Ifrs for Small and Medium Enterprises

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IFRS for Small And Medium Enterprises:
How Is It Different And Is It
necessary?

Introduction To The IFRS For SMEs

The IFRS (International Financial Reporting Standards) for SMEs is a self-contained standard of 230 pages, which was published on the 9th July 2009, designed to meet the needs and capabilities of small and medium-sized entities (SMEs), which are estimated to account for over 95% of all businesses around the world. The standard is a result of a five year development process with extensive consultation of SMEs worldwide. More than 100 countries have implemented IFRS and a number of other economically important countries, including Japan and the US, have programs in place to achieve a common conclusion for their national standards with IFRS. The IFRS for SMEs will provide a framework that allows financial statements to be prepared for use by lenders, vendors and other creditors, outside investors, credit rating agencies, and other external parties. The goal is to improve the SMEs’ access to capital.

IFRS for SMEs is intended to be used by SMEs, these are entities that publish general purpose financial statements for external users and do not have public accountability. An entity has public accountability under the IASB's (International Accounting Standards Boards) definition if it files, or is in the process of filing, its financial statements with a securities commission or other regulatory organization for the purpose of issuing any class of instruments in a public market, or it holds assets in a fiduciary capacity for a broad group of outsiders. Banks, insurance companies and brokers are examples of entities that hold assets in a fiduciary capacity. The requirements of IFRS for SME’s are almost similar to generally accepted accounting practices. The basic critical requirements that can be complied with by most of SME’s are at a very minimum cost and reap very high benefits.

IFRS for SMEs is viewed as an accounting framework for entities that are not of the size or even have the resources to use full IFRS. The IFRS for SMEs is less complex in a number of ways, compared to the Full IFRS.

Some topics that are not relevant for SMEs are omitted, these include earnings per share, interim financial reporting, and segment reporting. Full IFRSs allows accounting policy choices, the IFRS for SMEs allows only the easier option. Example of this includes 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. Many principles for recognising and measuring assets, liabilities, income and expenses in full IFRSs are simplified. Significantly fewer disclosures are required approximately a 90% reduction. To further reduce the burden for SMEs, revisions to the IFRS will be limited to once every three years.

I have found all this based on the websites:
http://www.ifrs.org/ifrs-for-smes/Pages/ifrs-for-smes.aspx
http://www.ifrs.org/Current-Projects/IASB-Projects/Small-and-Medium-sized-Entities/Pages/Small-and-Medium-sized-Entities.aspx

Main Differences Between IFRS for SMEs and Full IFRS

I have found many differences in my research between IFRS for SMES and full IFRS, from the website: http://www.pwc.com/gx/en/ifrs-reporting/pdf/Sims_diffs_IFRS_SMEs.pdf

This aims to highlight some of the key differences between IFRS for SMEs and full IFRS and to encourage early consideration of what IFRS for SMEs means to the entity.

Financial statements
Full IFRS: A statement of changes in equity is required, presenting a reconciliation of equity items between the beginning and end of the period. IFRS for SMEs: Same requirement. However, if the only changes to the equity during the period are a result of profit or loss, payment of dividends, correction of prior-period errors or changes in accounting policy, a combined statement of income and retained earnings can be presented instead of both a...
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