IFRS vs IFRS for SMEs

The majority of financial statements in South Africa are arguably compiled by implementing the International Financial Reporting Standards for Small and Medium-sized Entities (IFRS for SMEs) as a financial reporting framework. The International Accounting Standards Board (IASB) published IFRS for SMEs during July 2009. The standard was introduced in order to reduce complexities and the burden associated with applying full IFRS for small and medium-sized entities. The standard was designed in order to fulfil the needs of the users of the financial statements of small and medium-sized entities.

In accordance with the Regulations of the Companies Act, the following profit companies are allowed to implement IFRS for SMEs as a financial accounting framework:

1. Public companies not listed on an exchange, provided that the company meets the scoping requirements for IFRS for SMEs;
2. Profit companies, other than state-owned or public companies, whose public interest score for the particular financial year is at least 350, provided that the company meets the scoping requirements for IFRS for SMEs;
3. Profit companies, other than state-owned or public companies-
   • Whose public interest score for the particular financial year is at least 100 but less than 350; or
   • Whose public interest score for the particular financial year is less than 100, and whose statements are independently compiled
4. Profit companies, other than state-owned or public companies, whose public interest score for the particular financial year is less than 100, and whose statements are internally compiled.

The scoping requirements of IFRS for SMEs state that the following entities are allowed to implement the framework:

1. IFRS for SMEs is intended for use by small and medium-sized entities. Small and medium-sized entities are entities that:
   • Do not have public accountability; and
   • Publish general purpose financial statements for external users.

The use of IFRS for SMEs ensures the following benefits for the entities that implement the standard as a financial reporting framework[1]:

1. Some topics in full IFRS Standard are omitted because they are not relevant to typical SMEs;
2. Some accounting policy options in full IFRS Standards are not allowed because a more simplified method is available to SMEs;
3. Many of the recognition and measurement principles that are in full IFRS Standards have been simplified;
4. Substantially fewer disclosures are required; and
5. The text of full IFS Standards has been redrafted in “plain English” for easier understandability and translation.

[1] In accordance with the IASB website

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)