IASB issues exposure draft of proposed amendments to the IFRS for SMEs
08 Sep, 2022
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 second comprehensive review of that standard. The IASB suggests changes to all of the 35 sections, however, some of the changes are minor. Comments on IASB/ED/2022/1 are requested by 7 March 2023.
Background
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 IASB took up a first review of the IFRS for SMEs in 2012, resulting in the May 2015 amendments to the IFRS for SMEs, which became effective 1 January 2017. A second review was taken up in 2019 to identify whether and, if so, how the IFRS for SMEs should be updated to take account of IFRSs and amendments not currently incorporated into the IFRS for SMEs.
Suggested changes to the IFRS for SMEs
While there are proposed changes to all sections of the standard, the table below lists the most important ones:
| Topic | Description |
|---|---|
| Definition of public accountability | The IASB proposes to add clarity to the standard without changing the intended scope by noting that banks, credit unions, insurance companies, securities brokers/dealers, mutual funds and investment banks are often publicly accountable as well as entities where there is a high degree of outside interest in the entity. |
| Definition of an asset/liability liability | The IASB proposes to align the definition of an asset and of a liability with the 2018 Conceptual Framework with two exceptions where they want to avoid unintended consequences. |
| Definition of control | The IASB proposes aligning the standard with IFRS 10 and introducing control as the single basis for consolidation that applies to all entities. The IASB also proposes to retain the rebuttable presumption that control exists when an investor owns more than a majority of the voting rights of an investee as a simplification of the control model. |
| Impairment of financial assets | The IASB proposes to retain the incurred loss model for trade receivables and contract assets regarding revenue from contracts with customers and to require an expected credit loss model for all other financial assets measured at amortised cost. The requirement for impairment of equity instruments to be measured at cost would be retained. |
| Fair value measurement | The IASB proposes aligning the standard with IFRS 13. This alignment would not amend the requirements for when to use fair value measurement. |
| Joint control | The IASB proposes aligning the definition of joint control and retaining the classification of a joint arrangement as jointly controlled assets, a jointly controlled operation, or a jointly controlled entity and the measurement requirements for these classifications. |
| Acquisition method of accounting | The IASB proposes partially aligning the standard with the acquisition method of accounting in IFRS 3. |
| Revenue from contracts with customers | The IASB proposes aligning the standard with the principles and language used in IFRS 15. The proposed revised requirements are based on the five-step model in IFRS 15, with simplifications that retain the basic principles in IFRS 15 for recognising revenue. |
| Employee benefits | The IASB proposes to delete the paragraph of the standard containing the measurement simplifications for defined benefit obligations. |
| Whether further action is required |
The ED also contains question regarding whether further action is required on the following topics:
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Comment deadline and next steps
Comments on IASB/ED/2022/1 Third edition of the IFRS for SMEs Accounting Standard close on 7 March 2023.
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.
Additional Information
Please click for:
- IASB press release
- Access to the exposure draft on the IFRS Foundation website
- Access to the basis for conclusions on the IFRS Foundation website
- Snapshot of the proposals on the IFRS Foundation website
- Questions and anwers on the ED on the IFRS Foundation website
- Short introductory video on the IFRS Foundation website
- Our Need to know newsletter summarising the proposed changes
- Our UK Accounting Plus project page for the Second comprehensive review of the IFRS for SMEs
