SME Finance Policy Guide

46 GLOBAL PARTNERSHIP FOR FINANCIAL INCLUSION
IFRS for SMEs
The IFRS for SMEs is a self-contained standard of 230 pages, designed to meet the needs and capabilities of SMEs.
Compared with full IFRSs (and many national Generally Accepted Accounting Principles), the IFRS for SMEs is less
complex in a number of ways:
• Topics not relevant for SMEs are omitted. Examples: earnings per share, interim financial reporting, and segment
reporting.
• Where full IFRSs allow accounting policy choices, the IFRS for SMEs allows only the easier option. Examples: no
option to revalue property, equipment, or intangibles; a cost-depreciation model for investment property unless fair
value is readily available without undue cost or effort; no “corridor approach” for actuarial gains and losses.
• Many principles for recognizing and measuring assets, liabilities, income, and expenses in full IFRSs are simplified. For
example, amortize goodwill; expense all borrowing and R&D costs; cost model for associates and jointly-controlled
entities; no available-for-sale or held-to-maturity classes of financial assets.
• Significantly fewer disclosures are required (roughly 300 versus 3,000).
• The standard has been written in clear, easily translatable language.
• To further reduce the burden for SMEs, revisions to the IFRS will be limited to once every three years.
Source: http://www.ifrs.org/IFRS+for+SMEs/IFRS+for+SMEs.htm
enterprises, with requirements commensurate with
their size, the types of transactions they conduct, and
their limited range of stakeholders. A “one-size-fitsall”
approach to financial reporting and auditing
requirements ignores the capacity constraints that
SMEs face and unnecessarily increases the cost of doing
business for those enterprises, which generally drive
economic growth. In addition, by increasing the
requirements for SMEs, governments may create disincentives
for businesses to operate in the formal sector.
A holistic approach would take into account SMEs’
need for relief from excessive accounting and auditing
requirements, as well as their need for more time to
implement appropriate standards effectively.
Recognizing this, the International Accounting
Standards Board (IASB) issued in 2009 a simplified
version of its full IFRS, as many SMEs argued that full
the IFRS imposed a burden on them, a burden that had
been growing as IFRS became more detailed and more
countries had begun to use it.
Prior to the issuance of IFRS for SMEs, the United
Nations Conference for Trade and Development’s
Intergovernmental Working Group of Experts on
International Standards of Accounting and Reporting
(UNCTAD-ISAR) had already developed a three-tiered
system for financial reporting, as follows:
Level 1. This level would apply to listed enterprises
whose securities are publicly traded and those in
which there is significant public interest. These
enterprises should be required to apply the IFRS
issued by the IASB.
Level 2. This level would apply to significant business
enterprises that do not issue public securities
and in which there is no significant public interest.
This set of standards is likely to be superseded by
IFRS for SMEs.
Level 3. This level would apply to smaller enterprises
that are often owner-managed and have no