Forma # 1.ai - ICAB

Opportunities and Challenges for
Adoption of IFRS for SMEs in Bangladesh
Md. Shahadat Hossain FCA
On July 2009 the International
Accounting Standards Board
(IASB) published an International
Financial Reporting Standard
(IFRS) designed for use by small
and medium sized entities
(SME).That standard is the
International Financial Reporting
Standard for Small and
Medium–sized Entities (IFRS for
SMEs or the standard). Small and
medium-sized entities are entities
that do not have public
accountability, and publish
general purpose financial
statements for external users.
According to IASB’s report SMEs
are estimated to represent more
than 95% of all companies in the
world. The objective of financial
statements of a small or
medium-sized entity is to provide
information about the financial
position, performance and cash
flows of the entity that is useful
for economic decision-making by
a broad range of users who are
not in a position to demand
reports tailored to meet their
particular information needs.
The objective of introducing IFRS
for SMEs is to ensure that financial
statements provided to external
users i.e banks are consistently
prepared by all businesses. That
does make sense when a bank or
other external user is trying to
evaluate the financial viability of
the company. In Bangladesh IFRS
for SMEs is very important
because almost more than 70
percent of total bank loan is
disbursed to the private
companies. Again more than 30
percent of stock market
encompasses the share of banking
sector. So to ensure the depositors
interest and also to ensure the
interest of investors in banking
sector financial discipline of small
and medium sized entities need
to be strengthened. For
strengthening the financial
discipline for SMEs there is no
other alternative but to prepare
financial statements according to
the standard. Now the question is
according to local legislation how
far the standard is adoptable in
Bangladesh. In Bangladesh
financial statements of private
limited companies i.e the entity
that does not have public
accountability are prepared
complying with the contents of
Companies Act. So it is relevant to
compare the contents of the
standard and that of the
Companies Act. Some important
issues in this regard are described
below.
As per the standard a
complete set of financial
statements of an entity shall
include
(a) a statement of financial
position as at the reporting
date.
(b) a separate income statement
and a separate statement of
comprehensive income.
(c) a statement of changes in
equity for the reporting period.
(d) a statement of cash flows for
the reporting period.
(e) notes, comprising a summary
of significant accounting
policies and other explanatory
information.
The Bangladesh Accountant January - March 2011 65