The IFRS for SMEs Standard 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).

The summary includes the following:

Update on the second comprehensive review of the IFRS for SMEs Standard

The Board published a Request for Information in January 2020 as part of its second comprehensive review of the IFRS for SMEs Standard.

Extension of the comment period for the Request for Information

The Board recognises the challenges facing stakeholders as a result of the coronavirus pandemic and decided, at its April 2020 meeting, to extend the deadline for receiving comments on the Request for Information to 27 October 2020.

Options for responding to the Request for Information

The Request for Information is intended to seek views on whether and how aligning the IFRS for SMEs Standard with full IFRS Standards could better serve users of financial statements prepared applying the IFRS for SMEs Standard, without causing undue cost and effort.

The Board would like to hear from a broad range of stakeholders and has therefore provided three ways for respondents to share their views. Stakeholders can respond: 

  1. by comment letter;
  2. by comment letter using the optional response document (which should be completed and converted to PDF); or
  3. by completing the online survey.

The following flow chart may assist stakeholders in deciding how to provide feedback:

Comprehensive-Review-SME-graphic

Materials supporting the second comprehensive review of the IFRS for SMEs Standard

Webcasts on the Request for Information

The staff has made available two webcasts to help stakeholders respond to the Request for Information.

The first webcast provides an overview of the IFRS for SMEs Standard and introduces the Request for Information published in January 2020.

The second webcast describes how the Board approached the second comprehensive review and explains the framework the Board developed for the review.

In June 2020 we expect to provide an additional webcast where the staff will discuss the type of information the Board is seeking from respondents to the Request for Information.

Webinar on the Request for Information

The Board plans to conduct a webinar in early August 2020 to allow stakeholders to ask questions about the second comprehensive review.

User survey

The Board plans to survey users of SMEs’ financial statements to gain insight about the information needs of those users. The survey will contain questions to help the Board develop disclosures, should the Board decide to update the IFRS for SMEs Standard as part of the second comprehensive review.

Frequently asked questions on the Request for Information

Question Answer

How does the Board determine which terms are ‘important definitions’ in question G1B of the Request for Information?

Note: Question G1B discusses the following options for aligning the IFRS for SMEs Standard with full IFRS Standards:

  • alignment of principles;
  • alignment of both principles and important definitions; or
  • alignment of principles, important definitions and the precise wording of requirements.

By ‘important definitions’, the Board means definitions that are pervasive in IFRS Standards.

For example, in IFRS 10 Consolidated Financial Statements, the definition of ‘control’ provides the basis for consolidation and helps with determining when an investor should consolidate an investee. Similarly, IFRS 11 Joint Arrangements directs parties to an arrangement to first assess whether all the parties ‘control’ the arrangement collectively.

Is the Board reconsidering the scope of the IFRS for SMEs Standard as part of the second comprehensive review?

The Board has not requested information on the scope of the IFRS for SMEs Standard. In view of the feedback from the first comprehensive review and the outreach for this review, it was deemed unlikely that responses to the Request for Information would lead the Board to change its previous conclusions.

Question N5 in Part C of the Request for Information provides an opportunity to bring additional issues relating to the IFRS for SMEs Standard to the Board’s attention.

Does the Board intend to add more guidance to help preparers with applying the concept of ‘undue cost or effort’?

The Board deemed it inappropriate to provide further guidance in the IFRS for SMEs Standard because, ultimately, application of an undue cost or effort exemption depends on an SME’s specific circumstances and on management’s judgement.

The Board also noted that the terms ‘undue cost’ and ‘undue cost or effort’ are used in IFRS Standards and it would be inappropriate to define in the IFRS for SMEs Standard a term that is not defined in IFRS Standards.

Please clarify what information the Board is requesting in question N3 of the Request for Information.

Note: Question N3 relates to Section 28 Employee Benefits of the IFRS for SMEs Standard. Section 28 allows an entity to apply simplifications in measuring a defined benefit obligation if the entity is unable, without undue cost or effort, to use the projected unit credit method. Paragraph 28.19 of the IFRS for SMEs Standard allows an entity to ignore estimated future salary progression, the effect of future service and death in service.

The Board has received feedback that the simplifications in paragraph 28.19 of the IFRS for SMEs Standard are unclear and that defined benefit plans and other post-employment benefits are not common transactions among entities applying the IFRS for SMEs Standard.

The Board is requesting further information on whether the simplifications are applied regularly and, if so, what difficulties arise in applying the simplifications.

Update on the SME Implementation Group (SMEIG)

The SMEIG assists the Board in supporting the application of the IFRS for SMEs Standard. More information about the SMEIG, including its terms of reference and operating procedures, is available here.

Appointment of new SMEIG members

In February 2020, the Trustees of the IFRS Foundation sought nominations for SMEIG members. The Trustees received applications in excess of the number of vacant positions.

At their meeting in June 2020, the Trustees approved the appointment of 21 new SMEIG members and one observer with effect from 1 July 2020. These appointments will bring the number of SMEIG members to 28 and the number of observers to four.

Amendment of the SMEIG Terms of Reference and Operating Procedures

At their June 2020 meeting the Trustees also approved amendments to the SMEIG Terms of Reference and Operating Procedures. The revised version is available here.

Online resources for SMEs

The Board and the SMEIG provide educational materials to support the adoption and implementation of the IFRS for SMEs Standard. These materials are available on the IFRS Foundation’s website and include:

  • webcasts, podcasts and webinars; and
  • articles and other publications.

The IFRS Foundation has also made available a package of 35 supporting modules to help those applying, reading financial statements prepared applying, or learning about the IFRS for SMEs Standard.

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