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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:

Topic of the quarter—Spotlight on Section 9 Consolidated and Separate Financial Statements

Section 9 Consolidated and Separate Financial Statements in the third edition of the IFRS for SMEs Accounting Standard sets out requirements for an entity to prepare consolidated financial statements and how the entity prepares those statements. Section 9 also includes guidance on separate and combined financial statements.

Why did the IASB update Section 9?

In the second edition of the Standard, Section 9 was based on IAS 27 Separate Financial Statements and included guidance for special purpose entities based on SIC-12 Consolidation—Special Purpose Entities.1 In the third edition of the Standard, Section 9 is based on IFRS 10 Consolidated Financial Statements. IFRS 10 introduced a single control model for determining whether an entity controls another entity, providing users with more comparable, consistent and useful financial information.

What are the main changes to Section 9?

The updated Section 9 introduces:

  • an updated definition of control, which is now the single basis for consolidation. The requirements for special purpose entities have been removed from Section 9, removing uncertainty for SMEs about which requirements in Section 9 apply to which investees, and giving users of SMEs’ financial statements the benefits of a single control model (see Table 1—Definition of control and Figure 1—Assessing control); and
  • requirements for situations when a parent loses control of a subsidiary. For example, when a parent loses control through sale, Section 9 requires that it:
    • derecognises the former subsidiary’s assets and liabilities and any non-controlling interest; and
    • recognises the fair value of any consideration received, the fair value of any retained interest and the gain or loss related to the loss of control of the former subsidiary.

Table 1—Definition of control (see paragraph 9.4B)

Element All conditions that need to be satisfied for an investor to control an investee
Power An investor’s power over an investee when the investor has existing rights that give it the current ability to direct the investee’s relevant activities (the activities that significantly affect the investee’s returns).
Returns An investor’s exposure or rights to variable returns from its involvement with the investee.
Link between power and returns An investor’s ability to use its power over the investee to affect the investor’s returns. 

What has not changed in Section 9?

To simplify the application of the control model, the IASB retained the rebuttable presumption in paragraph 9.5 of the Standard.

Control is presumed to exist when the investor owns, directly or indirectly through subsidiaries, a majority of the voting rights of an investee. This presumption can be rebutted if it can be clearly demonstrated that one or more elements of control are absent. Figure 1 presents a decision tree for determining whether an investor has control of an investee.

Figure 1—Assessing control

What are the transition requirements in Section 9?

The amendments to Section 9 are applied retrospectively, as though the revised requirements were always in effect. These reliefs are provided to ease transition:

  • the investor applies the requirements retrospectively if applying the revised Section 9 would result in the investor consolidating an investee that was not previously consolidated (or no longer consolidating an investee that previously was consolidated). If retrospective application is impracticable, adjustments are made from the earliest practicable date.
  • the investor is not required to make adjustments if the determination of control for an investee does not change.
  • the investor is not required to make adjustments for subsidiaries over which control it lost control before the date of initial application.

The IASB also updated the educational module, Module 9 Consolidated and Separate Financial Statements. The module includes explanations, examples and assessments (including case studies) supporting application of the requirements in Section 9.

February SME Implementation Group meeting

The SME Implementation Group (SMEIG) is a consultative group for the IASB. It was established to support the global adoption of the Standard and to monitor its application.

SMEIG met on 5 February 2026. The purpose of the meeting was:

  1. to enable IASB technical staff to provide SMEIG members with an overview of an application question on paragraph 9.3 of the Standard; and
  2. to enable SMEIG members to provide feedback on whether and how to respond to the issue raised by the application question.

The application question was about whether the exemption in paragraph 9.3 of the Standard from preparing consolidated financial statements (the ‘consolidation exemption’) applies to an intermediate parent if its ultimate (or intermediate) parent is an investment entity that produces separate financial statements in which the subsidiary is measured at fair value through profit or loss (instead of consolidated financial statements).

The issue arises because IFRS 10 exempts such parent entities from preparing consolidated financial statements if their ultimate parents (or any intermediate parents) prepare financial statements in which their subsidiaries are measured at fair value through profit or loss. Because no equivalent exemption exists in paragraph 9.3 of the IFRS for SMEs Accounting Standard, the Standard’s requirements for such entities are more onerous than those in full IFRS Accounting Standards.

Most SMEIG members agreed that the response to the issue should be to amend the Standard. Most of the SMEIG members who agreed that there should be a response to the issue recommended that the IASB respond urgently, instead of during its next periodic review of the Standard.

The meeting agenda, papers and the meeting recording are available on the February 2026 SME Implementation Group meeting page.

Following the meeting, SMEIG members will vote on whether and how the issue should be addressed. The IASB will consider the results of the vote. 

Resources to support implementation of the Standard

Resources published since the December 2025 IFRS for SMEs Accounting Standard Update

To support implementation of the third edition of the Standard, the IASB has published these supporting materials since the last edition of the IFRS for SMEs Accounting Standard Update:

  • Updated educational modules—to help SMEs apply the Standard. These modules include explanations, examples and assessments. The IASB is updating the modules, prioritising sections with significant changes in the third edition of the Standard. The IASB has published:
  • Education webcasts—to help SMEs implement the Standard. This webcast series complements the educational modules. The IASB has released:
    • Webcast 6: Overview of the revised Section 23 Revenue from Contracts with Customers;
    • Webcast 7: Overview of the revised Section 23 Revenue from Contracts with Customers; and
    • Webcast 8: Overview of the revised Section 19 Business Combinations and Goodwill.
  • A podcast series providing bite-sized insights into the third edition of the Standard. The February 2026 episode is available.

Resources published before the December 2025 IFRS for SMEs Accounting Standard Update

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

1 When the second edition of the IFRS for SMEs Accounting Standard was developed, the requirements for both consolidated and separate financial statements were in IAS 27 Consolidated and Separate Financial Statements. After IFRS 10 Consolidated Financial Statements was issued in 2011, the consolidation requirements were moved to IFRS 10, and IAS 27 was amended and became IAS 27 Separate Financial Statements. Section 9 of the second edition therefore reflects the version of IAS 27 that preceded IFRS 10.