The Future of Micro-Entity Financial Reporting

1,637

Published on

Florin Toma, member of the International Federation of Accountant's Small and Medium Practices (SMP) Committee provides a look at the future of financial reporting for micro-entities.

Published in: Economy & Finance, Business
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
1,637
On Slideshare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
2
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Transcript of "The Future of Micro-Entity Financial Reporting"

  1. 1. Page 1 | Confidential and Proprietary Information The Future of Micro-Entity Financial Reporting Florin Toma, Member, IFAC Small and Medium Practices (SMP) Committee OTOC – EFAA Conference Porto, Portugal December 5, 2011
  2. 2. Page 2 | Confidential and Proprietary Information The Future of Micro-Entity Financial Reporting Agenda • IFAC Perspectives on the IFRS for SMEs • Current EU Situation • Case Study – Romania • Some Personal Remarks
  3. 3. Page 3 | Confidential and Proprietary Information IFAC’s Mission “… is to serve the public interest by: contributing to the development, adoption and implementation of high- quality international standards and guidance; contributing to the development of strong professional accountancy organizations and accounting firms, and to high-quality practices by professional accountants; promoting the value of professional accountants worldwide; and speaking out on public interest issues where the accountancy profession’s expertise is most relevant.” IFAC Perspectives on IFRS for SMEs
  4. 4. Page 4 | Confidential and Proprietary Information Importance of SMEs and SMPs IFAC Perspectives on IFRS for SMEs • SMEs are key to sustainable growth and public interest • High quality, internationally comparable financial reporting will help SME sector • SMPs provide a range of high-quality professional services to SMEs • SMPs bring choice & competition into market
  5. 5. Page 5 | Confidential and Proprietary Information IFAC SMP Committee – Strategic Objectives IFAC Perspectives on IFRS for SMEs • Participate in policy-making and regulatory dialogue (proportionate, stable, relevant) • Input to development of international standards (proportionate, stable, relevant) • Raise awareness of importance of SME sector and role of SMPs (voice and visibility) • Provide practical support to SMPs (capacity building)
  6. 6. Page 6 | Confidential and Proprietary Information IFAC’s Role in Development of IFRS for SMEs • Closely monitored project and regular input: – 2004 Discussion Paper – 2005 Staff Questionnaire – 2006 IASB Roundtable participation – 2007 Exposure Draft • IFAC Board publicly supported project • Micro entity reporting research (two papers) IFAC Perspectives on IFRS for SMEs
  7. 7. Page 7 | Confidential and Proprietary Information IFAC’s View of Outcome IFAC Perspectives on IFRS for SMEs “This global accounting standard represents a very significant step on the path to global convergence of financial reporting practices by SMEs. It will contribute to enhancing the quality and comparability of SME financial statements around the world and assist SMEs in gaining access to finance. The beneficiaries will be not only SMEs, but also their customers, clients, and all other users of SME financial statements” (IFAC Press Release, July 2009)
  8. 8. Page 8 | Confidential and Proprietary Information IFAC’s View of Outcome • IASB followed thorough and open due process • Significant simplification from full IFRS – addresses many concerns raised on exposure • SMO (Statement of Membership Obligation) 7: IFRS under revision: – may encourage member bodies to consider the use of IFRS for SMEs for non-public interest entities • IFRS Foundation’s implementation support (free training materials, train the trainer workshops etc.) very useful IFAC Perspectives on IFRS for SMEs
  9. 9. Page 9 | Confidential and Proprietary Information Micro-Entities • SMP Committee keeping watching brief • Some have questioned suitability (e.g., Nexia) • Exclude from the requirement to prepare and publish financial reports? (like the US?) • If no exclusion then use IFRS for SMEs or Micro-GAAP? IFAC Perspectives on IFRS for SMEs
  10. 10. Page 10 | Confidential and Proprietary Information Current EU Situation • Smaller SMEs allowed to present “abridged” financial statements if Member State implements this option (abridged FS presentation is still based on same EU accounting requirements and local GAAPs) • Many Member States have compulsory filing and publication requirements for SME financial statements; some Member States strongly oppose • No Member State has yet adopted IFRS for SMEs yet; UK and Ireland plan to adopt • Awareness amongst SMEs is patchy Adoption and Implementation
  11. 11. Page 11 | Confidential and Proprietary Information Current EU Situation Adoption and Implementation • EU Commission (EC) review of 4th and 7th Company Law Directives (‘Accounting Directives’) with aim of reducing administrative burden for SMEs, improving clarity, and enhancing international comparability • EC consultation on IFRS for SMEs: evidence that some Member States are willing to implement IFRS for SMEs, while others are not interested or against adoption • Micros entities a hot issue: proposals might lead to reduced or no requirements for filing and publication of FS (possibly just simplified balance sheet on request)
  12. 12. Page 12 | Confidential and Proprietary Information Case Study - Romania Entities by EU Size Classification Micro entities 91.4 Small entities 7.0 Medium entities 1.3 Large entities 0.3 Total 100.0%
  13. 13. Page 13 | Confidential and Proprietary Information Case Study - Romania Applicable Standards a. Full IFRS – mandatory as unique set of financial statements for banks stating in 2012 – voluntary application, as a 2nd set of financial statements for public interest entities – mandatory for consolidated accounts b. EU Directives compliant regulations – mandatory for all SMEs (as single set of financial reporting)
  14. 14. Page 14 | Confidential and Proprietary Information Study Case - Romania Applicable Standards cont… c. Simplified accounting – for micro entities (with total assets and total sales under 350,000 EUR), introduced this year as part of the EU simplification project d. IFRS for SMEs – Romania among the first countries to translate and disseminate the IFRS for SMEs throughout profession – regulatory authority (Ministry of Finance) does not envisage adoption for the time being – CECCAR project is looking at building SME reporting standards based on the IFRS for SMEs (adaptation, not adoption).
  15. 15. Page 15 | Confidential and Proprietary Information Some Personal Remarks Impediments to EU Adoption of IFRS for SMEs • IFRS for SMEs simplified version of full IFRS; not necessarily tailored to needs of SMEs and stakeholders • Difficulty reconciling with national tax requirements • Other – Institutional and political – Level of development of the local profession – Level of changes necessary to local regulations (especially tax)
  16. 16. Page 16 | Confidential and Proprietary Information SMP Quick Poll • Quarterly poll on challenges and issues faced by SMPs • Important platform for SMPs to make voice heard • Results posted at www.ifac.org/smp and SMP eNews • Only three minutes to complete online • Portuguese language version for you to have a say at http://www.research.net/s/SMPQuickPoll-Nov-Dec2011
  17. 17. Page 17 | Confidential and Proprietary Information Thank You Questions?

×