IASB rolls out final accounting guidelines
SME standards seek to lower onerous hurdles in statements
July 16, 2009
By Mzwandile Jacks
The International Accounting Standards Board (IASB) had issued accounting standards for small and medium enterprises (SMEs), providing relief in many areas that were found to be "onerous", it was announced on Tuesday.
Bruce Mackenzie, a member of the accounting practices sub-committee on SMEs at the SA Institute of Chartered Accountants (Saica), said the final International Financial Reporting Standards (IFRS) for small businesses lowered the burden of preparing financial statements, which had been cumbersome in the application of the full standards.
"The main area of relief is in the property, plant and equipment. This has been simplified. There is no option to revalue assets.
"Residual value depreciation method need only be reviewed where there is an indicator of change," Mackenzie said.
The IFRS for SMEs is a separate, stand-alone financial reporting framework. It consists of the standard, illustrative financial statements, presentation and disclosure checklist. It is applicable where there is no public accountability and no listed debt or equity. There should also be no plans to list equity.
The regulation is applicable where a specific entity does not hold assets in a fiduciary capacity for a broad group of outsiders as a primary business.
Mackenzie said from January, the IFRS introduced a concept of a comprehensive income statement and a three-year statement of financial position.
The IFRS for SMEs requires the same, but there are no requirements to show three years of financial position.
"And there are very few items of comprehensive income in the IFRS for SMEs," Mackenzie said.
The publication of the IFRS for SMEs marks the end of a five-year process, during which the final standard was developed with input from South Africa and many other countries around the world.
South Africa became the first country last year to adopt the exposure draft of the IFRS for SMEs as a statement of generally accepted accounting practice (GAAP).
There were 5 000 companies reporting in terms of statement of GAAP for SMEs in South Africa and this was used as a test bed for the IASB.
The intention of the early adoption at the time was to provide immediate relief for small entities.
The statement of GAAP had simpler options, less disclosure and was easier to understand than the full IFRS.
Sue Rudolph, the project director of accounting at Saica, said complexity was one of the biggest problems with financial reporting faced by SMEs in the country.
She said there were 30 new standards becoming effective in the next year and companies reporting under full IFRS faced tough challenges in preparing their accounts.
"The IASB has indicated that the SME standard will only be amended every three years. This in itself will provide relief for companies adopting this standard, as full IFRS currently has numerous changes being required annually, said Rudolph.
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