IFRS applicability for Small Business

How small and medium-sized entities go through and apply IFRS?

It is because IFRS is very cumbersome. They’re very complex and there are a lot of rules and complexities surrounding them. Now if you think about small and medium-sized entities just because they’re small just because they’re medium doesn’t mean to say that they are not important. They are vitally important to drive any economy because ultimately a small or medium size density will become a larger entity and will ultimately become listed hopefully at some point in the future and therefore generate more profits create more wealth for the economy to taxes, create more jobs and then further increase wealth through the Taxes generated from employment so small and medium-sized entities should not be confused with being not important.

 However, in order to get them on the path to success and to grow bigger and become more International, we don’t want to overburden them with too much accounting regulation in that early day because if we do that then they’ll spend more time focusing on and the accounts crap then managing the business and looking at the future looking at the business strategy and how they can improve the strategy and improve the value of the business going forward. So what we decided to do on the international rules is we try to simplify the accounting for small and medium-sized entities now, even though it says small and medium-sized entity some of the small and medium-sized entities by definition can actually be quite large. But they meet the small and medium-sized entity as there are criteria here within your IFRS for SMEs. So first of all, let’s think about what we have with regards to your small and medium-sized then Steve. 

What do we look at internationally as SMEs? Well, SMEs essentially our businesses that do not have public accountability so let’s think about which businesses have public accountability listed companies Banks insurance company. They all have public accountability do then so therefore companies that do not have public accountability will be other lists in businesses and non-financial institutions. So banks have to follow IFRS has Financial Insurance institutions have to follow IFRS has listed companies have the following. Issues but if you’re all listed or a non-financial institution, you do not have to follow the full-blown set of IFRS has however there could be some quite large unlisted businesses in the UK. We have some smaller discount retailers.

You may have heard if you’re in the UK such as BNN Bargains Home Bargains, Wilkinson’s if you’ve ever been to an airport in the UK, I’m sure you’ve seen Virgin Atlantic part of the Virgin Group and Virgin group is pretty large. But it’s not listed. So by definition, it’s an IFRS also, it is an SMB so that cool or could follow IFRS for SMEs puts pretty large. So, you know just because it’s defined as an SMA doesn’t necessarily mean that it is small or medium. It could actually be quite large. However, they still have the choice if they want to go through their own adopt diet for us as if they so wished it not there for mandatory what they want. They can adopt a more simplified stand. And IFRS for SMEs. So when we thought about this as an issue, what were the options? Well one option was to totally go through and rewrite a new set of IFRS have so you’ve got all your IFRS has you could write out some new IFRS has that are then more simplified? Okay. The other alternative would have been to take the IFRS has and then at the end of each IFRS just go through the end. That means should do as opposed to following the full rules or what was finally decided upon was to say well look there’s the IFRS is let’s create a new accounting standard. So IFRS is for SMEs as it says that Is a self-contained accounting standard it exists by itself and it’s designed to be more simplified than your fault. IFRS is I’d all it goes from does is essentially it has a more condensed version in one accounting standard. Okay, which makes it more simplified. 

 How does it go through if you like to make it less complex? 

What you got there, is it removes anything that’s not relevant. So earnings per share aren’t relevant for an unlisted business interim financial reporting. It’s not relevant for an unlisted business and segment reporting again is not considered relevant for an unlisted business. Again, what we go through and do as well as we go through the simplify the IFRS has so when we look at the detail in a moment. The simplification is trying to take away the options that you have with regards to accounting standards and keep them as straightforward as possible likewise as well fewer disclosures similarly as well. It’s written in clear easily. 


It’s about the language you could argue with that one. I do think that IFRS is quite clear and easily translatable. But there we go. And then what we have here is that the revisions are much less regular. Okay, so we’re not expected to update IFRS for SMEs as regularly as what we would with your full-blown IFRS. Okay. So what we’ve got just a couple of examples with regards to what you see within that standard. And that IFRS is for some. So what we have here is most of them refer to your assets. That’s where Simplicity arises. So I’m property plant and equipment on the IFRS. You have a choice of the cost versus the revaluation model here. It’s just a cost model only intangibles under IFRS you expense research and you must capitalize development here you expense research and development which makes it much easier doesn’t it and have it to the terminal? I don’t know. 


When are we going to start capitalizing but I’m not opposed by the time you decided to capitalize the project finished. Okay, and then everyone’s moved on in the developing new products investment property value model only again keeping it simple as opposed to having a choice of two borrowing costs under IFRS. You must capitalize That’s complicated. Isn’t it to make it simple don’t bother capitalizing it expense the borrowings as incurred and then with your business combinations when you’re thinking about your Goodwill again, would this be relevant so much for some of the smaller SMEs maybe not because they’re not yet acquiring other entities and gaining control, but for some of the larger SMEs who are beginning to expand and gain control of some centuries and if they’re not following fall IFRS has we use your partial Goodwill. So your proportionate share of net assets. And then we just amortize it over the 10 years. Okay. There we go Excellence. So try to remember most of those there because you can add supplements that it in any potential answer to the question a long time ago. This was a current issue question. So I would recommend that you attend to that current issue question or at least read it through to go through and get a thorough understanding of this separate IFRS for SMEs. 




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