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Accounting by Small and Medium-sized Entities and in Emerging Economies

Date recorded:

The IASB listened to the views of the national standard setters about experience and recommendations for a project on accounting by small and medium-sized entities and in emerging economies. In particular, there was discussion about:

  • what are the entities involved, and whether, if a differential reporting framework were developed, the IASB's should identify qualitative or quantitative characteristics to determine if an entity could use such differential reporting requirements. In that respect, views were expressed that the IASB should not go for a route supporting quantitative characteristics;
  • what are the users and what are their needs;
  • whether some IFRS are less relevant for some entities;
  • whether the cost of applying some IFRS outweigh the benefits in some situations; and
  • whether the concerns of smaller entities are different from those of large entities.

The national standard setters have adopted various approaches, such as a comprehensive set of simplified standards (UK), targeted adjustments in standards (Canada and USA) or a differential reporting framework (Canada and New Zealand). Comments were also expressed that a major issue is, in fact, the lack of infrastructure and education in some parts of the world to enable a proper implementation of IFRS.

As a conclusion to the discussion, the IASB's Chairman indicated that a possible direction for the project might be to consider issuing, as a first step, literature that would help draw the companies subject to the discussion ultimately into IFRS, as opposed to developing literature that would have a basis of accounting different from the IFRS literature. Particular consideration would be needed about disclosure and the cost/benefit balance of the requirements. Market participants would need to be involved in the discussions.

Finally, questions were raised whether, if an enterprise were to apply some literature with requirements that differ from IFRS, it could claim compliance with IFRS.

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