AASB believes the IFRS for SMEs should be updated in line with full IFRSs

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  • IFRS for SMEs (mid blue) Image

13 Mar 2014

The Australian Accounting Standards Board (AASB) has submitted a comment letter on the IASB’s Exposure Draft ED/2013/9 ‘Proposed amendments to International Financial Reporting Standard for Small and Medium-sized Entities’. In the letter the AASB expresses disappointment that the review of the standard has not been as comprehensive as hoped.

According to the AASB, the IFRS for SMEs should be updated regularly to reflect changes to existing and new standards in full IFRSs to avoid increasing the gap in recognition and measurement requirements between the IFRS for SMEs and full IFRSs. The AASB is concerned by the limited number of accounting policy options available to SMEs and "does not support having differential recognition and measurement requirements in the IFRS for SMEs". Also, the AASB believes that SMEs should benefit from all improvements to full IFRSs, particularly where these are intended to make a standard easier to apply. Regarding the proposed amendments to the IFRS for SMEs the AASB has little concerns, pointing out that this is mainly due to the fact that "the proposals are minimal in nature".

The AASB is not arguing in empty space. Although the IFRS for SMEs has not been adopted for use in Australia and a 'Tier 2' reporting framework based on 'Reduced Disclosure Requirements' (RDR) was implemented instead, the IFRS for SMEs principles are used in the development of Tier 2 disclosure requirements each time a new standard is released. As the AASB thus maintains the same recognition and measurement criteria for all reporting entities in all sectors, differences between full IFRSs and the IFRS for SMEs pose a challenge.

The problem of how to deal with updates or the perceived lack of updates when the IFRS for SMEs is not adopted as such but used instead as a starting point for other standard-setting also led the UK Financial Reporting Council (FRC) to view the proposed amendments to the IFRS for SMEs critically. When the UK replaced its local GAAP with a new standard based on the IFRS for SMEs, the FRC made several changes, one of which was to widen the scope of the standard significantly compared to the IFRS for SMEs. As a consequence the FRC argued in its reaction to the proposed amendments that the IASB was interpreting the scope of the IFRS for SMEs too narrowly.

Please click for the AASB comment letter on the AASB website.

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