IASB issues Exposure Draft of proposed amendments to IFRS for SMEs
The International Accounting Standards Board (IASB) has published an Exposure Draft (ED) of proposed amendments to its 'International Financial Reporting Standard for Small and Medium-sized Entities' (IFRS for SMEs). The proposals are the result of the first comprehensive review of that standard, which is to be conducted in three year intervals. The IASB suggests smaller changes to 21 of the 35 sections. Comments on ED/2013/9 are requested by 3 March 2014.
On 9 July 2009, the IASB had issued the International Financial Reporting Standard for Small and Medium-Sized Entities (IFRS for SMEs). This standard was meant to provide simplifications to the requirements in full IFRSs that reflect the needs of users of SMEs' financial statements and cost-benefit considerations. Compared with full IFRSs, it is less complex in that topics with no relevance to SMEs are omitted, policy choices are reduced, requirements in full IFRSs are simplified and disclosures are reduced.
In order to balance keeping the requirements of the IFRS for SMEs broadly in sync with those in full IFRSs on the one hand and reducing the burden stemming from regular changes to the literature on the other, the IASB had decided that the IFRS for SMEs should be subject to a review approximately once every three years. The Board had also decided that not necessarily all changes made to full IFRSs during that period would be copied to the IFRS for SMEs; rather, a change in full IFRSs would cause the Board to consider whether (and, if so, how) the current version should be amended.
The 2012-2014 review cycle
In conformity with its stated intent to review the IFRS for SMEs on a three years basis, the IASB commenced its first review in 2012. The review was initiated with the publication of a Request for Information (RfI) to solicit views from constituents as to which topics the IASB should consider for amendment. In parallel, the Board consulted its SME Implementation Group (SMEIG). The Board deliberated the feedback at its meetings in March to June 2013. When reviewing the feedback received the Board came to the conclusion not to suggest a major overhaul of the existing version, given that the Standard is still fairly new and has just been implemented by many entities. Therefore, the IASB suggested only limited amendments to the 2009 version IFRS for SMEs.
An overview of the suggested changes to the IFRS for SMEs
The vast majority of the proposed changes concern clarifications to the current text and, hence, will not constitute changes to the way entities account for certain transactions and events. A tabular overview of the sections suggested for amendments is reproduced below.
The one major exception to this general approach concerns section 29 on income taxes where the IASB had already anticipated finalisation of its proposed changes to IAS 12 Income Taxes. However, these changes were not finalised and the project was put on hold. To eliminate the difference between the key principles in accounting for income taxes in the IFRS for SMEs and IAS 12, the IASB now suggests to align the IFRS for SMEs with the current treatment in IAS 12.
|1 — Definition of an SME||Clarification with regard to publicly accountability added|
|2 — Concepts and pervasive principles||Added guidance on 'undue cost and effort' exemption|
|4 — Statement of financial position||Relief from requirement to disclose certain comparative information added|
|5 — Statement of comprehensive income and income statement||Clarification with regard to discontinued operations and alignment with changes made to IAS 1 on reclassifications added|
|6 — Statement of changes in equity and statement of income and retained earnings||Alignment with changes made to IAS 1 on OCI components added|
|9 — Consolidated and separate financial statements||Clarifications, guidance on dealing with different reporting dates, and amended definition of 'combined financial statements' added|
|11 — Basic financial instruments||Several clarifications and 'undue cost and effort' exemption regarding requirement to measure investment in equity instruments at FV added|
|12 — Other financial instruments issues||Several clarifications and 'undue cost and effort' exemption regarding requirement to measure investment in equity instruments at FV added|
|17 — Property, plant and equipment||Alignment with changes made to IAS 16 on classification of spare parts, stand-by and servicing equipment added|
|18 — Intangible assets other than goodwill||Modified requirement that useful life of intangible should not exceed 10 years when entities are unable to reliably estimate the useful life|
|19 — Business combinations and goodwill||Several minor amendments constituting clarifications, added guidance as well as modified requirement that useful life of goodwill not exceed 10 years when entities are unable to reliably estimate the useful life|
|20 — Leases||Clarifications added as to what arrangements (do not) constitute a lease|
|22 — Liabilities and equity||Some guidance, exemptions as well as alignment with full IFRSs regarding IFRIC 19 and IAS 32 added|
|26 — Share-based payment||Several clarifications added and scope aligned with IFRS 2|
|27 — Impairment of assets||Clarification regarding applicability to assets from construction contracts|
|28 — Employee benefits||Clarification added and disclosure requirements on accounting policy for termination benefits removed|
|29 — Income taxes||Alignment of key principles with IAS 12 as regards recognition and measurement of deferred tax and 'undue cost and effort' exemption regarding requirement to offset income tax assets and liabilities added|
|30 — Foreign currency translation||Scope clarified|
|33 — Related party disclosures||Definition of 'related party' aligned with IAS 24|
|34 — Specialised activities||Certain disclosure relief for biological assets as well as clarification of accounting for extractive activities added|
|35 — Transition to the IFRS for SMEs||Several changes to IFRS 1 incorporated and wording simplified|
|Glossary||Some definitions amended and five new terms added|
Comment deadline and next steps
Comments on ED/2013/9 Proposed Amendments to the IFRS for SMEs close on 3 March 2014.
The IASB will consider the comments it receives on the proposals and will then decide whether to proceed with any of the suggested amendments to the IFRS for SMEs.
Please click for:
- IASB press release
- Our IAS Plus project page for the Comprehensive review 2012-2014 of the IFRS for SMEs