The International Accounting Standards Board (IASB) has published its proposals to update the IFRS for SMEs accounting standard. The proposals made by the IASB will form the third edition of the IFRS for SMEs Accounting Standard. The Exposure Draft is now subject to public consultation and comments are welcomed by the IASB up to 7 March 2023.
Some of the changes proposed in the Exposure Draft include;
- New concepts introduced on measurement, presentation and disclosure, including guidance on derecognition in Section 2 Concepts and Pervasive Principles.
- Amendments to Section 19 Business Combinations and Goodwill to align it with the current version of IFRS 3.
- The removal, in Section 11 Financial Instruments, of the option to apply the recognition and measurement requirements in IAS 39 Financial Instruments: Recognition and Measurement.
- The introduction of an expected credit loss model for some financial assets measured at amortised cost in Section 11 Financial Instruments.
- An updated definition of control in Section 9 Consolidated and Separate Financial Statements to align the standard with IFRS 10.
- The current Sections 11 Basic Financial Instruments and 12 Other Financial Instrument Issues are combined to create a new section 11 Financial Instruments, Part I Basic Financial Instruments and Part II Other Financial Instrument Issues.
- A new Section 12 Fair Value Measurement which consolidates the fair value measurement requirements in one section.
- Updates to Section 23 Revenue to align the standard with the principles of IFRS 15, with simplified requirements to make the five-step model in IFRS 15 easier to apply for SMEs.
The IASB decided not to align the requirements of IFRS 16 Leases with the IFRS for SMEs standard at this time due to the workload it would impose on SMEs. It was also decided to await findings from the post-implementation review of IFRS 16 which may provide additional information about the associated costs and benefits.
Currently 87 jurisdictions require or permit the use of the IFRS for SMEs Standard. In Ireland and the United Kingdom, FRS 102 is adopted which is based on the IFRS for SMEs- but with significant modifications. FRS 102 is subject to periodic review which is expected to take place later in 2022.