IASB March 2008
The discussion of the SME project was educational, and no decisions were made. At the meeting the staff:
- summarised the project activities since the exposure draft was published in February 2007
- identified the main issues raised in the letters of comment on the exposure draft
- presented a proposed work plan for completion of an IFRS for SMEs.
Issues raised in the letters of comment
The Board reviewed some of the main issues in the comment letters. General issues not related to specific sections in the exposure draft included the following:
Stand-alone document Many respondents would eliminate all cross-references to full IFRSs, thereby making the IFRS for SMEs fully stand-alone. Others either:
(a) would keep the number of cross references to an absolute minimum or
(b) were indifferent between having minimal cross- references and removing all of them.
Only two comment letters did not agree that the IFRS for SMEs should be a stand-alone document. The agenda paper included a complete list of cross-references to full IFRSs.
Accounting policy options Many respondents recommended that all or most options in full IFRSs should be available to SMEs. The Board noted that making the IFRS for SMEs stand-alone while also including all options was likely to enlarge the document substantially.
Anticipating changes to full IFRSs Many respondents were of the view that the IFRS for SMEs should be based on existing IFRSs and should not anticipate changes to IFRSs that the Board is considering in others projects.
Disclosure Although many respondents encouraged the Board to make further simplifications to disclosure requirements, many did not identify specific disclosures to be eliminated or why. The Board encouraged the staff to seek the views of users regarding disclosure and other possible changes to the exposure draft.
The Board would appreciate views not only on disclosure simplifications but also on what additional disclosures might be needed, including, for example, disclosures about significant
customers and other economic dependencies. The Board also asked the staff to obtain users’ views on the recognition and measurement simplifications in the exposure draft.
Name for SMEs Many respondents agreed with the Board’s description of entities that should be allowed to use the IFRS for SMEs - namely entities that do not have public accountability. However, many also suggested that the Board should find a better term than ‘SMEs’ to describe those entities. The staff will bring recommendations to the Board at a future meeting.
Scope Many respondents discussed the suitability of the proposals for micro-sized entities (ie those with under 10 or so employees), small listed entities, and entities that act in a fiduciary capacity. The staff pointed out that the IFRS for SMEs is intended to be suitable for any entity that
(a) does not have public accountability and
(b) prepares general purpose financial statements (GPFSs).
The exposure draft identified two types of entity that have public accountability. For all other entities, it would be up to individual jurisdictions—not the IASB—to decide which entities should prepare GPFSs and whether those entities should follow IFRSs, the IFRS for SMEs or some other framework.
Fair value – general Many comment letters proposed that fair value measurements in the IFRS for SMEs should be restricted to
(a) circumstances in which a market price is quoted or readily determinable without undue cost or effort and
(b) all derivatives.
Some respondents also thought it was necessary that the measured item should be readily realisable and/or there is an intention to dispose of or transfer the item.
Implementation guidance for the IFRS for SMEs Many respondents cited the need for implementation guidance and encouraged the Board to consider how such guidance could be provided. The Board generally acknowledged the need but disagreed with those who favour a programme for developing formal ‘interpretations’ of the IFRS for SMEs. The IASC Foundation education team is developing training materials on the IFRS for SMEs that could meet this need.
In addition to general issues, most respondents raised issues related to specific sections in the exposure draft. Although respondents offered suggestions for each of the 38 sections, the topics that received the most comments (generally in favour of further simplifications) included consolidation, amortisation of goodwill and other indefinite life intangibles, financial instruments, requirements for statements of cash flows and changes in equity, measurements for impairments and finance leases, share based payment, employee benefits, and income taxes.