At its September 2003 meeting, the Board decided that it should develop accounting standards appropriate for small and medium-sized entities (SMEs) and that development of IASB SME standards should start by extracting the fundamental concepts from the IASB Framework and the principles and related mandatory guidance from IFRSs and related Interpretations. Any modifications to these concepts or principles must be based on the identified needs of users of SME financial statements. The Board felt that it was likely that disclosure and presentation modifications will be justified based on user needs, but there would be a rebuttable presumption that no modifications would be made to the recognition and measurement principles in IFRSs.

At this meeting, the staff presented, for discussion, a proposed implementation of the foregoing approach with respect to IAS 19, Employee Benefits. The staff extracted all black-letter principles from IAS 19 plus some material from the non-black letter sections that were identified as matters of principle. The extraction reflected the following modifications of the recognition and measurement principles in IAS 19:

• Discounting for all employee benefits payable beyond one year from balance sheet date.
• Measurement of non-monetary benefits (cars, housing, and similar) at cost.
• Allowing an actuarial method that results in measurements that are consistent with the Projected Unit Credit method (IAS 19 requires strict adherence to the Project Unit Credit method).
• Allowing SMEs to choose between two of the methods of recognising actuarial gains and losses that are allowed by IAS 19.
• SMEs would use a single method of recognising actuarial gains and losses for post-employment benefits other than pensions.

• Principles relating to multiemployer plans.
• Principles relating to state plans.
• Principles relating to insured plans.
• The asset ceiling test.
• Regularity of actuarial valuation.
• Detailed guidance on actuarial assumptions.
• Principles relating to reimbursement rights.
• Standards on curtailments and settlements.

Board members commented on the draft extraction, but no Board decisions were made. Among the comments:

• The IAS 19 principles relating to multiemployer plans, state plans, and insured plans should not be omitted because these kinds of plans are commonly used by SMEs.
• Consider whether all or most of the material on defined benefit plans should be removed from the extraction, with reference back to the full IAS 19, because SMEs tend not to have defined benefit plans.
• The SME version of IAS 19 is "far more readable" than the full IAS 19. The document may have an educational use in relation to IAS 19.
• Add a statement of objective and an executive summary at the beginning.
• Explicitly mention the fall-back to the full IFRS in each SME standard.
• Some Board members found the measurement simplifications appropriate, while others favoured reverting to the full text of IAS 19.
• Requiring discounting for all employee benefits payable beyond one year from the balance sheet date complicates, rather than simplifies IAS 19 for SMEs.
• Abolishing the full corridor approach of IAS 19 is not simplification.
• Staff should indicate its proposed justification for each proposed recognition and measurement change or disclosure omission or simplification.
• The Board should agree on the types of entities for which it believes its SME standards appropriate (who is the target company), but should not adopt quantified size criteria.
• Present the proposed SME standards to the Board in a 'marked draft' reflecting all changes to the principles in the related IFRS.