Monday, April 2, 2007

IASB publishes draft IFRS for SMEs

The International Accounting Standards Board (IASB) is today publishing for public comment the Exposure Draft of its International Financial Reporting Standard for Small and Medium-sized Entities ( IFRS for SMEs ).

The aim of the proposed standard is to provide a simplified, self-contained set of accounting principles that are appropriate for smaller, non-listed companies and are based on full International Financial Reporting Standards (IFRSs), developed primarily for listed companies. By removing choices for accounting treatment, eliminating topics that are not generally relevant to SMEs and simplifying methods for recognition and measurement, the resulting draft standard reduces the volume of accounting guidance applicable to SMEs by more than 85 per cent when compared with the full set of IFRSs. As a result, the Exposure Draft offers a workable, self-contained set of accounting standards that would allow investors for the first time to compare SMEs’ financial performance across international boundaries on a like for like basis.

In order to assist companies in preparing accounts based on the proposed IFRS for SMEs , the requirements of IFRSs have been simplified and redrafted using plain English where possible. However, SMEs that decide to upgrade to using full IFRSs would find the transition eased because both sets of standards are based on the same underlying principles.

Introducing the Exposure Draft, Sir David Tweedie, IASB Chairman, said:

Our goal has been to produce a standard for use by smaller and unlisted companies that offers the comparability of full IFRSs while reducing the burden on the preparing company. When completed, the SME standard will make the accounting requirements more accessible to smaller preparers in both developed and emerging markets. With this publication, we are now actively seeking the views of companies, banks, the audit profession, and other interested parties as part of a broad consultation to see if we’ve taken out too much or not enough or if we’ve got it about right.

The adoption of the IFRSs for SMEs will be a matter for each country or adopting jurisdiction to decide. For example, the EU requires listed companies to comply with International Financial Reporting Standards (IFRSs), but will leave it to Member States to decide which standards SMEs should follow. The IASB proposes that listed companies, however small, would not be eligible to use the IFRS for SMEs .

The Exposure Draft is available for e IFRS subscribers from today and will be freely available on the Website from 26 February 2007. The IASB invites comments on the Exposure Draft by 1 October 2007. As a step to facilitate broader consultation, the IASB will for the first time publish a proposed standard in translation. The Exposure Draft will be published in French, German and Spanish in April 2007: see the IASB Website for more details.

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