IFRS for Private Entities (formerly IFRS for SMEs) Paul Pacter, IASB IASC Foundation, Beijing  9 October 2008
Benefits of global private entity IFRS <ul><li>Comparability </li></ul><ul><li>Improved quality of reporting as compared t...
IASB Exposure Draft <ul><li>Organised by topic ED is 254 pages, plus: </li></ul><ul><ul><li>Financial statements  </li></u...
About the ED <ul><li>Simplified principles tailored for smaller, private entities that: </li></ul><ul><ul><li>Do not have ...
Statutory GAAP reporting by SMEs <ul><li>Required by law for all or most private companies? </li></ul><ul><li>USA:  Genera...
Who are we aiming at? <ul><li>In most countries, only 1% of businesses have over 50 employees.  United Kingdom (2007): </l...
How did we simplify? <ul><li>Some topics in IFRSs omitted if irrelevant to private entities </li></ul><ul><li>Where IFRS h...
Extensive outreach and consultation <ul><li>Presentations at 95 conferences and roundtables in 40 countries (54 since ED w...
Key issues in Board re-deliberations <ul><li>Broad Issues </li></ul><ul><li>Eliminate cross-references to full IFRSs </li>...
Key issues in Board re-deliberations <ul><li>Specific technical issues </li></ul><ul><li>Deferred income taxes </li></ul><...
IASCF training materials for PEs <ul><li>Being developed by IASC Foundation </li></ul><ul><li>One module per Section (ED h...
Use in the United States <ul><li>Could private companies in the US use the IFRS for Private Entities? </li></ul><ul><li>No...
Use in Europe <ul><li>IAS regulation applies only to full IFRSs </li></ul><ul><li>IFRS for PEs not required or prohibited ...
Use elsewhere <ul><li>South Africa </li></ul><ul><li>Already adopted the ED as their final standard </li></ul><ul><li>Worl...
Next steps <ul><li>Staff analyses of comments and field tests, recommendations for changes to the ED:  Presented to the Bo...
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AP5D Private Entities.ppt

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AP5D Private Entities.ppt

  1. 1. IFRS for Private Entities (formerly IFRS for SMEs) Paul Pacter, IASB IASC Foundation, Beijing 9 October 2008
  2. 2. Benefits of global private entity IFRS <ul><li>Comparability </li></ul><ul><li>Improved quality of reporting as compared to existing GAAP </li></ul><ul><li>Focus on user needs of private entities </li></ul><ul><li>Ease burden where full IFRSs or full national GAAP are now required </li></ul><ul><li>Education and training </li></ul><ul><li>Auditing efficiencies </li></ul>© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org
  3. 3. IASB Exposure Draft <ul><li>Organised by topic ED is 254 pages, plus: </li></ul><ul><ul><li>Financial statements </li></ul></ul><ul><ul><li>Disclosure checklist </li></ul></ul><ul><ul><li>Basis for conclusions </li></ul></ul><ul><li>Board vote: 13 to 1 </li></ul><ul><li>ED issued: 15 February 2007 </li></ul><ul><li>Translated: 5 languages </li></ul><ul><li>Comment deadline was: 30 November 2007 </li></ul><ul><li>Board re-deliberations have begun </li></ul>© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org
  4. 4. About the ED <ul><li>Simplified principles tailored for smaller, private entities that: </li></ul><ul><ul><li>Do not have public accountability </li></ul></ul><ul><ul><li>Issue general purpose financial statements </li></ul></ul><ul><li>Based on full IFRSs, which are developed for public capital markets </li></ul><ul><li>Simplifications based on: </li></ul><ul><ul><li>User needs </li></ul></ul><ul><ul><li>Cost-benefit </li></ul></ul>© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org
  5. 5. Statutory GAAP reporting by SMEs <ul><li>Required by law for all or most private companies? </li></ul><ul><li>USA: Generally No. </li></ul><ul><ul><li>20,000,000 private businesses: No </li></ul></ul><ul><ul><li>25,000 SEC/others  FASB GAAP by law </li></ul></ul><ul><li>Rest of world: Generally Yes. </li></ul><ul><ul><li>Europe: 5,000,000 companies must prepare GAAP f/s and have audit by law </li></ul></ul><ul><ul><li>Same in most other countries </li></ul></ul>© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org
  6. 6. Who are we aiming at? <ul><li>In most countries, only 1% of businesses have over 50 employees. United Kingdom (2007): </li></ul>Number Percent Total Entities 4,679,000 100.0 Owner run (no employees) 3,460,000 74.0 1 – 9 employees 1,019,000 21.7 10 – 49 employees 167,000 3.6 50 – 99 employees 17,000 0.4 100 – 199 employees 8,000 0.2 200 – 499 employees 5,000 0.1 500 or more employees 3,000 0.1
  7. 7. How did we simplify? <ul><li>Some topics in IFRSs omitted if irrelevant to private entities </li></ul><ul><li>Where IFRS has options, include only simpler option </li></ul><ul><li>Recognition and measurement simplifications </li></ul><ul><li>Reduced disclosures </li></ul><ul><li>Simplified drafting </li></ul>© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org
  8. 8. Extensive outreach and consultation <ul><li>Presentations at 95 conferences and roundtables in 40 countries (54 since ED was issued) </li></ul><ul><li>8 published articles (+ 2 more soon) </li></ul><ul><li>Field tests with 116 very small companies globally </li></ul><ul><ul><li>Field test questionnaire in English, French, Spanish </li></ul></ul><ul><li>162 comment letters </li></ul>© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org
  9. 9. Key issues in Board re-deliberations <ul><li>Broad Issues </li></ul><ul><li>Eliminate cross-references to full IFRSs </li></ul><ul><li>Do not anticipate changes to full IFRSs </li></ul><ul><li>Title: ‘SME’ in title implies a ‘size test’ </li></ul><ul><li>Historical cost model should be default </li></ul><ul><li>Fair value – reduce and clarify </li></ul><ul><li>Further disclosure simplifications </li></ul>© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org
  10. 10. Key issues in Board re-deliberations <ul><li>Specific technical issues </li></ul><ul><li>Deferred income taxes </li></ul><ul><li>Impairment measurement </li></ul><ul><li>Consolidation – reduce or eliminate </li></ul><ul><li>Amortise goodwill and other intangibles </li></ul><ul><li>Actuarial gains/losses on pensions </li></ul><ul><li>Share-based payment – simplify calculation </li></ul><ul><li>Debt-equity classification </li></ul>© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org
  11. 11. IASCF training materials for PEs <ul><li>Being developed by IASC Foundation </li></ul><ul><li>One module per Section (ED has 38 sections). </li></ul>© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org <ul><li>Finish by mid/late 2009 </li></ul><ul><li>Multiple languages </li></ul><ul><li>Free of charge </li></ul><ul><li>IASCF train the trainers </li></ul><ul><li>To illustrate: </li></ul><ul><ul><li>Section 16 PP&E is 7 A5 pages long </li></ul></ul><ul><ul><li>Training module is 32 A4 pages, many examples, cases, quiz. </li></ul></ul>
  12. 12. Use in the United States <ul><li>Could private companies in the US use the IFRS for Private Entities? </li></ul><ul><li>No reason why not </li></ul><ul><li>No statutory audit requirement in US </li></ul><ul><li>Basis of presentation note would refer to conformity with IFRS for PEs </li></ul><ul><li>If audited, auditor would report on conformity with IFRS for PEs </li></ul><ul><li>AICPA: Designated IASB under Rule 203 </li></ul><ul><li>Considerable support in US </li></ul>© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org
  13. 13. Use in Europe <ul><li>IAS regulation applies only to full IFRSs </li></ul><ul><li>IFRS for PEs not required or prohibited </li></ul><ul><li>Each jurisdiction must decide </li></ul><ul><li>We believe it is consistent with Directives </li></ul><ul><li>EC staff and some MEP stated concerns – not enough simplifications </li></ul><ul><li>Hint at developing an EU SME standard </li></ul><ul><li>Expressed interest in adopting: </li></ul><ul><li>Denmark, Norway, UK, Sweden, others </li></ul>© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org
  14. 14. Use elsewhere <ul><li>South Africa </li></ul><ul><li>Already adopted the ED as their final standard </li></ul><ul><li>World Bank, IDB, other development agencies </li></ul><ul><li>Strong support, $ for training </li></ul><ul><li>Major conferences for Latin America and Eastern Europe/Balkans </li></ul><ul><li>Others under serious consideration </li></ul><ul><li>Latin America, Australia </li></ul>© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org
  15. 15. Next steps <ul><li>Staff analyses of comments and field tests, recommendations for changes to the ED: Presented to the Board March, April, May 2008 </li></ul><ul><li>Working Group met: April 2008 </li></ul><ul><li>Board re-deliberations: May-Nov 2008 </li></ul><ul><li>Final Standard: Vote 1Q 2009 </li></ul><ul><li>Effective: Whenever adopted locally </li></ul><ul><li>Training materials: Mid-late 2009 </li></ul>© 2008 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org

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