Cover paper (Agenda Paper 30)

In September 2022, the IASB published Exposure Draft Third edition of the IFRS for SMEs Accounting Standard (ED). The ED was open for comment for 180 days, which ended on 7 March 2023.

At the December 2023 IASB meeting, the IASB continued its redeliberations of the proposals in the ED.

Fair value measurement (Agenda Paper 30A)

The purpose of this paper was for the IASB to consider feedback on proposed new Section 12 Fair Value Measurement in the ED and decide whether to make any changes to that proposed new section.

Staff recommendation

The staff recommended that the IASB should:

• Finalise the proposals for the new Section 12 without significant amendments to its overall content
• Consider drafting suggestions made by respondents and use of plainer language to express requirements in the new Section 12
• Remove the appendix to the new Section 12 and include examples in separate educational material
• Consider suggestions for additional guidance and illustrative examples when updating the separate educational material

IASB discussion

IASB members supported the staff recommendation to finalise the proposals for the new Section 12 without significant amendments to its overall content. They also supported the staff’s proposal to use plainer language to express the requirements in proposed Section 12 of the IFRS for SMEs Accounting Standard to reduce complexity.

IASB members welcomed the staff proposal to move the non-mandatory guidance to separate educational material, rather than to appendices to the standard for consistency. This would also enable greater flexibility in providing examples for SMEs.

IASB members were supportive of the staff’s suggestion for additional guidance and illustrative examples when developing the educational material for Section 12.

IASB decision

All IASB members voted in favour of the staff recommendations.

Investment entities (Agenda Paper 30B)

The purpose of this paper was to ask the IASB to consider feedback from comment letters on investment entities—a topic that the IASB considered but for which amendments were not proposed in the ED and to decide whether to amend Section 9 Consolidated and Separate Financial Statements of the IFRS for SMEs Accounting Standard.

Staff recommendation

The staff recommended that the IASB does not amend Section 9 of the IFRS for SMEs Accounting Standard to include requirements for investment entities.

IASB discussion

One IASB member said it would be easy to add the requirement for investment entities to the IFRS for SMEs Accounting Standard although there was no absolute reason for including them, considering other factors.

Some IASB members believed that introducing the requirement for investment entities would introduce complexity to the standard, even though it could reduce ongoing cost for a small population of SMEs that are investment entities.

Some IASB members did not think the relevance principle is met as there would only be a small population of SMEs that would be affected by introducing the requirement for investment entities in the standard.

IASB decision

All IASB members voted in favour of the staff recommendation not to amend Section 9 of the IFRS for SMEs Accounting Standard to include requirements for investment entities.

Requirement to offset equity instruments (Agenda Paper 30C)

The purpose of this paper was to ask the IASB to consider the feedback on whether to remove paragraph 22.7(a) of the IFRS for SMEs Accounting Standard. This is a topic that the IASB sought views on but for which amendments were not proposed in the ED.

Staff recommendation

The staff recommended that the IASB remove paragraph 22.7(a) of the IFRS for SMEs Accounting Standard.

IASB discussion

Some IASB members questioned whether removing the paragraph could create problems for entities that have already applied this requirement previously. One IASB member considered whether an accounting policy choice should be allowed here. Some IASB members were supportive of retaining this paragraph to leave the simplification within the IFRS for SMEs Accounting Standard but proposed to add a clarification to address the comments received, for example adding the words ‘unless legislation requires otherwise’.

Other IASB members supported the staff recommendation and considered that removing the paragraph would be consistent with the IASB’s alignment approach. This is because full IFRS Accounting Standards do not set out the presentation requirements for receivables on equity instruments. These IASB members were not in favour of an accounting policy choice.

IASB decision

Only 6 of 14 IASB members voted in favour of the staff recommendation to remove paragraph 22.7(a) of the IFRS for SMEs Accounting Standard.

13 IASB members voted in favour of retaining paragraph 22.7(a) of the IFRS for SMEs Accounting Standard and provide an accommodation for the comments received for example, adding the words ’unless legislation requires otherwise’.