Relief for small and medium enterprises – IFRS for SMEs
The long awaited final accounting requirements for Small and Medium Entities (SMEs) has finally arrived.
Following from significant worldwide demand by users, pro-active consultation by SAICA with South African stakeholders, as well as substantive input by SAICA to the International Accounting Standards Board (IASBs) process, the IASB published an International Financial Reporting Standard (IFRS) for SMEs on the 9th July 2009.
This is the first set of international accounting requirements developed specifically for SMEs.
The IFRS for SMEs has simplifications which reflect the needs of users of SMEs financial statements. Although prepared on IFRS foundations, IFRS for SMEs is a stand – alone framework which is separate from IFRSs. This will replace the Statement of GAAP for SMEs issued by the APB in 2007 to provide relief to ‘limited interest’ entities as defined in the Corporate Laws Amendment Act. Once approved for issue by the Accounting Practices Board (APB) this will be immediately effective and qualifying entities may apply this.
The final IFRS for SMEs has simplifications that reflect the needs of users of SMEs financial statements that is less complex and therefore cost effective for the SME.
It is suitable for all entities that prepare general purpose financial statements (not tailored to the needs of any one group) except those whose securities are publicly traded and who hold assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses.
Below are a few of the areas of additional major relief provided in the final standard, as compared to the Statement of GAAP for SMEs:
- Operating leases – no requirement for straight lining if increases are reflective of expected general inflation.
- Residual values, useful lives and depreciation method no longer required to be reviewed annually for property, plant, equipment and intangible assets.
- Amortisation of all indefinite life intangible assets, including goodwill. Therefore, no indefinite life intangible assets or goodwill.
- The Financial instrument section has been split into two sections, Basic Financial Instruments and Other Financial Instruments Issues. Amortised cost being almost exclusively applied for measurement of financial instruments.
- Borrowing, research and development costs to be expensed. Capitalisation not allowed as an alternative.
To find out more about IFRS for SMEs or to book for a seminar on this go to https://www.saica.co.za/TechnicalInformation/Accounting/IFRSforSMEs/tabid/1638/language/en-ZA/Default.aspx which comprises of:
- The IASB issued standard comprising :
- IFRS for SMEs
- A Basis for Conclusions
- Illustrative Financial Statements and a Presentation and Disclosure Checklist
- IFRS for SMEs fact sheet
- Media releases
- IASB release
- SAICA release
- The SAICA media presentation
- SAICA IFRS for SMEs seminar programme
In due course we will also be providing further guidance including:
- A circular on who can use this, transition requirements, etc.
- A SAICA IFRS for SMEs summary booklet
- Frequently Asked Questions