The amendments to the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) which are effective from annual periods beginning on or after 2017 are likely to reduce the cost of producing financial statements for SMEs.
“The positive changes are applicable to companies and close corporations with a public interest score below 350, as determined in terms of the Companies Act 71 of 2008 (Companies Act), that have opted to apply IFRS for SMEs and other entities that are not compelled to comply with a prescribed financial reporting standard but have elected to apply IFRS for SMEs in preparing their financial statements,” says Bongeka Nodada, SAICA Project Director: Financial Reporting.
Nodada also states that the revisions simplify the application of the IFRS for SMEs in that it introduces several exemptions, clarifies guidance in the standard and aligns the requirements of this standard with the IFRS in areas where IFRS for SMEs is considered more complex than IFRS. The exemptions introduced include:
- The exemption from accounting for its investments in shares on its balance sheet at market value;
- The exemption from measuring a liability to pay a non-cash dividend at the market value of the assets to be distributed; and
- The exemption from consolidating subsidiaries in its financial statements which are acquired with the intention to dispose of within one year of acquisition.
“The amendments clarify the scope of the standard such that it is clear which entities are permitted to apply the standard. Requirements on the accounting for tax and exploration and evaluation assets (by mining companies, for example) have been aligned with IFRS”, says Nodada.
In addition to easing the reporting requirements for SMEs, these changes are likely to have a positive impact on the balance sheet of SMEs as companies will be permitted to account for fixed assets at market value. The current standard prohibits this and companies can only account for the fixed assets at their carrying value.
“These changes to the IFRS for SMEs came into effect for annual periods beginning on or after 1 January 2017 and companies should ensure that they consider these amendments in preparing their financial statements to ensure compliance with the Companies Act,” concluded Nodada.
More information on the amendments to the IFRS for SMEs can be obtained at https://www.saica.co.za/Technical/FinancialReporting/MembersHandbook/IFRSforSMEs/tabid/2712/language/en-ZA/Default.aspx
The IFRS for SMEs is a self-contained Standard designed to meet the needs and capabilities of small and medium-sized entities (SMEs) and as a consequence the IFRS for SMEs is far less complex than IFRS. IFRS is a single set of accounting standards, developed and maintained by the IASB with the intention of those standards being capable of being applied on a globally consistent basis—by developed, emerging and developing economies—thus providing investors and other users of financial statements with the ability to compare the financial performance of publicly listed companies on a like-for-like basis with their international peers.
The South African Institute of Chartered Accountants (SAICA), South Africa’s pre-eminent accountancy body, is widely recognised as one of the world’s leading accounting institutes. The Institute provides a wide range of support services to more than 42 000 members who are chartered accountants [CAs(SA)] and hold positions as CEOs, MDs, board directors, business owners, chief financial officers, auditors and leaders in their spheres of business operation. Most of these members operate in commerce and industry, and play a significant role in the nation’s highly dynamic business sector and economic development.
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