The IASB originally intended full International Financial Reporting Standards (IFRS) to be suitable for all entities, listed and unlisted, large and small. However the reality is that only some SMEs have been interested in adopting full IFRS because for those SMEs without a capital market focus, the cost and time involved in preparing IFRS information can be discouraging. The IASB now proposes a consistent framework for all entities’ financial statements that takes account of the costs and benefits to all stakeholders.

The potential take-up of the revised IFRS for SMES is much greater than that of full IFRS because of the vast number of SMEs internationally.  CPA Ireland is particularly interested in this project, as many of its membership comprises of practitioners and accountants working in the SME sector.

While CPA broadly supports the proposals, the Institute commented in its recent submission to the Board that the use of the term “IFRS for SMEs” is not the most suitable title and the board should consider it to be replaced with “IFRS for NPAEs (“non-publicly accountable entities”). The exposure draft does not give an indication of the size criteria of an SME, but mentions that it is a company with about 50 employees and the CPA is of the opinion that this does not give an accurate representation of the average SME. The term SME is a well know term for different set of criteria in company legislation known by users of financial statements and the Institute feels that this is causing confusion to many users.

Commenting on the proposed standards, CPA President Brendan Allen said, “ In simplifying standards for SMEs, we are pleased to see that the IASB has accepted that current International Financial Reporting Standards (IFRS) are designed for listed companies. SMEs however require a more straightforward, practical solution in line with the needs of their stakeholders reading the accounts and the costs to the company to produce them. “

CPA has been closely monitoring progress on this initiative and has actively represented its views to the International Accounting Standards Board during the current consultation process. 

“It will be critically important to ensure that the standards developed reflect the particular concerns of Irish SMEs and that we do not have a set of regulations which suit some jurisdictions better than others. CPA has committed to carrying out field research for all our members post- implementation to ensure smooth transition to the standard, “said Allen.