Subsidiaries that are SMEs

Date recorded:

Research results—what we have heard (Agenda Paper 31)


In 2016, following comments received on the last agenda consultation, the IASB included in its research pipeline a project on Subsidiaries that are SMEs. In March 2019 the staff reported to the Board that the research project had become active.

The staff undertook research and the aim of this paper was to:

  • (a) remind the Board of the objective of the research stage of the project
  • (b) discuss which entities are SMEs for the purpose of this project
  • (c) set out the background to the research project
  • (d) discuss the definition of subsidiary that would apply
  • (e) explain the two parts to the research and when each will be reported to the Board
  • (f) report the findings of the research

The staff asked the Board whether it had any questions on the research results reported in the paper.

Board discussion

The Board discussed the usefulness of the project, with many Board members supporting the project. However, one Board member said that it would be difficult for groups to distinguish between SME subsidiaries and non-SMEs subsidiaries. In his view, it is difficult to understand why constituents have asked for this project. The staff explained that SME subsidiaries would like to have the possibility to apply full IFRS for the group reporting, but do not want to be burdened with full IFRS disclosures that would be based on their stand-alone materiality. One Board member said it would be interesting to see how the Standard would be scoped.

A Board member was concerned that IFRS for SMEs disclosures would not work if there was a measurement difference. For example, intangible assets can be revalued under full IFRS, but there is no disclosure requirement for revalued intangibles in the IFRS for SMEs Standard as that measurement was not permitted. The staff said that the IFRS for SMEs disclosures would have to be tailored for these cases and this would be addressed in the next phase of the research.

No decisions were made.

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