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The IFRS for SMEs Accounting Standard Update is a staff summary of news, events and other information about the IFRS for SMEs® Accounting Standard (Standard) and related SME activities. The staff summary has not been reviewed by the International Accounting Standards Board (IASB).

This edition of the IFRS for SMEs Accounting Standard Update includes:

Overview of the third edition of the Standard—Topic of the quarter—Spotlight on Section 11 Financial Instruments

The IASB issued the third edition of the Standard in February 2025. This edition of the Standard is updated to reflect improvements made in full IFRS Accounting Standards in the scope of the second comprehensive review of the IFRS for SMEs Accounting Standard.  

The IASB developed the amendments to the Standard by applying the alignment approach. The alignment approach requires the IASB to use the principles of relevance to SMEs, simplicity and faithful representation, including costs and benefits to determine whether and, if so, how to align the Standard with full IFRS Accounting Standards.

Section 11 Financial Instruments sets out the recognition, measurement and disclosure requirements for financial instruments.

In applying the alignment principles to IFRS 9 Financial Instruments, the IASB retained in the third edition of the Standard:

  • the incurred loss model for the impairment of financial assets measured at amortised cost; and
  • the hedge accounting and derecognition requirements.

Table 1 summarises the main changes to Section 11 in the third edition of the Standard.

Table 1—Main amendments to Section 11 in the third edition of the Standard

Amendment Description of amendment
Structure of Section 11
  • Section 11 Basic Financial Instruments and Section 12 Other Financial Instrument Issues have been combined into a single Section 11 Financial Instruments.
  • The new Section 11 is divided in two parts: Part I contains the requirements for basic financial instruments and Part II contains the requirements for other financial instrument issues, which were previously in Section 12. 
Option to apply IAS 39 Financial Instruments: Recognition
and Measurement 
  • As part of the second comprehensive review, the IASB applied the alignment approach to IFRS 9. Having done so, it decided the fallback to IAS 39 was no longer needed. Consequently, all entities applying the Standard apply the same recognition and measurement requirements to financial instruments. 
Supplementary principle to classify debt instruments 
  • Paragraph 11.9 sets out the conditions a debt instrument satisfies to fall within the scope of Part I of Section 11.  
  • In response to stakeholder feedback that it can sometimes be difficult to decide how to classify a debt instrument, the IASB added a supplementary principle to the Standard for an SME to apply after considering the conditions and examples in Section 11.
  • The principle states that, if the contractual terms of the debt instrument give rise to cash flows that are solely payments of principal and interest on the outstanding principal amount, the SME applies Part I of Section 11 and measures the debt instrument at amortised cost. 
Issued financial guarantee contracts 
  • In response to stakeholder feedback that the requirements in the Standard for issued financial guarantee contracts were more complex than those in IFRS 9, the IASB updated the requirements:
    • to include a definition for ‘financial guarantee contracts’;
    • to require an SME to use Section 21 Provisions and Contingencies to account for financial guarantee contracts issued for nil consideration if the specified debtor is another entity within the group; and
    • to include all other financial guarantee contracts in the scope of Part II of Section 11, which means they are measured at fair value.
Added disclosure requirements 
  • Although the IASB decided to retain the incurred loss model, it also decided to improve the disclosure requirements to provide users of SMEs’ financial statements with information about the credit risk and expected cash flows of financial assets held by the SME. The IASB added a requirement for an SME to disclose an analysis of the age, by reference to due date, of its trade receivables and other financial assets.
  • The IASB also decided to require an SME to disclose a maturity analysis for its financial liabilities. This analysis will improve the information provided to users of SMEs’ financial statements about expected cash flows and liquidity and solvency.

An update on the membership of the SMEIG

The SMEIG is a consultative body to the IASB and works to support the international adoption, implementation and application of the IFRS for SMEs Accounting Standard. The SMEIG’s responsibilities include considering application questions that could merit the publication of educational materials and advising the IASB on the need to amend the Standard.

SMEIG reappointments

The Trustees of the IFRS Foundation have reappointed four members of the SMEIG for their second three-year terms, which will start on 1 July 2025. Those four members are:

  • Blaise Colyvas (South Africa);
  • Danny Tan (Malaysia);
  • Hironori Okada (Japan); and
  • Kwabena Situ (Ghana).

Chair of the SMEIG

IASB member Jianqiao Lu's term expires on 31 August 2025, marking the end of his tenure as chair of the SMEIG. Jianqiao reflects on his time as chair, saying,

It has been an honour to lead the SMEIG and to work alongside such talented and committed professionals. I am proud of what we have achieved together. I would like to express my sincere gratitude to the SMEIG members for their support and contributions.

IASB member Zach Gast will assume the role of chair of the SMEIG, bringing his expertise to lead the SMEIG in fulfilling its responsibilities.

Resources to support implementation of the Standard

Published resources

To support implementation of the third edition of the Standard, the IASB has published:

Ongoing activities and resources

To support implementation of the third edition of the Standard, the IASB is in the process of publishing:

  • updated educational modules—these modules are designed to help SMEs apply the Standard and include explanations, examples and assessments. The IASB is updating the educational modules, prioritising sections with significant changes. The IASB has already published Module 11 Financial Instruments, which supports application of Section 11 Financial Instruments. In the third quarter of 2025, the IASB is planning to publish:
    • Module 1 Small and Medium-sized Entities;
    • Module 2 Concepts and Pervasive Principles; and
    • Module 7 Statement of Cash Flows.
  • a webcast series—the webcast series will complement the educational modules. Webcast 1: Overview of the third edition of the IFRS for SMEs Accounting Standard and Webcast 2: Overview of amendments to Section 11 Financial Instruments are already available.
  • a podcast series—the podcast series provides bite-sized insights into the third edition of the Standard. The January and March podcast episodes are available.

WSS Conference 2025

The WSS Conference is a forum for national standard-setters to connect with the IASB and International Sustainability Standards Board (ISSB), receive updates on the IFRS Foundation’s projects, share insights on IFRS adoption, meet IASB and ISSB members and staff and network with other national standard-setters.

IASB members and staff will present a session on the third edition of the Standard at the WSS Conference.

This year’s WSS Conference will take place on 29–30 September 2025. If you are a national standard-setter and your organisation has not received an invitation to the WSS Conference, please contact us.