Subsidiaries that are SMEs

Date recorded:

Project proposal—moving the project to the standard-setting programme (Agenda Paper 31)

In this session, the staff presented evidence for its conclusion that this project should be moved to the standard-setting programme.

The staff have identified three possible ways in which the project could proceed within the standard-setting programme. These are:

  • defer any further work on the project until the second comprehensive review is complete and the Board has issued amendments to the IFRS for SMEs Standard (Option X)
  • defer any further work on the project until the Australian Accounting Standards Board (AASB) has issued its simplified disclosure standard and then issue the standard as an IASB exposure draft (ED) (Option Y)
  • develop an ED as soon as possible (Option Z)

Staff recommendation

The staff recommend that the project be added to the standard-setting programme from the research programme (Part A of the paper). They recommend that the IASB develop an ED as soon as possible. (Part B of the paper).

The staff also propose that, while developing an ED, they consult with lenders that typically lend to non-publicly accountable entities and with preparers of subsidiary financial statements, and that this is more appropriate than a consultative group drawn from a broad membership (Part C of the paper).

Board discussion and voting

Two Board members were not present for this session. Hence, only 12 members voted on each matter.

All Board members in attendance approved the recommendation to move the project to the standard-setting programme.

Board members cited the potential cost-savings and potential growth in the use of full-IFRS as benefits. Some Board members were concerned about the effect this project could have on the review of the IFRS for SMEs and the potential burden placed on stakeholders who would need to comment on two projects rather than a single SME-related project. However, many other Board members stated that the user base of the two standards is different – the users of this standard are likely to be larger entities with multiple subsidiaries that have established practices in place to manage changes in accounting standards, rather than SME companies themselves.

Another concern related to the potential misalignment of the two SME- related standards. If a new IFRS is released, updated reduced disclosures would need to be produced at the same time. The question was posed how this would affect the IFRS for SMEs, which is not continuously updated. The discussion clarified that there would be a need for additional consideration when updating the IFRS for SMEs – the reduced disclosures (which would have been formulated using, potentially, different recognition and measurement requirements) may need to be amended to suit users’ needs.

The Board was asked to vote on whether they agreed that staff should continue their work on the project with the discussion of whether a Discussion Paper would be produced before an Exposure Draft being deferred to a future meeting. 10 Board members voted in favour of this, with two against.  

All Board members present voted in favour of not establishing a consultative group for the project.

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