards Board (IASB) is in the midst of its review of the International Financial Reporting Standard for Small- and Medium-Sized Entities (IFRS for SMEs), which was first issued in 2009 and has since been adopted by numerous countries around the world. The Comprehensive Review 2012-14 is intended to consider whether there is a need for any amendments to the standard. The SME Implementation Group (SMEIG), an advisory body to the IASB established to support and monitor the international adoption and implementation of the IFRS for SMEs, has been involved throughout the review.
As the next step in the review process, the SMEIG will consider the feedback received from respondents to the Exposure Draft (ED), Proposed amendments to the IFRS for SME, and develop a report of recommendations for the IASB. The feedback and issues raised by respondents to the ED are summarized in three staff papers.
According to the staff papers, most respondents to the ED supported the majority of the proposed changes. The papers outline the main issues raised by respondents as follows[i]:
(a) The most common concern raised was the decision of the IASB not to propose accounting policy options for revaluation of property, plant and equipment (PPE) and capitalisation of development/borrowing costs.
(b) Many respondents commented on the scope of the IFRS for SMEs. The following were the main views expressed:
(i) The scope should not be restricted to non-publicly accountable entities.
(ii) There is a disparity between the scope (all non-publicly accountable entities) and the primary aim of the IASB in developing the IFRS for SMEs in paragraph BC29 of the ED, which is seen to be a focus on smaller/less complex non-publicly accountable entities.
(iii) Better identify the needs of users of SME financial statements.
(iv) The IFRS for SMEs is still too complex for small owner managed entities.
(v) Credit unions should be excluded from the definition of ‘publicly accountable’.
(c) Most respondents commented on the IASB’s proposed approach for dealing with new and revised IFRSs. The following were the main issues raised:
(i) The criteria for assessing changes to full IFRSs should be expanded and improved.
(ii) Changes to the IFRS for SMEs should not be introduced until sufficient implementation experience exists for full IFRSs.
(iii) The simplifications under IAS 19 (2011) Employee Benefits should be incorporated during this review.
(iv) The IFRS for SMEs should be more closely aligned with full IFRSs.
(d) Most respondents supported aligning Section 29 Income Tax with IAS 12 Income Taxes. However, about half of these respondents also suggested simplifications or other modifications to the proposals in Section 29.
(e) Few respondents commented on many of the other proposed amendments.
The IFRS Foundation anticipates posting the report of the SMEIG’s recommendations to the IASB website in October 2014. The IASB will then consider the responses to the ED and the SMEIG recommendations and re-deliberate on the proposals in the ED. If all goes according to plan, the IASB will issue final amendments to the IFRS for SMEs in the first half of 2015.
IFAC and CNDCEC invite you to the WCOA 2014 where this topic will be debated during the Session 1.2 The evolution of private companies financial reporting.
[i] From Agenda Paper 1, pages 5 and 6
