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Standards for Non-Publicly Accountable Entities (NPAEs/SMEs)

Date recorded:

Board members noted that comments at the Standards Advisory Council meeting held 10 and 11 February demonstrated that many people 'turned on' a filter whenever they discussed this project and seemed to filter out information that the Board was giving. The Board had been consistent throughout this project in its attempts to focus on the needs of users of financial statements. In broadening the membership of the working group, the Board needed to find 'real users' of small company financial statements.

Comments at the SAC had also demonstrated that constituents had a tendency to focus on 'who is going to apply the standards' rather than the Board's approach of assessing costs and benefits to both users and preparers. Board members noted that the Board's target was the information needs of smaller entities with any third party users-as understood by the IASB Framework. One Board member suggested that external users would not include management, tax authorities or other regulators who, by virtue of their position or local law, are able to request any information they require from the entity. External users would include, for example, owners who are not directors or part of management, trade suppliers and credit rating agencies such as Dun & Bradstreet. Board members noted that this limitation was a tool to assist the Board in its analysis of IFRS in the non-public entity environment. It was not related to issues related to which entities would apply the standards.

Broadening the advisory panel/working group

The Board agreed to broaden the membership of the working group, but stressed that the nominations should be assessed with a degree of rigor.

Round-table discussions

The staff introduced a proposed questionnaire that would be sent to all respondents to the IASB's Preliminary Views document, the SAC and the working group. The questionnaire was intended to focus the discussion at the round-tables likely to be held in September 2005. The questionnaire was intended to probe responses already made and, if properly completed, would require a good deal of effort on behalf of those responding. Board members and senior staff had comments on some aspects of the questionnaire, but the general approach was agreed.

Disclosure and presentation simplification

The staff and some of the Board agreed to review the current disclosure requirements of IFRSs (using a disclosure checklist prepared by one of the major accounting firms) to determine not only what might be unnecessary in a non-publicly accountable entity environment but also what additional disclosure might be necessary (e.g., in those circumstances in which there was a recognition or measurement difference between IFRSs and the policies adopted).

Other matters

The remainder of the project plan was agreed. The Board also decided to use the term 'non-publicly accountable entities' (NPAEs) in place of 'small and medium-sized entities' (SMEs).

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.