IASB provides update on the second review of the IFRS for SMEs

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  • IASB (International Accounting Standards Board) (blue) Image

07 Mar 2022

The International Forum of Accounting Standard Setters (IFASS) is currently holding its spring meeting as a virtual conference. During one presentation today, the IASB offered insights on the current status of project to review of the IFRS for SMEs, the timeline, the framework applied and the tentative decisions of the IASB.

The IASB issued the IFRS for SMEs in 2009 and amended in it 2015 with the 2015 amendments becoming effective on 1 January 2017. In 2018, the IASB began thinking about the second review of the IFRS for SMEs with first discussions beginning in 2019. A request for information was published in January 2020. By now, all major topics — including those that were held back in the first round of amendments because they were considered too recent to provide enough experience for their application by SMEs — have been discussed with only disclosures, transition and some sweep issues remaining. The IASB staff hopes to be able to issue an exposure draft by the end of 2022.

First discussions by the IASB quickly revealed that an overarching framework was needed for decisions made in the project. Board member views ranged from complete alignment of the IFRS for SMEs with full IFRSs to treating the IFRS for SMEs as an independent standard and only updating it for specific issues arising from application. The IASB agreed three alignment principles to find a balance between full alignment and treating the IFRS for SMEs as a standalone standard:

  • Relevance to SMEs — Would a change make a difference to the decisions of users?
  • Simplification — Can appropriate simplifications be made?
  • Faithful representation — Does the outcome faithfully represent economics?

It also turned out that a cost/benefits analysis was an underpinning question.

Applying the alignment principles and cost/benefit consideration, the IASB has come up with three groups of (non-)alignments:

  1. Alignment with IFRSs;
  2. Partial alignment with IFRSs; or
  3. Not to align with IFRSs.

Translated into main tentative decisions so far made by the IASB, this means:

Alignment with IFRSs

Partial alignment with IFRSs

Not to align with IFRSs

Rewrite as new section in the IFRS for SMEs Update current section in the IFRS for SMEs No changes to the IFRS for SMEs
Conceptual Framework for Financial Reporting IFRS 10 Consolidated Financial Statements IFRS 14 Regulatory Deferral Accounts
IFRS 3 Business Combinations IFRS 11 Joint Arrangements IFRS 16 Leases
IFRS 13 Fair Value Measurement IFRS 9 Expected Credit Loss IAS 19 Employee Benefits (2011 Amendments)
IFRS 15 Revenue from Contracts with Customers

These tentative decisions have diverse reasons, background or extent. While, for example a new section on fair value measurement would be introduced, this would not come with new requirements, just the collection of the current requirements into one new section. And the IFRS 9 amendments would introduce a dual model consisting of incurred and expected credit losses. A detailed list of all 35 tentative decisions made to date is available on the IASB website.

Questions from the IFASS members included what format the forthcoming ED will have (new sections will be identified as fully new, amended sections in the usual style of EDs) and whether the IASB really believes that three levels of standards are needed (full IFRSs, new IFRS with reduced disclosure requirements, and the IFRS for SMEs — a paper on this question will be brought to the March IASB meeting). Opinions on whether the IFRS for SMEs should be aligned with IFRS 16 were divided.

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