EFRAG draft comment letter on the comprehensive review of IFRS for SMEs
Aug 24, 2012
The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the IASB's 'Request for Information: Comprehensive Review of the IFRS for SMEs' that was published for public comment in June 2012. EFRAG suggested that a two-step approach to the review could have been useful: (1) a high-level review of the IFRS for SMEs' objectives, keeping entities in mind when considering the requirements of the standard, and exploring how it should relate to full IFRS, then (2) a more detailed exploration of how changes to full IFRS should be reflected in IFRS for SMEs. Because this approach was not used, EFRAG encountered many questions and is split on two fundamental issues.
Firstly, EFRAG was split on the weight that different factors (such as stability, changes in user’s needs and alignment with full IFRS) should have when amending the IFRS for SMEs.
- View 1: IFRS for SMEs should only be amended when a problem has been identified through post-implementation reviews or there is other evidence that the standard does not work appropriately.
- View 2: All available and relevant information should be considered when amending the IFRS for SMEs, such as identified problems and changes to full IFRS.
- View 3: Most changes to full IFRS regarding measurement and recognition should also be reflected in the IFRS for SMEs as a result of the periodic reviews.
Secondly, EFRAG had differing views on including options in the IFRS for SMEs that would allow entities to apply accounting policies that would result in more similar outcomes to full IFRS.
- View A: Options would increase the costs and complexity of the standard and the resulting financial statements would be less comparable.
- View B: IFRSs for SMEs should include the same options for entities that are non-publicly accountable as for those that are, although they may be formulated in a simplified manner.
The draft comment letter also includes a 39-page appendix with questions for constituents related to the different views. Comments on EFRAG's draft comment letter are invited by 12 November 2012.