On Jul 9, 2009, the International Accounting Standards Board (IASB) published the first "International Financial Reporting Standard for Small and Medium-sized Entities" (IFRS for SMEs). The IASB refers to the IFRS for SMEs as a standard (i.e., singular), but it's really a complete set of financial reporting standards that is intentionally much shorter and simpler than full IFRS. As its name implies, the IFRS for SMEs is designed around the financial reporting capabilities and needs of smaller companies and their stakeholders. In this article, the author will discuss key details of the IFRS for SMEs and explore the significant impact that it's likely to have on small-business accounting.
FINANCIAL REPORTING By Bruce Pounder, CMA, CFM A Game-Changer for Small-Business Accounting The International Accounting Standards Board recently issued its long-awaited “International Financial Reporting Standard for the final name doesn’t fully convey lack public accountability. Small and Medium-sized Entities.” the intricacies of the Standard’s According to the IASB, “An The Standard is poised to be a entity scope. So who, exactly, is the entity has public accountability if: “game-changer” for small- intended audience? (a) its debt or equity instruments business accounting in the The IFRS for SMEs is, like full are traded in a public market or it United States and around the IFRS, a country-neutral set of is in the process of issuing such world. financial reporting standards. instruments for trading in a public Therefore, the IFRS for SMEs is market…or (b) it holds assets in a appropriate for smaller compa- fiduciary capacity for a broad O n July 9, 2009, the Interna- tional Accounting Standards Board (IASB) published the first nies, regardless of which country or countries they operate in. In countries that impose statu- group of outsiders as one of its primary businesses. This is typi- cally the case for banks, credit “International Financial Reporting tory financial reporting obligations unions, insurance companies, Standard for Small and Medium- on companies within the scope of securities brokers/dealers, mutual sized Entities” (IFRS for SMEs). the IFRS for SMEs, a company’s funds and investment banks.” This The IASB refers to the IFRS for use of the Standard in satisfying its definition of public accountability SMEs as a standard (i.e., singular), statutory reporting obligations effectively excludes most small but it’s really a complete set of would have to be allowed or companies and therefore puts financial reporting standards that required by local legislative action. those companies within the scope is intentionally much shorter and In contrast, in countries that don’t of the IFRS for SMEs. simpler than full IFRS. impose such obligations on com- As its name implies, the IFRS panies within the scope of the What the Standard Is For for SMEs is designed around the IFRS for SMEs (e.g., the U.S.), The IFRS for SMEs applies to the financial reporting capabilities and companies can decide for them- preparation of general purpose needs of smaller companies and selves whether and when they want financial statements that are pub- their stakeholders. In this month’s
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