The IFRS for SMEs Update is a staff summary of news, events and other information about the IFRS for SMEs® Standard and related SME activities. The staff summary has not been reviewed by the International Accounting Standards Board (Board).
This edition of the IFRS for SMEs Update includes:
The SMEIG met on 9 September 2021 to:
In her note below, Bee Leng Tan, SMEIG member, sets out an overview of the meeting. The SMEIG report will be available shortly on the meeting page.
Kyrgyzstan adopted the IFRS for SMEs Standard without modification. Small and medium-sized businesses may, voluntarily, and by decision of their governing bodies that have approved the accounting policy, prepare financial statements in accordance with IFRS Standards or the IFRS for SMEs Standard.
Currently, 87 jurisdictions require or permit the IFRS for SMEs Standard. The jurisdiction profiles can be viewed here.
The IFRS Foundation provides educational materials to support the implementation and application of the IFRS for SMEs Standard. These materials are available on the Supporting materials for the IFRS for SMEs Standard page and include:
The IFRS Foundation has also made available a package of 35 supporting modules to help those who wish to learn more about the IFRS for SMEs Standard, particularly those who apply the Standard and users of financial statements that are prepared in accordance with the Standard.
Bee Leng Tan is the Executive Director at the Malaysian Accounting Standards Board (MASB). As part of her role as Executive Director, she ensures that the MASB participates meaningfully to the Board’s standard-setting process. Bee Leng also represents the MASB at the IFRS Advisory Council and the Board’s Emerging Economies Group. She serves as a member of the ACCA Global Forum for Corporate Reporting and the Technical Advisory Group of IFR4NPO, an initiative led jointly by the Chartered Institute of Public Finance and Accountancy and Humentum.
The Malaysian Private Entities Reporting Standard (MPERS) issued by the MASB is substantively equivalent to the IFRS for SMEs Standard. In Malaysia, a private entity has an option to apply either MPERS or the Malaysian Financial Reporting Standards (MFRS). Financial statements that have been prepared in accordance with MFRS shall also make an explicit and unreserved statement of compliance with IFRS Standards.
The IFRS for SMEs Standard provides a relatively stable platform for SMEs because the Standard is subject to review only periodically. The IFRS for SMEs Standard was issued 12 years ago and is undergoing only its second comprehensive review.
The Request for Information Comprehensive Review of the IFRS for SMEs Standard was published by the Board in January 2020 and remained open for comment by the public until October 2020.
In September 2021, the SMEIG held a virtual meeting to discuss feedback on the Request for Information and make recommendations to the Board for updating the IFRS for SMEs Standard.
Staff proposals for leases
The SMEIG discussed three possible approaches to updating Section 20 Leases of the IFRS for SMEs Standard. Some SMEIG members supported adopting Approach 1—aligning Section 20 with IFRS 16 Leases, with simplifications. These members said:
These members took the view that adopting Approach 1 would not be burdensome to SMEs.
Some members who supported Approach 1 enquired how different Approach 1 and Approach 2 would be in practice. Adopting Approach 2 would result in extending the accounting for finance leases in the IFRS for SMEs Standard to all leases.
A few SMEIG members supported Approach 3—to improve disclosures for operating leases without changing recognition and measurement requirements. These SMEIG members said Approach 3 would meet the needs of users of SMEs’ financial statements, tailor for the costs and SME capabilities, and was true to the objective of the IFRS for SMEs Standard. One member said that many SMEs applying the Standard are medium or smaller entities for which Approach 3 would be the appropriate and practical option.
I look forward to the Board’s technical staff discussing the range of SMEIG member views on updating Section 20 with the Board.
Other staff proposals
The staff proposal not to align the IFRS for SMEs Standard with IFRS 14 Regulatory Deferral Accounts was supported by SMEIG members.
SMEIG members also supported the staff proposal to align the IFRS for SMEs Standard with the 2011 amendments to IAS 19 Employee Benefits only in respect of the recognition requirements for termination benefits. Some members said that, in their jurisdictions, defined contribution plans are more prevalent than defined benefit plans in the SME sector.
In general, SMEIG members supported the staff proposal to align multiple sections of the IFRS for SMEs Standard with amendments to IFRS Standards and IFRIC Interpretations. However, I shared a significant concern about the proposed alignment with IAS 16 Property, Plant and Equipment and IAS 41 Agriculture relating to bearer plants. I explained that alignment would introduce unnecessary complexities for SMEs and bring limited benefits, if any. In my view, the requirement to bifurcate the bearer plant and its produce conflicts with the simplicity principle and requiring the use of fair value measurement for produce growing on bearer plants introduces complexity.
SMEIG members discussed how to proceed with other topics raised in the feedback to the Request for Information, including interim financial reporting, biological assets, loans from a director, share-based payment, shares and equity instruments, and assets held for sale. A SMEIG member said SMEs should be allowed an option to capitalise borrowing costs and software development costs. SMEIG members also welcomed the staff proposal to hold a sub-group meeting on issued financial guarantee contracts and the impairment of financial assets.
The Board is working towards publishing an exposure draft. The timeline for publication depends on the availability of resources and it is unlikely that an exposure draft will be published before the second half of 2022.