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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 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:

Addendum to the Exposure Draft

On 28 March 2024, the IASB published the Addendum Exposure Draft which supplements the 2022 Exposure Draft.

The Addendum Exposure Draft sets out two groups of proposals:

(1) Supplier Finance Arrangements

The supplementary amendments would require an SME to disclose for its supplier finance arrangements:

  • their terms and conditions;
  • the amount of the liabilities that are part of the arrangements, disclosing separately the amounts for which the suppliers have already received payment from the finance providers, and stating where the liabilities are presented in the statement of financial position;
  • the range of payment due dates; and
  • the type and effect of non-cash changes.

(2) Lack of Exchangeability

The supplementary amendments would require an SME to apply a consistent approach in:

  • assessing whether a currency can be exchanged into another currency; and 
  • estimating the exchange rate to use (and the disclosures to provide) when a currency cannot be exchanged into another currency.

Which SMEs would be affected by the proposals?

The proposed amendments to Section 7 Statement of Cash Flows of the IFRS for SMEs Accounting Standard (the Standard) would affect an SME that, as a buyer, enters into one or more supplier finance arrangements (as described in the proposals), under which the SME or its suppliers can access financing for amounts the SME owes its suppliers.

The proposed amendments to Section 30 Foreign Currency Translation of the Standard would affect an SME that has:

  • transactions in non-exchangeable foreign currencies;
  • a foreign operation with a non-exchangeable functional currency; or
  • a non-exchangeable presentation or functional currency.

The deadline for comments on the proposals in the Addendum Exposure Draft is 31 July 2024. To submit comments, respondents can use the comment template.

Invitation to participate in fieldwork on impairment of SMEs’ financial assets

At its January 2024 meeting, the IASB discussed proposals to introduce an expected credit loss model for the impairment of SMEs’ financial assets. The IASB tentatively decided that:

  • SMEs who do not provide financing to customers as one of their primary businesses be required to continue to use the incurred loss model to measure the impairment of their financial assets; and
  • SMEs who provide financing to customers as one of their primary businesses be required to apply an expected credit loss model, aligned with the simplified approach in IFRS 9 Financial Instruments, to measure the impairment of their financial assets.

Accounting practitioners involved in the preparation of SMEs’ financial statements and users of SMEs’ financial statements are invited to take part in fieldwork to explore the potential effects of the IASB’s tentative decision.

Participants will be asked:

  • to fill out a questionnaire; and
  • to discuss their response to the questionnaire with the SME project team.

The aim is for the questionnaires and follow-up calls to participants to be completed by 30 April 2024.

Taking part in the fieldwork offers preparers and users of SMEs’ financial statements an opportunity to learn more about the IASB’s proposed requirements and their likely practical effects.

Participants are not required to have any prior experience in applying IFRS 9 and will not be asked to prepare financial information or disclosures in accordance with the proposed requirements.

Preparers and users who would like to participate in the fieldwork and receive a questionnaire should send an email to the project team:

Redeliberation of proposals in the 2022 Exposure Draft

The December 2023 IFRS for SMEs Accounting Standard Update summarised the IASB’s tentative decisions on the 2022 Exposure Draft at its meetings between June and December 2023.

The IASB has continued to consider feedback on the 2022 Exposure Draft. Table 1 and Table 2 summarise the IASB’s tentative decisions between January and March 2024.

Table 1—IASB tentative decisions confirming proposals in the 2022 Exposure Draft

Topic IASB meeting Tentative Decision
Reconciliation for liabilities arising from financing activities January 2024 To finalise the proposal in the 2022 Exposure Draft to require SMEs to disclose a reconciliation between the opening and closing balances in the statement of financial position for liabilities arising from financing activities.
Agriculture Bearer Plants January 2024 To finalise the proposals for bearer plants in the 2022 Exposure Draft. 
Leases January 2024 To consider aligning the Standard with IFRS 16 Leases in the next comprehensive review of the Standard.
Business Combinations and Goodwill February 2024 To proceed with the amendments to Section 19 Business Combinations and Goodwill of the Standard proposed in the 2022 Exposure Draft. 
Revenue from Contracts with Customers February 2024
  • To confirm its proposal to require an SME to identify each promise to transfer a distinct good or service, or bundle of goods or services.
  • To confirm its proposal to require an SME to include an amount of variable consideration in the transaction price, only to the extent that it is highly probable that this amount will become due when the uncertainty associated with the variable consideration is resolved. 
Concepts and Pervasive Principles March 2024 To proceed with the proposals in Section 2 Concepts and Pervasive Principles of the 2022 Exposure Draft and to make changes to these proposals, only to improve drafting.
Revenue from Contracts with Customers March 2024
  • To confirm its proposal to require an SME to apply the criteria in paragraph 23.78(a), (c) and (d) of the 2022 Exposure Draft to determine whether the SME satisfies a promise over time or at a point in time.
  • To confirm its proposal to require an SME to present contract assets and receivables separately.
Other topics March 2024

To finalise paragraph 30.8A in the 2022 Exposure Draft, which clarifies the requirements for transactions that include payment or receipt of advance consideration in a foreign currency, and to clarify in this paragraph that:

  • an SME generally recognises a non-monetary asset or non-monetary liability; and
  • an SME that makes more than one payment or receipt in advance is required to determine a date of the transaction for each payment or receipt.

Table 2—IASB Tentative decisions to amend its proposals in the 2022 Exposure Draft

Topic IASB Meeting Tentative decision
Impairment of financial assets January 2024

The IASB tentatively decided that, for a small population of SMEs with significant exposure to credit risk:

  • the relevance principle of the IASB’s alignment approach is satisfied;
  • the population be defined as SMEs that provide financing to customers as one of their primary businesses; and
  • the population be required to apply an expected credit loss model.

Given these three tentative decisions, the IASB also tentatively decided:

  • to require SMEs that do not provide financing to customers as one of their primary businesses to continue to use the incurred loss model to measure the impairment of their financial assets; and
  • to require SMEs that provide financing to customers as one of their primary businesses to apply an expected credit loss model, aligned with the simplified approach in IFRS 9, to measure the impairment of their financial assets.
Consolidated and Separate Financial Statements February 2024
  • To delete paragraph 9.23(b) of the Standard, which requires an SME to disclose the basis for concluding that control exists if the parent does not own more than half of the voting power in the other entity.
  • To add to paragraph 8.6 of the Standard examples of the types of judgements that management might make in the process of applying the SME’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
Revenue from Contracts with Customers

February 2024
  • To require an SME to account for a contract modification as a separate contract if:
    • the modification increases the scope of the existing contract because of additional goods or services promised that are distinct from those in the existing contract; and
    • the modification increases the price of the existing contract by an amount of consideration that reflects the entity’s stand-alone selling price of the additional goods or services and any appropriate adjustments to that price to reflect the circumstances of that contract.
  • To require an SME to account for an option that provides a material right to the customer as a separate performance obligation if the SME can do so without undue cost or effort.
  • To require an SME to recognise the costs of obtaining a contract with a customer as an expense when those costs are incurred.
  • To include the term ‘barter’ in the description of non-cash consideration in the Standard. 
Revenue from Contracts with Customers March 2024
  • To require an SME to apply the requirements based on the principle and indicators of control in IFRS 15 Revenue from Contracts with Customers to determine whether the SME is a principal or agent.
  • To require an SME to account for a warranty as a separate promise only if the customer has the option to purchase the warranty separately.
  • To require an SME that is evaluating whether a customer obtains control of an asset to consider any agreement to repurchase the asset.
  • To specify in the Standard that a customer does not obtain control of an asset if an SME has an obligation or a right to repurchase the asset.
  • To include no requirements specifying how an SME accounts for repurchase agreements that arise from contracts with customers in the Standard.
  • To withdraw the proposed requirements for accounting for unexercised rights in paragraphs 23.119–23.120 of the 2022 Exposure Draft. 

 

 

Other topics

 March 2024
  • To clarify in paragraph 28.17 of the Standard that an SME is required to assess the depth of the market for high-quality corporate bonds at a currency level.
  • To align the requirements for offsetting income tax assets and liabilities in Section 29 Income Tax of the Standard with those in paragraphs 71 and 74 of IAS 12 Income Taxes.
  • To clarify the requirement in proposed paragraph 26.14A of the 2022 Exposure Draft by explaining that the cumulative amount ultimately recognised for goods or services received as consideration for cash-settled share-based payments equals the amount of cash paid.

Find out more on the Second Comprehensive Review of the IFRS for SMEs Accounting Standard project page.