Overview & Key Features
Purpose: Provides simplified financial reporting for small and medium-sized entities by omitting irrelevant topics, reducing guidance and disclosure, and eliminating choice.
- Significantly less guidance than full IFRS
- Simplified recognition and measurement principles
- Only the easier option allowed where full IFRS allows choices
- Topics not relevant to SMEs are omitted
- Revised only once every three years to reduce reporting burden
Scope & Applicability
Public Accountability Test: No quantitative thresholds for qualification; scope determined by test of public accountability.
Full IFRS Applies For:
- Public entities - whose securities are publicly traded
- Financial institutions - such as banks and insurance companies
Omitted Topics
Topics in Full IFRS but Omitted in IFRS for SMEs:
- Earnings per share (IAS-33)
- Interim financial reporting (IAS-34)
- Segment reporting (IFRS-8)
- Classification for non-current assets held for sale (IFRS 5)
Presentation & Disclosure
| Aspect | IFRS for SMEs | Full IFRS |
|---|---|---|
| Comprehensive Income | Combined statement permitted | Separate or combined |
| Equity Changes | Statement permitted where no OCI nor equity movements other than profit/loss, dividends, and/or prior period adjustments | Statement of changes in equity required |
| Segment Reporting | Not required | Required (IFRS-8) |
| Earnings per Share | Not required | Required (IAS-33) |
Revenue Recognition
| Standard | Recognition Approach |
|---|---|
| Full IFRS | When performance obligation satisfied (IFRS 15 five-step approach) |
| IFRS for SMEs | Goods: when significant risks and rewards of ownership transferred Services: stage of completion |
Key Measurement Differences
Simplified Approaches: IFRS for SMEs uses simpler measurement models compared to full IFRS.
| Area | Full IFRS | IFRS for SMEs |
|---|---|---|
| Property, Plant & Equipment | Revaluation model or cost model | Cost model as the default, with option to apply revaluation model if FV measurable |
| Investment Property | Fair value model or cost model | Fair value through P/L (if measurable) or as PPE |
| Intangible Assets | Amortization only if finite useful life | All intangibles (including goodwill) amortized |
| R&D Expenditure | Capitalized when criteria met | All internally generated R&D expensed |
| Borrowing Costs | Capitalized when qualified | Expensed when incurred |
Financial Instruments
| Measurement | Full IFRS | IFRS for SMEs |
|---|---|---|
| Amortized Cost | Financial assets: business model is held to collect cash flows | All 'basic' financial instruments other than those publicly traded |
| Cost | IFRS 9 removed cost exemption for unquoted equity | Unquoted investments in equity instruments (where FV not reliably measurable) |
| Fair Value through P/L | Financial assets: all others; Financial liabilities: held for trading | All other financial instruments |
Business Combinations & Consolidation
| Aspect | Full IFRS | IFRS for SMEs |
|---|---|---|
| Transaction Costs | Excluded under IFRS 3 | Included in cost of investment |
| Goodwill | Impairment test only, not amortized | Amortized as for intangible assets |
| Joint Ventures | Choice of full or partial goodwill method | Only partial goodwill allowed |
| Foreign Operations | Exchange differences in OCI, reclassified on disposal | Exchange differences in P/L, not reclassified |
Employee Benefits & Deferred Tax
| Aspect | Full IFRS | IFRS for SMEs |
|---|---|---|
| Remeasurements | In OCI only | Can be recognized in P/L or OCI |
| Method | Projected unit credit method | Simplified calculation permitted |
| Deferred Tax Asset | Recognized only if probable sufficient future taxable profit | Valuation allowance recognized based on more likely than not recovery |
Impairment
Full IFRS: Annual tests for indefinite life intangibles, intangibles not yet available for use, and goodwill.
IFRS for SMEs: Impairment test only required where indicators of impairment exist.