Deloitte comments to IASB on SME exposure draft

  • Deloitte Comment Letter Image

28 Nov 2007

We have submitted to the IASB our Comments on the Exposure Draft: IFRS for Small and Medium-sized Entities.

The IASB issued the Exposure Draft (ED) for comment on 15 February 2007. We note that there is strong demand globally for the introduction of an IFRS for SMEs. As a global issue, we believe that the resulting ED produced by the IASB is a fair compromise given the competing priorities of different jurisdictions and represents a good starting point from which debate and changes may be made to create an effective standard for SMEs. The key matters raised in our letter are summarised below. We also suggest that, to increase the use of the final standard in different jurisdictions, the IASB consider whether it would be viable to make the final standard available free of charge on the internet.

The key matters raised in the Deloitte letter on the SME ED are:

  • The final Standard should be a fully stand-alone document. We support the objective of a self-contained, comprehensive, set of standards for SMEs and do not agree that the IFRS for SMEs should contain any cross referencing to full IFRS, with the exception of financial instruments, as discussed in Appendix C. We believe that SMEs should be able to find all their financial reporting requirements in the one stand-alone document.
  • The IFRS for SMEs has not addressed the needs of SME subsidiaries where consolidated financial statements are prepared by the parent company in accordance with full IFRS. Such entities are likely to prefer to apply the same recognition and measurement principles as applied by the group but with reduced disclosure. We believe that such an option should be included within the IFRS for SMEs.
  • Further simplification of the recognition and measurement principles is required. The needs of users of SME financial statements are not as sophisticated as those of full IFRS financial statements and therefore the accounting requirements should be simplified. This may include further elimination of options, and/or, alternatively, increasing divergence from full IFRS. The proposals also appear to have unintended consequences that make the ED, in some respects, more onerous than for those applying full IFRS.
  • Further disclosure relief is required. Although we acknowledge that the ED proposes significant disclosure relief when compared to full IFRS, we believe this is a key area where simplification has not gone far enough. Further enhancements are possible without any risk of not satisfying the information need of users.
  • Clarification that the IFRS for SMEs is not part of the IFRS hierarchy is required (possibly via an amendment to IAS 8). We are concerned that in circumstances where full IFRS is silent on a transaction, condition or event, users of full IFRS may be required to analogise to the IFRS for SMEs for guidance.
Click to view Comments on the Exposure Draft: IFRS for Small and Medium-sized Entities (PDF 284k). You will find all past Deloitte letters of comment to the IASB and the IASC Here.


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