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IASB issues finalised amendments to the IFRS for SMEs

21 May 2015

The International Accounting Standards Board (IASB) has published amendments to its 'International Financial Reporting Standard for Small and Medium-sized Entities' (IFRS for SMEs). The amendments are the result of the first comprehensive review of that standard, which was originally issued in 2009. They affect 21 of the 35 sections of the standard (not counting consequential amendments) and the glossary, however, most of the changes are rather minor. The amendments are effective for annual periods beginning on or after 1 January 2017 with earlier application permitted.


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 as 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 and concluded 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 in an Exposure Draft published in October 2013.


An overview of the changes to the IFRS for SMEs

The vast majority of the 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 affected by the amendments is reproduced below (the table does not list consequential amendments).

Three amendments are however of larger impact:

  • The standard now allows an option to use the revaluation model for property, plant and equipment as not allowing this option has been identified as the single biggest impediment to adoption of the IFRS for SMEs in some jurisdictions in which SMEs commonly revalue their property, plant and equipment and/or are required by law to revalue property, plant and equipment;
  • the main recognition and measurement requirements for deferred income tax have been aligned with current requirements in IAS 12 Income Taxes (in developing the IFRS for SMEs, the IASB had already anticipated finalisation of its proposed changes to IAS 12, however, these changes were never finalised); and
  • the main recognition and measurement requirements for exploration and evaluation assets have been aligned with IFRS 6 Exploration for and Evaluation of Mineral Resources to ensure that the IFRS for SMEs provides the same relief as full IFRSs for these activities.


1 — Definition of an SME

Clarification with regard to publicly accountability and clarification with regard to the use of the IFRS for SMEs in the parent's separate financial statements added

2 — Concepts and pervasive principles Added guidance on the 'undue cost and effort' exemption
4 — Statement of financial position

Requirement to present investment property measured at cost less accumulated depreciation and impairment separately on the face of the statement of financial position added and relief from requirement to disclose certain comparative information provided

5 — Statement of comprehensive income and income statement

Clarification with regard to the single amount presented for discontinued operations added and alignment with changes made to IAS 1 on reclassifications

6 — Statement of changes in equity and statement of income and retained earnings Alignment with changes made to IAS 1 on OCI components
9 — Consolidated and separate financial statements Clarifications on consolidation, guidance on dealing with different reporting dates, clarifications on disposal of subsidiaries, option to to account for investments in subsidiaries, associates and jointly controlled entities in separate financial statements using the equity method, and amended definition of 'combined financial statements' added
11 — Basic financial instruments Several clarifications and 'undue cost and effort' exemption regarding the requirement to measure investments in equity instruments at FV added
12 — Other financial instruments issues Clarifications on the scope of this section and clarifications regarding hedge accounting added
17 — Property, plant and equipment Alignment with changes made to IAS 16 on classification of spare parts, stand-by and servicing equipment, exemption regarding the use of cost of the replacement, and option to use the revaluation model for property, plant and 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, and addition of an undue cost or effort exemption regarding the requirement to recognise intangible assets separately in a business combination
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 added and the main recognition and measurement requirements for exploration and evaluation assets aligned with IFRS 6
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


Dissenting opinion

One board member expressed a dissenting opinion regarding the Board's decision to make reporting of non-cash distributions at fair value subject to an undue cost or effort exemption (exemption added to Section 22 — Liabilities and equity). This board member is concerned that the undue cost or effort relief will deprive financial statement users of relevant information about the value of assets distributed to owners. Although the IFRS for SMEs includes a number of undue cost or effort exemptions, this board member believes that exemptions should only be granted if the costs clearly outweigh the benefits to users of having the information.


Effective date

Entities reporting using the IFRS for SMEs are required to apply the amendments for annual periods beginning on or after 1 January 2017. Earlier application is permitted.


Additional Information

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The IASB notes that a complete revised version of the IFRS for SMEs will be issued in the next few months.


FEE advocates "proportionally applying IFRS to all companies listed on pan-European funding and trading platforms"

21 May 2015

The Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) has responded to the European Commission's public consultation 'Building a Capital Markets Union' and the question whether there is value in developing a common EU level accounting standard for small and medium-sized companies. FEE believes that "using a common accounting framework would provide significant value for SMEs that intend to access pan-European funding and trading platforms" and also states that "the current patchwork of accounting frameworks based on the EU Accounting Directive cannot serve as the basis for such a single framework".

FEE argues that the lack of a common framework reduces comparability between financial statements and thereby hinders potential investors (both within and outside the EU) in making decisions about cross border investments. Therefore, FEE claims, the EU needs a high quality reporting framework that can be understood by investors from across the EU and from third countries. FEE advocates proportionate application of IFRS to all companies listed on pan-European trading platforms and intending to access cross border capital investment extending also to the individual financial statements of all listed entities including those which are not required to produce consolidated accounts.

In its assessment, FEE considered four alternatives:

    1. proportionate application of IFRS to all companies listed on pan-European trading platforms and intending to access cross border capital investment;
    2. maintenance of the status quo (no common framework);
    3. development of an EU specific common accounting standard; and
    4. using the IFRS for SMEs.

FEE concluded that 2. would not be an option as it hinders potential investors in making decisions about cross border investment, 3. would take too long and would lead to the inclusion of too many member state options and would also isolate the European market, and 4. expressly states that it is not suitable for listed companies and also differs in some key aspectss from full IFRSs. Therefore, FEE believes that 1. is the best option available. The comment letter states:

We envisage that this could be achieved through ongoing simplification of recognition and measurement requirements of IFRS, and reduced disclosures through the completion of the Disclosure Initiative project of the IASB. [...] However, it should be noted that, at present, it is not clear whether the benefits of such a framework would outweigh the costs for SMEs. Therefore a thorough impact assessment should be conducted.

Please click to access the full response on the FEE website.

Canadian standard-setter sees role as international mediator

21 May 2015

The Canadian Accounting Standards Board (AcSB) has issued its Draft Strategic Plan 2016 – 2021. Internationally, the AcSB proposes that it will continue its efforts to encourage the IASB and the FASB to narrow the differences between their respective sets of standards. It will also monitor the effective date decisions of jurisdictions applying IFRSs and work with others to encourage a common date for global adoption of new standards.

Given the frequency of cross-border activities and comparisons made between Canadian and U.S. entities operating in the same industries, Canada has traditionally liaised closely with the FASB. The AcSB intends to use this advantage to help IASB and the FASB to find continued ways to converge their respective sets of standards. To this end, it proposes to "assist in the identification of qualified Canadians to serve on the advisory groups of those two Boards, and liaise with the FASB on matters of mutual interest".

The AcSB has adopted a policy of incorporating into Canadian GAAP new or amended IFRSs, as issued by the IASB, after completing its own due process, which is usually within three to eight months of their release by the IASB. As a consequence, Canadians can find themselves among the first to adopt, and interpret, a significant and complex new or amended IFRS - with all the challenges, risks and costs associated with it. Therefore, the AcSB proposes to "work with the IASB, securities regulators and standard setters in other jurisdictions to minimize the challenges faced by Canadians in being among the first to adopt and interpret significant and complex new or amended standards" - if possible by encouraging a common date for global adoption of new standards. This would of course also add to increased international comparability.

Please click to access the Draft Strategic Plan 2016 – 2021 on the AcSB website.

Accounting for sovereign debt restructurings under IPSAS

21 May 2015

The staff of the International Public Sector Accounting Standards Board (IPSASB) have developed a short audio podcast and an accompanying publication to highlight how International Public Sector Accounting Standards (IPSASs) reflect the accounting consequences of sovereign debt restructuring transactions.

Both, the podcast and the publication, use a question and answer format and highlight issues which may be encountered in a sovereign debt restructuring. They illustrate how IPSASs, at a high level of principle, capture the economic consequences of debt restructurings. The relevant standards (IPSASs 28–30) were developed in 2008 with reference to the IFRS financial instruments standards in place at that time (IAS 32, IAS 39, and IFRS 7); a project to update the standards with reference to the requirements of IFRS 9 has been added to the IPSASB's agenda.

Please click to access the podcast (6 minutes) and the accompanying publication (5 pages) on the IPSASB website.

Designated new EFRAG President will not take office

19 May 2015

The European Commission had nominated Mr Wolf Klinz as President of the Board of the European Financial Reporting Advisory Group (EFRAG) in March. He was expected to take office by June after his nomination had been approved by the European Parliament and Council and after appointment by the General Assembly of EFRAG. However due to ill health Mr Klinz has decided not to accept the EFRAG Presidency.

Mr Roger Marshall will continue to act as President ad interim until a final President is appointed. The European Commission will nominate another candidate for the Presidency as soon as possible.

Please click to access the announcement on the EC website.

IASB officially proposes to defer the effective date of IFRS 15

19 May 2015

The International Accounting Standards Board (IASB) has published the expected Exposure Draft (ED) aimed at deferring the effective date of IFRS 15 'Revenue from Contracts with Customers' to 1 January 2018. Comments are requested by 3 July 2015.



On 28 May 2014, the IASB issued IFRS 15 with an effective date of 1 January 2017 with earlier application permitted. After issuing the new revenue standard, which is substantially the same as the FASB's ASU 2014-09 Revenue from Contracts with Customers, the IASB and the FASB formed the joint Revenue Transition Resource Group to support the implementation of the new standard. As result of the discussions of the resource group, the IASB has tentatively decided to propose some targeted amendments to IFRS 15. As some entities may wish to apply these amendments at the same time as they first apply IFRS 15, the IASB believes that a deferral of the effective date by one year would provide additional time for these entities to implement the amended standard. The IASB also acknowledges that IFRS 15 was issued later than had been intended, so implementation time was shorter than anticipated. Lastly, at the time of the IASB's discussion, the FASB had already decided to propose to defer the effective date of their revenue standard by one year (a proposed ASU to that effect has by now been published) and the IASB concluded that it would be less confusing for the market if both IFRS and US GAAP preparers apply the new standard at the same time.


Suggested changes

The amendments proposed in ED/2015/2 Effective Date of IFRS 15 (proposed amendments to IFRS 15) merely aim at changing the mandatory effective date of IFRS 15 from annual periods beginning on or after 1 January 2017 to annual periods beginning on or after 1 January 2018. Earlier application of IFRS 15 would continue to be permitted. Entities would also continue to be permitted to choose between applying the standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the standard recognised at the date of initial application.

The targeted amendments to IFRS 15 to clarify particular aspects of the requirements are not part of the Exposure Draft published today. Those proposed amendments will be included in a further Exposure Draft to be published later in 2015.


Additional information

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ASBJ publishes research paper on the amortisation of goodwill

19 May 2015

The Accounting Standards Board of Japan (ASBJ) has published the Research Paper No.1 'Research on Amortisation of Goodwill' with a view to make a contribution to the global discussion regarding how goodwill should be accounted for.

The research paper provides preliminary results of the research by the staff of the ASBJ into the following aspects:

  • Review of public disclosures regarding the accounting practice of how to determine goodwill amortisation periods under the Japanese accounting standards;
  • Suvery to find recent accounting practices of major Japanese listed companies relating to goodwill amortisation;
  • Limited review of academic literature; and
  • Discussion with financial statements users in Japan regarding their views on the amortisation of goodwill.

Based on these research activities, the paper notes the following observations:

    1. The review of public disclosures and responses to the survey from major Japanese listed companies indicated that 5 years was often estimated as the amortisation period for many business combinations. However, for goodwill arising from larger scale business combinations, many companies estimated longer periods (such as 10 years and 20 years) to reflect the longstanding effect that the goodwill is expected to have.
    2. As a result of the review of academic literature, the ASBJ staff found that, at least, it is difficult to immediately conclude that the impairment-only approach is superior to the amortisation and impairment approach.
    3. The majority of Japanese financial statement users expressed support for the amortisation and impairment approach.

The ASBJ anticipates that this paper will inform the work jointly carried out by the ASBJ, EFRAG and the OIC with regard to how goodwill should be accounted for and disclosed. The ASBJ also hopes that the paper will help stimulate the global discussion of accounting requirements for goodwill.

Please click to download the paper from the ASBJ website.

EFRAG, EFFAS/ABAF, and IASB announce joint outreach event on profit or loss and OCI

19 May 2015

The European Financial Reporting Advisory Group (EFRAG), the European Federation of Financial Analysts Societies (EFFAS) and the Association Belge des Analystes Financiers (ABAF), and the International Accounting Standards Board (IASB) have announced a new joint outreach event will be held on 1 July 2015 to discuss how profit or loss (P&L) could become more useful and what the role of other comprehensive income (OCI) is.

In particular, the outreach event is seeking input from investors on ways to improve the usefulness of P&L and will discuss the following questions with the participants:

  • Is P&L the starting point in your analysis? If not, what is?
  • Are there items included in the P&L that you eliminate? What are they?
  • Are there elements that you need but that you do not find in the P&L statement?
  • Are there items shown in OCI that you include in your analysis? If you do not use OCI, why not?
  • Should bad news (adverse litigation, for example) be reflected earlier than good news that is expected but still uncertain?
  • When assets are measured at fair value through P&L, how do you treat the gains and losses associated with the changes in value during the period?
  • Do you trust P&L items more than balance sheet items?

Registration for this event is requested by 24 June 2015.

For more information, see the press release on the EFRAG website.

Deloitte publishes fifth annual global IFRS banking survey

18 May 2015

Deloitte has issued its 'Fifth Global IFRS Banking Survey — Finding your way'. The report captures the current views of 59 major banking groups—including 12 of the 18 global systemically important financial institutions (G-SIFIs)—on recent accounting and regulatory changes. With IFRS 9 published and the FASB's CECL project expected to come to a conclusion soon, this study focuses on how banks are approaching the implementation of the anticipated IFRS 9/FASB CECL model requirements in their organisations.

It summarises key findings such as:

  • Total anticipated implementation budgets have doubled in the year since our previous survey.
  • 76% of banks surveyed expect bank accounts to be more useful for regulators under the new rules.
  • A majority of respondents expect to use one or more of the operational simplifications available, despite discouragement from the Basel Committee on Banking Supervision (BCBS).
  • 85% of banks surveyed anticipate their expected credit loss provisions to exceed those calculated under Basel rules, mostly driven by the provision of lifetime expected losses under "stage II".
  • More than half of respondents indicated that they do not have enough technical resources to deliver their IFRS 9/FASB CECL project and a quarter of these further doubt that there will be sufficient skills available in the market to cover any shortfall.

Click for previous surveys:

Study of the CFA Institute on the role of comprehensive income

18 May 2015

The CFA Institute, a global association of investment professionals, has published 'Analyzing Bank Performance: Role of Comprehensive Income'. The study argues that the information reported on the statement of other comprehensive income (OCI) is an integral part of performance reporting and that there is a need to increase investor attention on OCI statement items.

The report reviews existing academic evidence and analyses data from 44 global and mainly large, complex banks over an eight-year reporting period (2006–2013). Although it focuses on banks, the findings are more widely applicable as the question of what constitutes performance is highly relevant and will also be one of the central questions of the forthcoming exposure draft on the Conceptual Framework project.

The study findings show that OCI information has economic information content and that losses on the OCI statement are more common than losses on the income statement. Therefore, the authors (who include a Trustee, a member of the IFRS Advisory Council, and a member of the IFRS Interpretations Committee) propose the following measures to enable and encourage investors to increase scrutiny and incorporate OCI in their valuation and performance analysis:

  • enhancement of the presentation and disclosure of OCI line items by financial statement preparers and standard-setters,
  • explanation of the purpose of OCI within the conceptual framework and incorporation of enhanced presentation principles into the intended performance reporting project, and
  • incorporation of granular OCI information into data aggregators' electronic databases to facilitate increased investor access.

Please click to access the study on the CFA Institute's website.

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