As a result of its comprehensive review of the IFRS for SMEs, the IASB proposed smaller changes to 21 of the 35 section of the standard in early October. The FRC does not disagree with the amendments themselves but believes the changes are not far-reaching enough.

The FRC puts forward the opinion that the IASB is interpreting the scope of the IFRS for SMEs too narrowly. Instead of addressing the needs of all entities that don't have public accountability and publish general purpose financial statements for external users, the IASB is focusing on the smallest entities of this kind that typically don't have as many less complex transactions and are normally limited in their resources to apply full IFRSs.

The FRC believes that one result of this focus may be that the IASB limits the ability of jurisdictions to adopt the IFRS for SMEs. If large or complex entities threaten to fall within the scope of the standard, jurisdictions would either need to stay with their local set standards for these entities or would need to adapt the IFRS for SMEs to their needs.

In March 2013, the UK replaced its local GAAP with a new standard based on the IFRS for SMEs. In doing so, the FRC made several changes, one of which was to widen the scope of the standard significantly compared to the IFRS for SMEs. This has the effect that any entity not required to apply full IFRSs will be able to apply the new FRS 102. However, this decision has led to the necessity of further changes to reflect the complexity of transactions of the entities falling under this wider scope. Most recently, in November 2013, the FRC suggested changes to FRS 102 with respect to hedge accounting that would move the new standard even further away from the IFRS for SMEs.

Please click for access to the draft comment letter on the FRC website.