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Paul Pacter

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  • 1. Copyright © 2009 IASC Foundation. All rights reserved.
  • 2. The Final IFRS for SMEs
    • Good Financial Reporting Made Simple.
      • 230 pages
      • Simplified IFRSs, but built on an IFRS foundation
      • Suitable for entities that are not listed and not financial institutions
      • Final standard issued 9 July 2009
      • Vote: 13 assents, 1 dissent
  • 3. The Final IFRS for SMEs
      • Internationally recognised
      • Designed specifically for SMEs
      • Standalone product that sits side-by-side with the full set of IFRSs
      • Attributes:
      • Simplification
      • Stability
      • Utility
  • 4. Who will be eligible to use it?
    • Any entity that does not have public accountability
      • securities not publicly traded
      • not a financial institution
      • Over 99% of private entities around the world are expected to be eligible to use the standard
      • Subsidiary of a listed company can use it if the sub itself is not listed
  • 5. Is it stand-alone or linked to full IFRS?
    • Completely stand-alone
      • The only ‘fallback’ option to full IFRS is the option to use IAS 39 instead of the financial instruments sections of IFRS for SMEs
  • 6. Who are we aiming at?
    • Non-publicly accountable entities that must produce general purpose financial statements (GPFS)
      • Present fairly financial position, operating results, and cash flows
      • For external capital providers and others
      • Which entities must produce GPFS is a public interest issue
      • Decided by legislature and regulators, not by IASB
  • 7. Steps to get to the final Standard
      • Sept 2003: World Standard Setters survey
      • June 2004: Discussion Paper (117 comments)
      • April 2005: Questionnaire on recognition and measurement (94 responses)
      • Oct 2005: Roundtables on R&M (43 groups)
      • Feb 2007: Exposure Draft (162 comments)
      • Nov 2007: Field tests (116 real SMEs)
  • 8. Steps to get to the final Standard
      • Mar – Apr 2008: Board education sessions
      • May 2008 – Apr 2009: Redeliberations
      • May 2009: Near-final draft posted on IASB website
      • 1 June 2009: Ballot draft sent to the Board
      • 9 July 2009: Final IFRS for SMEs issued
  • 9. Steps to get to the final Standard
    • Along the way:
      • Board deliberations at 44 public board meetings
      • Four working group meetings (40 experts)
      • Translations of ED (5 languages)
      • 7 Standards Advisory Council meetings
      • 5 World Standard Setters’ meetings
      • 105 staff presentations and roundtables in 40 countries
  • 10. How does it differ from full IFRSs?
      • Tailored for SMEs and needs of users of their financial statements
      • Much smaller (230 pages vs 2,800 in full IFRSs)
      • Organised by topic
      • No ‘black letter’
      • Simplifications from full IFRSs
        • Based on user needs
        • And cost-benefit
  • 11. How did we simplify?
    • Some topics in IFRSs omitted if irrelevant to private entities
    • Where IFRSs have options, include only simpler option
    • Recognition and measurement simplifications
    • Reduced disclosures
    • Simplified drafting
  • 12. Examples of omitted topics
      • Segment reporting
      • Interim reporting
      • Earnings per share
      • Insurance
      • Assets held for sale
  • 13. Examples of omitted complex options
      • Financial instruments options including:
      • Available for sale
      • Held to maturity
      • Fair value option
      • Proportionate consolidation
      • Revaluation of PP&E
      • Revaluation of intangibles
      • Free choice on investment property
      • Various options for government grants
  • 14. Recognition & measurement simplifications
      • Financial instruments:
      • Two classifications, not four
      • Drop “continuing involvement approach” for derecognition
      • Much simplified hedge accounting
      • Goodwill impairment – indicator approach
      • Goodwill amortisation
      • Expense all R&D
      • Cost method for associates and JVs
  • 15. Recognition & measurement simplifications
      • Much less fair value for agriculture
      • Expense all borrowing costs
      • Defined benefit plans: No corridor or deferrals
      • First-time adoption: Less prior data
      • Defined benefit – not required to use projected unit credit method if impracticable
      • Share-based payment – can use directors’ judgement in estimating value
  • 16. Disclosure simplifications
      • Reduced disclosures:
      • Full IFRSs – more than 3,000 items in the disclosure checklist
      • IFRS for SMEs – roughly 300 disclosures
  • 17. Why would an SME want to adopt it?
      • Improved access to capital
      • Improved comparability
      • Improved quality of reporting as compared to existing national GAAP
      • The focus on the needs of users of SME financial statements
      • Less of a burden for entities in jurisdictions where full IFRSs or full national GAAP are now required
  • 18. What next?
      • Spanish translation was released 17/09/2009
      • http://go.iasb.org/IFRSforSMEs
      • Other translations to follow
      • Development of IASCF training materials (English version late 2009)
      • ‘ Train the trainers’ courses (2010)
      • Promote adoptions around the world
  • 19. Can SMEs simply choose to adopt it?
    • Depends on local law
      • USA – yes. IASB is now the second designated standard setter (along with FASB) in the AICPA code of ethics.
      • In some countries, on the other hand, currently only full IFRSs and local GAAP can be used. There would need to be a change to local law to permit adoption of the IFRS for PEs.
  • 20. What is its authority?
      • No different from any other IFRS
      • Separate but parallel to full IFRS
  • 21. IFAC Member Obligation #7
      • Member bodies of IFAC should support the work of the IASB by notifying their members of every IFRS
      • Member bodies should use their best endeavors to incorporate the requirements of IFRSs in their national accounting requirements
  • 22. What would the audit report say?
    • ISA 700: Audit report must identify financial reporting framework and must give an opinion on the financial statements
    • So, audit report is something like:
      • “ Fairly presents financial position, results of operations, and cash flows in conformity with the International Financial Reporting Standards for Small and Medium-sized Entities”
  • 23. Plan for maintenance
      • Initial comprehensive review after 2 years implementation experience
      • Fix errors and omissions, lack of clarity
      • Also consider need for improvements based on recent IFRSs and amendments to IASs
      • Thereafter once every three years (approximately) omnibus exposure draft of updates
  • 24. Jurisdiction plans for adoption
      • Brief survey sent to all WSS invitees
    • Simple question: Do you plan to require or permit adoption in the next 3 year – Yes? No? Maybe? Comments?
      • Responses received from 51 jurisdictions
  • 25. Jurisdiction plans for adoption
      • Overview of 51 responses:
    Number of Jurisdictions Plan to require 19 Plan to permit 10 May require or permit 13 No plan to require or permit 9
  • 26. Jurisdiction plans for adoption
      • Plan to require (19):
    Bahamas Bahrain Brazil Cyprus El Salvador Ireland Kosovo Lebanon Malawi Malaysia Mongolia Panama Saudi Arabia Singapore Swaziland South Africa Turkey Uganda United Kingdom
  • 27. Jurisdiction plans for adoption
      • Plan to permit (10):
    Argentina Austria Chile Denmark Namibia Nigeria Sri Lanka Tanzania United States Uzbekistan
  • 28. Jurisdiction plans for adoption
      • May require or permit (13):
    Albania Australia Hong Kong Iceland Israel Moldova Netherlands New Zealand Norway Romania Slovakia Sweden Taiwan
  • 29. Jurisdiction plans for adoption
      • No plan to require or permit (9):
    Canada France Germany Japan Malta Mexico Poland Slovenia Switzerland
  • 30. Jurisdiction plans for adoption
      • World Bank press release July 2009:
    • The IFRS for SMEs provides a valuable financial reporting reference framework for smaller entities that is more responsive to the size and ownership of their operations, and should help improve their access to finance .   In countries that have already adopted IFRS as the national accounting standard, the simplifications introduced by the SME standard will provide much needed relief .
      • So... What are the plans to consider the IFRS for SMEs in your country?
  • 31. Questions or comments? © 2009 IASC Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.iasb.org Expressions of individual views by members of the IASB and its staff are encouraged. The views expressed in this presentation are those of the presenter. Official positions of the IASB on accounting matters are determined only after extensive due process and deliberation. On any aspect of presentation or the standard.