Cover Paper (Agenda Paper 30)

In January 2020, the IASB published Request for Information (RfI) Comprehensive Review of the IFRS for SMEs Standard. The comment period ended on 27 October 2020.

After reviewing the feedback received on the RfI, the IASB tentatively decided to develop an Exposure Draft (ED) for amendments to the IFRS for SMEs Standard using the alignment approach.

At its May 2021 meeting, the IASB started deliberating specific sections of the IFRS for SMEs Standard that could be aligned with new requirements in IFRS Accounting Standards in the scope of the review.

At its March 2022 meeting, the IASB decided on an approach to develop proposed amendments to the disclosure requirements in the IFRS for SMEs Accounting Standard that would result in consistency between these disclosure requirements and ED/2021/7 Subsidiaries without Public Accountability: Disclosures. At this meeting the IASB will deliberated the exceptions to that approach. 

Towards an exposure draft—disclosures (Agenda Paper 30A)

This paper discussed how the principles agreed at the March 2022 IASB meeting will be applied when proposing amendments to the disclosure requirements in the IFRS for SMEs Accounting Standard and asked for the IASB’s approval of the small number of exceptions and additional disclosures recommended.

Staff recommendation

The staff recommended the IASB propose amendments to the disclosure requirements in the IFRS for SMEs Accounting Standard as follows:

• In 18 sections of the IFRS for SMEs Accounting Standard, there are no recognition and measurement changes to be proposed so there are also no recommendations to amend the disclosure requirements
• In 14 sections of the IFRS for SMEs Accounting Standard, the IASB has tentatively decided to propose alignment of recognition and measurement requirements with IFRS Accounting Standards; therefore, this will lead to changes to the disclosure requirements for alignment with those proposed in ED/2021/7
• In 3 sections of the IFRS for SMEs Accounting Standard, the IASB has tentatively decided to propose partial alignment of recognition and measurement requirements with IFRS Accounting Standards. In this paper the staff recommend amendments to disclosure requirements for Section 11 Financial Instruments and Section 34 Specialised Activities and will consider bringing recommendations to Section 33 Related Party Disclosure to a future IASB meeting.

For Section 11, the staff recommended:

• A further disclosure reduction for impairment losses on financial assets measured at amortised cost (other than trade receivables and contract assets in the scope of Section 23 Revenue), using an expected credit loss (ECL) model aligned with the simplified approach in IFRS 9. This further reduction (from those included in ED/2021/7) reflects the fact that the amendments to the IFRS for SMEs Accounting Standard that the IASB has tentatively decided to propose are aligned with the simplified approach in IFRS 9 and do not incorporate the general approach in IFRS 9
• A separate disclosure of the carrying amount, changes in the provision for ECL and amounts of income and expenses recognised for issued financial guarantee contracts to be consistent with the current requirements in the IFRS for SMEs Accounting Standard and the disclosures for the ECL model as recommended above
• Where no recognition and measurement changes have been made, amendments to the disclosure requirements in Section 11 are not recommended (except for some minor editorial amendments)

For Section 34, the staff recommended:

• To align the disclosure requirements in respect of exploration and evaluation assets with the requirements under IFRS Accounting Standards. These disclosures were an exception in ED/2021/7 so that entities are explicitly referred to the relevant IFRS Accounting Standards whether exploration and evaluation assets are classified as intangible assets or property, plant and equipment.

IASB discussion

IASB members noted that principles of the agreed approach have been applied consistently as asserted by the staff in the agenda paper. IASB members raised concern in relation to whether any changes in ED/2021/7 will affect the relevant proposed disclosure for the IFRS for SMEs Accounting Standard.

The staff explained that they will provide some of the comments received in response to ED/2021/7 when the ED for IFRS for SMEs Accounting Standard is published so that SME stakeholders can utilise those comments and incorporate them into their feedback. Some IASB members agreed with the approach to leverage the work performed on ED/2021/7. However, one IASB member was concerned about getting the two projects mixed up.

Some IASB members noted that the staff should not be restricted by the disclosure improvement in ED/2021/7 and if any areas for improvement are identified beyond ED/2021/7, the staff should include those areas as a part of this comprehensive review.

IASB decision

All IASB members voted in favour of the staff’s recommended direction and approach in relation to the proposed amendments to the disclosure requirements in the IFRS for SMEs Accounting Standard.