medium-sized entities
A comparison with IFRS the basics
Contents
Introduction
Chapter one Preparation and presentation of financial statements
Chapter two Business combinations and group financial statements
Chapter three Elements of the statement of financial position
Chapter four Elements of the statement of comprehensive income
Chapter five Transition to the IFRS for SMEs
Contents by section
3
4
26
52
102
114
118
Introduction
Shortly after its inception in 2001, the International Accounting Standards Board (IASB) started
a project to consider reporting issues for small and medium-sized entities (SMEs). Following a
Discussion Paper in 2004, and an Exposure Draft in 2007, the IFRS for SMEs standard was issued
in July 2009.
Possibly the greatest shift in the final standard was that the IASB considered this to be a standalone standard that is separate from full IFRS (full IFRS is the collective term used for all other
standards and interpretations issued by the IASB). In this guide, we take a top-level review of the
IFRS for SMEs standard and provide an overview of the differences between IFRS for SMEs and full
IFRS. In addition, we provide a commentary of the possible effects that the adoption of IFRS for
SMEs may have on a reporting entity, if its previous generally accepted accounting principles
(GAAP) had been full IFRS.
It would be near impossible to produce a publication that compares two broad sets of accounting
frameworks and includes all differences that could arise in accounting for the myriad of business
transactions that could possibly occur. The existence of any differences and their materiality to
an entitys financial statements depends on a variety of specific factors including: the nature of
the entity; the detailed transactions it enters into; its interpretation of accounting principles; its
industry practices; and its accounting policy elections where IFRS for SMEs and IFRS offer a
choice. Therefore, this guide focuses on the recognition and measurement differences expected to
arise most frequently and, where applicable, provides an overview of how and when those
differences are expected to arise. It does not include a full comparison of the different disclosure
requirements of IFRS for SMEs compared to full IFRS.
The sections in the standard have been grouped into similar topics, such as presentation issues,
statement of financial position, etc. All IFRS for SMEs sections are compared with the relevant full
IFRS standards and interpretations as contained in the 2010 bound version published by the IASB.
The impact assessment from comparing these two frameworks is based on current documentation
and interpretations. As the IFRS for SMEs standard is new to reporting entities, interpretations
and practices will develop over time. This may lead to the identification of additional impacts that
should be considered by entities adopting this standard.
As full IFRS has been compared with many other local GAAPs, it is hoped that this comparison
may also provide some insight into the implication of transitioning from a reporting entitys local
GAAP (if not IFRS) to IFRS for SMEs. In planning a possible move to IFRS for SMEs, it is important
that entities monitor the IASBs agenda in respect of the IFRS for SMEs standard, as well as the
development of international interpretation and practice.
Overall, this guide is intended to help preparers, users and auditors to gain a general
understanding of the similarities and key differences between IFRS and IFRS for SMEs. We hope
you find this guide a useful tool for that purpose.
April 2010
INTRODUCTION 3
Chapter one
Preparation and presentation of
financial statements
Executive summary
In this chapter, we compare the following sections of the IFRS for SMEs with the relevant standard
under full IFRS.
IFRS for SMEs
IFRS
Section 31 Hyperinflation
The concepts and principles of IFRS for SMEs are based on the Framework for the Preparation and
Presentation of Financial Statements (the Framework) and therefore are very similar to full IFRS.
Likewise, the statements needed to comprise a complete set of financial statements under IFRS
for SMEs are also very similar to that required by IFRS. The most significant difference in the
presentation of financial statements for SMEs is that there are less disclosure requirements in
some instances. IFRS for SMEs also permits some of the statements required to be omitted or
merged with other statements under certain circumstances, which will reduce the disclosure
requirements for SMEs. The detailed requirements are set out in the following pages.
IFRS
IAS 1 Presentation of Financial Statements
Impact assessment
The scope of IFRS for SMEs restricts its use only to entities that
meet the definition of an SME. The standard clearly states that
entities that do not meet the definition of an SME cannot claim
compliance with IFRS for SMEs, even if they are permitted or
required to do so in their jurisdiction.
Scope
An SME is defined as an entity that:
Does not have public accountability
and
Publishes general-purpose financial statements for external
users.
Public accountability is further defined as an entity that:
Has debt or equity instruments traded in a public market (or it
is in the process of issuing such instruments)
or
Holds assets in a fiduciary capacity for a broad group of
outsiders as one of its primary businesses.
IFRS
Framework for the Preparation and Presentation of
Financial Statements
IAS 1 Presentation of Financial Statements
Impact assessment
Relevance
Materiality
Reliability
Substance over form
Prudence
Completeness
Comparability
Timeliness
Balance between benefit and cost.
Faithful representation
Balance between the qualitative characteristics.
IFRS
Framework for the Preparation and Presentation of
Financial Statements
IAS 1 Presentation of Financial Statements
Impact assessment
Recognition of elements
Measurement
IFRS for SMEs specifies two common measurement bases, which
are amortised historical cost and fair value. In most cases the
standard specifies which measurement must be used in different
sections.
Accrual basis
An entity must prepare its financial statements, except for cash
flow information, using the accrual basis of accounting.
Offsetting
The standard specifically disallows offsetting of assets and
liabilities, and income and expense, unless required or permitted
in the relevant section.
IFRS
IAS 1 Presentation of Financial Statements
Impact assessment
Fair presentation
Compliance
Entities that apply this standard must claim compliance with
IFRS for SMEs.
Going concern
Entities are required to make an assessment as to whether they
are a going concern. Any material uncertainties regarding going
concern need to be disclosed. If the financial statements are not
prepared on a going concern basis, this fact and the basis of
preparation needs to be disclosed.
IFRS
IAS 1 Presentation of Financial Statements
Impact assessment
Frequency of reporting
Financial statements should be prepared at least annually.
Certain disclosures are required if the reporting period is longer
or shorter than a year.
Consistency of presentation
Comparative information
Comparative information is required (unless specifically stated
otherwise) for all amounts disclosed. This is also required for
narrative and descriptive information when it is relevant to an
understanding of the financial statements.
IFRS
IAS 1 Presentation of Financial Statements
Impact assessment
IFRS
IAS 1 Presentation of Financial Statements
Impact assessment
Information to be presented
IFRS for SMEs provides a list of items that, as a minimum, should
be disclosed on the face of a statement of financial position.
Additional line items and subtotals are permitted.
IFRS
IAS 1 Presentation of Financial Statements
Impact assessment
Furthermore, disclosure is required in respect of the noncontrolling interest in profit and loss and total comprehensive
income.
Section 6: Statement of changes in equity and statement of income and retained earnings
IFRS for SMEs
Section 6 Statement of Changes in Equity and
Statement of Income and Retained Earnings
IFRS
IAS 1 Presentation of Financial Statements
Impact assessment
Information to be presented
Not applicable.
IFRS
IAS 7 Statement of Cash Flows
Impact assessment
Cash equivalents
Cash equivalents are short-term, highly liquid investments held to Cash equivalents are held for meeting short-term cash
meet short-term cash commitments rather than for investment
commitments rather than for investment or other purposes. For
or other purposes.
an investment to qualify as a cash equivalent, it must be readily
convertible to a known amount of cash and be subject to an
Bank overdrafts may be included when repayable on demand and
insignificant risk of changes in value.
are an integral part of the entitys cash management.
Overdrafts that are repayable on demand and form an integral
part of an entitys cash management are included as a
component of cash and cash equivalents.
IFRS
IAS 7 Statement of Cash Flows
Income tax
Income tax
Impact assessment
Non-cash transactions
Any investing and financing transactions that do not require the
use of cash or cash equivalents are excluded from the statement
of cash flows.
IFRS
IAS 1 Presentation of Financial Statements
Impact assessment
Accounting policies
Disclosure in the summary of significant accounting policies
includes:
IFRS
IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors
Impact assessment
IFRS
IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors
Impact assessment
IFRS
IAS 10 Events after the Reporting Period
Impact assessment
Events after the end of the reporting period are classified as:
Events after the end of the reporting period are classified as:
Events after the end of the reporting period would include all
events up to the date the financial statements are authorised
for issue.
Events after the end of the reporting period would include all
events up to the date the financial statements are authorised
for issue.
Definition
Dividends
If an entity declares dividends to holders of its equity instruments
after the end of the reporting period, the entity must not
recognise those dividends as a liability at the end of the reporting
period. However, the amount may be presented as a segregated
component of retained earnings.
IFRS
IAS 24 Related Party Disclosures
Impact assessment
Scope
This section requires entities to include in its financial statements
the disclosures necessary to draw attention to the possibility that
its financial position and profit or loss have been affected by the
existence of related parties and by transactions and outstanding
balances with such parties.
Defnition
A related party is a person or entity that is related to the entity
preparing its financial statements.
a) A person or close member of that persons family is related if
that person:
Is a member of the key management personnel
Has control over the entity
or
Has joint control or significant influence over the entity.
b) An entity is related to a reporting entity if any of the following
apply:
The entity and reporting entity are members of the same
group
Either entity is an associate or joint venture of the other
Both entities are joint ventures of a third entity
Either entity is a joint venture of a third entity and the
other entity is an associate of the third entity
The entity is a post-employment benefit plan for the benefit
of employees of the entity or any related entity
The entity is controlled or jointly controlled by a person
identified in (a)
A person identified in (a) (i) has significant voting power
A person identified in (a) (ii) has significant influence
A person has both significant influence and joint control
A member of the key management personnel has control
or joint control over the reporting entity.
IFRS
IAS 24 Related Party Disclosures
Impact assessment
Entities must disclose the name of the parent and the ultimate
controlling party.
Entities must disclose the name of the parent and the ultimate
controlling party.
Subsidiary relationships
Disclosures
At a minimum, entities must disclose the following regarding
related party transactions:
IFRS
IAS 24 Related Party Disclosures
Impact assessment
a) The parent
b) Entities with joint control or significant influence
over the entity
c) Subsidiaries
d) Associates
e) Joint ventures in which the entity is a venturer
f) Key management personnel
g) Other related parties.
IFRS
IAS 29 Financial Reporting in Hyperinflationary
Economies
Impact assessment
Scope
Applies to an entity whose functional currency is that of a
hyperinflationary economy.
Indicators of hyperinflation
This section does not establish an absolute rate at which an
economy is deemed hyperinflationary. An entity must make that
judgment by considering all information available, using the given
indicators of hyperinflation.
IFRS
IAS 29 Financial Reporting in Hyperinflationary
Economies
Impact assessment
Chapter two
Business combinations and
group financial statements
Executive summary
In this chapter, we consider business combinations and group financial statements and compare the
following sections of the IFRS for SMEs with the relevant standard under full IFRS:
IFRS for SMEs
IFRS
Whilst IFRS for SMEs applies a purchase method of accounting for business combinations, there
are a number of differences between the accounting treatment under IFRS for SMEs and IFRS 3
Business Combinations. Perhaps the most significant difference is that goodwill is amortised over
its useful life under IFRS for SMEs. Where this cant be reliably estimated, a useful life of 10 years
is assumed. This is likely to significantly reduce the work required for preparers as impairment
tests will only be required where there are indicators of impairment. The other key difference
compared to full IFRS is that acquisition costs will be capitalised, resulting in higher goodwill
balances being recorded.
IFRS for SMEs provides preparers with a wider choice of accounting treatment for interests in
jointly controlled entities and associates. Whilst IFRS requires the use of the equity method in the
consolidated accounts (or proportionate consolidation for JCEs), under IFRS for SMEs, entities
can use the cost model, the equity method or the fair value model, which gives entities much
greater flexibility to select a policy most appropriate to their business.
These differences may be significant to some entities that have large group structures or are
highly acquisitive and therefore the different requirements should be considered prior to adopting
IFRS for SMEs.
IFRS
IFRS 3 Business Combinations
Impact assessment
Scope
Definitions
A business combination is the bringing together of separate
entities or businesses into one reporting entity.
A business is an integrated set of activities and assets conducted
and managed for the purpose of providing a return to investors
or lower costs or other economic benefits directly and
proportionately to policyholders or participants. Furthermore, a
business generally consists of inputs, processes applied to those
inputs and resulting outputs that are or will be used to generate
revenues. If goodwill is present in a transferred set of activities or
assets, the transferred set is presumed to be a business.
IFRS
IFRS 3 Business Combinations
Impact assessment
Method of accounting
IFRS
IFRS 3 Business Combinations
Impact assessment
Contingent consideration
When a business combination agreement provides for an
adjustment to the cost of the business combination contingent on
future events, the acquirer includes the estimated amount of the
adjustment in the cost of the combination at the acquisition date
if the adjustment is probable and can be measured reliably.
If the potential adjustment is not recognised at acquisition date,
but subsequently becomes probable and can be measured
reliably, the additional consideration is treated as an adjustment
to the cost of the combination.
IFRS
IFRS 3 Business Combinations
Impact assessment
Provisional accounting
Retrospective adjustments to provisional amounts recognised in
initial accounting for a business combination may be made up to
12 months after the acquisition date.
This time limit does not apply to adjustments to the cost of the
combination contingent on future events which becomes
probable and can be reliably measured subsequent to acquisition
date. (See discussion under Contingent consideration on
page 30.)
IFRS
IFRS 3 Business Combinations
Impact assessment
Non-controlling interests
Where the acquirer obtains less than a 100% interest in the
acquiree, a non-controlling interest (NCI) in the acquiree is
recognised at the NCIs proportion of the net identifiable assets,
liabilities and provisions for contingent liabilities of the acquiree
at their attributed fair values at the date of acquisition; no
amount is included for any goodwill relating to the NCI.
Definition of goodwill
Goodwill is defined as future economic benefits arising from
other assets that are not capable of being individually identified
and separately recognised.
IFRS
IFRS 3 Business Combinations
Impact assessment
Measurement of goodwill
Goodwill is initially measured at cost, being the excess of the cost The measurement of goodwill at the acquisition date is computed
of the business combination over the acquirers interest in the net as the excess of (a) over (b) below:
fair value of the identifiable assets, liabilities and contingent
a) The aggregate of:
liabilities recognised.
The consideration transferred (generally measured at
acquisition-date fair value)
After initial recognition, goodwill is measured at cost less
The amount of any non-controlling interest in the
accumulated amortisation and accumulated impairment losses.
acquiree
Goodwill is amortised in accordance with the principles of
The acquisition-date fair value of the acquirers previously
amortisation of intangible assets in Section 18. If a reliable
held equity interest in the acquiree
estimate of the useful life of goodwill cannot be made the life is
b) The net of the acquisition-date fair values (or other amounts
presumed to be 10 years. Detailed requirements in relation to
recognised in accordance with the requirements of the
standard) of the identifiable assets acquired and the liabilities
impairment testing of goodwill are contained in Section 27. This
assumed.
includes the requirement that the acquirer test it for impairment
where there is an indication that it may be impaired.
Goodwill acquired in a business combination is not amortised.
The acquirer measures goodwill acquired in a business
combination at the amount recognised at the acquisition date
less any accumulated impairment losses. Detailed requirements
in relation to the subsequent accounting for goodwill are dealt
with in IAS 36 Impairment of Assets. This includes the
requirement that the acquirer has to test it for impairment
annually, or more frequently if events or changes in
circumstances indicate that it might be impaired.
IFRS
IFRS 3 Business Combinations
Impact assessment
Bargain purchase
An excess arises where the acquirers interest in the net fair value
of the acquirees identifiable assets, liabilities and provisions for
contingent liabilities exceeds the cost of the combination. The
standard recognises that this is sometimes referred to as
negative goodwill.
Where such an excess arises, the acquirer must:
Reassess the identification and measurement of the acquirees
assets, liabilities and provisions for contingent liabilities and
the measurement of the cost of the combination
Recognise immediately in profit or loss any excess remaining
after that reassessment.
IFRS
IAS 27 Consolidated and Separate Financial
Statements
SIC12 Consolidation Special Purpose Entities
Impact assessment
IFRS for SMEs and IFRS have a similar scope for consolidated
financial statements.
Scope
IFRS
IAS 27 Consolidated and Separate Financial
Statements
SIC12 Consolidation Special Purpose Entities
Impact assessment
Similar exemptions under IFRS for SMEs and IFRS (taking into
account that entities that have their securities listed cannot use
IFRS for SMEs).
a) The parent is itself a wholly-owned subsidiary, or is a partiallyowned subsidiary of another entity and its other owners,
including those not otherwise entitled to vote, have been
informed about, and do not object to, the parent not
presenting consolidated financial statements
b) The parents debt or equity instruments are not traded in a
public market (a domestic or foreign stock exchange or an
over-the-counter market, including local and regional markets)
c) The parent did not file, nor is it in the process of filing, its
financial statements with a securities commission or other
regulatory organisation for the purpose of issuing any class of
instruments in a public market
d) The ultimate or any intermediate parent of the parent
produces consolidated financial statements available for public
use that comply with IFRS.
IFRS
IAS 27 Consolidated and Separate Financial
Statements
SIC12 Consolidation Special Purpose Entities
Impact assessment
Definition of control
IFRS
IAS 27 Consolidated and Separate Financial
Statements
SIC12 Consolidation Special Purpose Entities
Impact assessment
IFRS
IAS 27 Consolidated and Separate Financial
Statements
SIC12 Consolidation Special Purpose Entities
Impact assessment
IFRS for SMEs and full IFRS have the same consolidation
procedures.
Consolidation procedures
This section includes consolidation procedures, requirements to
eliminate intra-group balances and the requirement to have
uniform reporting dates and uniform accounting policies.
IFRS
IAS 27 Consolidated and Separate Financial
Statements
SIC12 Consolidation Special Purpose Entities
Impact assessment
IFRS for SMEs differs from full IFRS in the treatment of the
disposal of subsidiaries. The main differences relate to the
simplifications in the SME standard and so under IFRS for SMEs,
the gain or loss on disposal may differ.
Disposal of subsidiaries
The difference between the proceeds from the disposal of the
subsidiary and its carrying amount as of the date of disposal,
excluding the cumulative amount of any exchange differences
that relate to a foreign subsidiary recognised in equity, in
accordance with Section 30 Foreign Currency Translation, is
recognised in the consolidated statement of comprehensive
income (or the income statement, if presented) as the gain or
loss on the disposal of the subsidiary.
If the parent continues to hold an investment in the entity, it is
accounted for as a financial asset, associate or jointly controlled
entity depending on the nature of the investment. The carrying
amount of the investment at the date it ceases to be a subsidiary
is the cost on initial measurement as a financial asset, associate
or jointly controlled entity.
IFRS
IAS 27 Consolidated and Separate Financial
Statements
SIC12 Consolidation Special Purpose Entities
Impact assessment
Non-controlling interests
a) At cost
or
b) In accordance with IAS39.
The entity must apply the same accounting policy for all
investments in a single class (subsidiaries, associates or jointly
controlled entities), but it can elect different policies for different
classes.
The entity must apply the same accounting policy for each
category of investments.
There are additional requirement in relation to investments
accounted for at cost that are classified as held for sale.
IFRS
IAS 31 Interests in Joint Ventures
Impact assessment
Scope
The section is applicable to accounting for all joint ventures in
consolidated financial statements and in financial statements of
an investor that is not a parent but has an interest in one or more
joint ventures.
Accounting for interests in joint ventures in a venturers separate
financial statements is covered in Section 9.
IFRS
IAS 31 Interests in Joint Ventures
Impact assessment
IFRS
IAS 31 Interests in Joint Ventures
Impact assessment
IFRS
IAS 31 Interests in Joint Ventures
Impact assessment
IFRS
IAS 31 Interests in Joint Ventures
Impact assessment
IFRS
IAS 28 Investments in Associates
Impact assessment
Scope
The section is applicable to accounting for associates in
consolidated financial statements and in financial statements of
an investor that is not a parent, but has an interest in one or
more associates.
Accounting for interests in associates in an investors separate
financial statements is covered in Section 9.
IFRS
IAS 28 Investments in Associates
Impact assessment
Measurement
An investor must account for all of its investments in associates
using one of the following:
The cost model (investment is measured at cost less any
accumulated impairment losses). This model may not be used
for investments for which there is a published price quotation,
in which case the fair value model must be applied.
The equity method (investment is initially measured at
transaction price and subsequently adjusted to reflect the
investors share of profit or loss and other comprehensive
income of the associate).
The fair value model (investment is initially measured at
transaction price and subsequently remeasured to fair value
at each reporting date, with changes in fair value recognised
in profit or loss). Cost model may be applied to investments
for which it is impracticable to measure fair value without
undue cost or effort.
While the requirements of IFRS for SMEs and IFRS are the same,
the subsequent accounting for goodwill differs as detailed in
Section 19. In particular, IFRS for SMEs requires implicit goodwill
to be amortised over its useful life (or 10 years if the useful life
cannot be reliably estimated). This amortisation is included in
the calculation of the investors share of profits or losses of the
associate under IFRS for SMEs.
IFRS
IAS 28 Investments in Associates
Impact assessment
While the requirements of IFRS for SMEs and IFRS are the same,
the requirements relating to impairment testing differ as detailed
in Section 27. In particular, for investments in associates, IFRS
requires reference to impairment indicators in IAS 39, but
impairment testing to be carried out in accordance with IAS 36.
IFRS for SMEs requires the application of the general impairment
indicators in section 27.
IFRS
IAS 28 Investments in Associates
Impact assessment
IFRS for SMEs does not refer to inclusion in the investors interest
in the associate of long-term interests that in substance are part
of the net investment in the associate.
IFRS
IAS 28 Investments in Associates
Impact assessment
An investor must cease using the equity method from the date
that significant influence ceases.
Classification
Investments in associates are classified as non-current assets.
Chapter three
Elements of the
statement of financial position
Executive summary
In this chapter, we consider the elements that make up the statement of financial position and compare
the following sections of the IFRS for SMEs with the relevant standard under full IFRS:
IFRS for SMEs
IFRS
Section 20 Leases
IAS 17 Leases
Section 13 Inventories
IAS 2 Inventories
IAS 41 Agriculture
IFRS 6 Exploration for and Evaluation of Mineral
Resources
IFRIC 12 Service Concession Arrangements
There are a number of differences in the accounting treatment of items in the statement of
financial position. The key differences are as follows:
Property, Plant and Equipment there is no option to use a revaluation model.
Investment Property must be measured at fair value unless fair value cannot be measured
reliably without undue cost or effort.
Intangible Assets all internally generated intangibles, including research and development
costs, must be expensed, which may be a significant issue for some entities. All intangible
assets must be amortised and the useful life is presumed to be 10 years if it cannot be
measured reliably.
Income Tax whilst the temporary differences approach remains, there are different
definitions which may impact the recognition of deferred tax. The recognition and
measurement of uncertain tax positions brings in new requirements, not dealt with under IFRS.
Entities may find these new requirements difficult to apply in practice and interpretative issues
may arise.
Financial Instruments IFRS for SMEs gives entities the choice of applying the requirements of
the standard or applying IAS 39 Financial Instruments: Recognition and Measurement to the
recognition and measurement of financial instruments. In some cases there are significantly
different treatments that entities will need to consider before deciding to adopt IFRS for SMEs.
Share-based Payments the fair value of share in equity-settled share-based payment
arrangements can be measured using the directors best estimate of fair value if observable
market prices are not available, which may make valuation easier for SMEs.
Employee Benefits entities cannot use the corridor approach. All actuarial gains and losses
must be recognised in full either through profit and loss or through other comprehensive
income. The requirements regarding the valuation of defined benefit plans are less onerous,
which may reduce the compliance costs for some SMEs.
Section 35:
17: Transition
Property, plant
equipment
Section
to theand
IFRS
for SMEs
IFRS for SMEs
Section 17 Property, Plant and Equipment
IFRS
IAS 16 Property, Plant and Equipment
Impact assessment
Scope
This section applies to accounting for property, plant and
equipment and investment property whose fair value cannot be
measured reliably without undue cost or effort. Section 16
Investment Property applies to investment property for which fair
value can be measured reliably without undue cost or effort.
Definition
Recognition
An entity recognises the cost of an item of property, plant and
equipment as an asset if, and only if:
Initial measurement
An entity measures an item of property, plant and equipment at
initial recognition at its cost. Cost includes:
a) Its purchase price
b) Any costs directly attributable to bringing the asset to the
location and condition necessary for it to be capable of
operating in the manner intended by management
c) The initial estimate of the costs of dismantling and removing
the item and restoring the site on which it is located.
Borrowing costs do not form part of the cost of an item of
property, plant and equipment.
There are no differences between IFRS and IFRS for SMEs, except
for borrowing costs, which are capitalised under full IFRS if they
are directly attributable to the acquisition, construction or
production of a qualifying asset.
IFRS
IAS 16 Property, Plant and Equipment
Impact assessment
IFRS for SMEs differs from IFRS in that it does not permit the
application of the revaluation model to property, plant and
equipment
Subsequent measurement
An entity must measure all items of property, plant and
equipment after initial recognition at cost less any accumulated
depreciation and any accumulated impairment losses.
IFRS for SMEs states that the residual value should be reviewed
only if there are indicators that it has changed since the most
recent annual reporting date. Under full IFRS, the review should
be made at each financial year-end.
IFRS
IAS 16 Property, Plant and Equipment
Impact assessment
There are no differences between IFRS and IFRS for SMEs, except
that a review of the depreciation method for IFRS for SMEs is
only required if there is an indication that it has changed. Under
IFRS, the depreciation method must be reviewed at least at each
financial year-end.
Derecognition
An entity must derecognise an item of property, plant and
equipment:
a) On disposal
or
b) When no future economic benefits are expected from its use
or disposal.
a) On disposal
or
b) When no future economic benefits are expected from its use
or disposal.
Section 16: Investment property ection 35: Transition topthe IFRS for SMEs
IFRS for SMEs
Section 16 Investment Property
IFRS
IAS 40 Investment Property
Impact assessment
Scope
This section applies to accounting for investments in land or
buildings that meet the definition of investment property.
Only investment property whose fair value can be measured
reliably without undue cost or effort on an ongoing basis is
accounted for in accordance with this section. All other
investment property is accounted for as property, plant and
equipment in accordance with Section 17 Property, Plant
and Equipment.
Definition
Investment property is property (land or a building, or part of a
building, or both) held by the owner or by the lessee under a
finance lease to earn rentals or for capital appreciation or both.
Initial measurement
IFRS
IAS 40 Investment Property
Impact assessment
Subsequent measurement
Investment property whose fair value can be measured reliably
Investment property may be carried at either:
without undue cost or effort must be measured at fair value at
Cost less accumulated amortisation and impairment losses or
each reporting date with changes in fair value recognised in profit
Revalued amount less accumulated amortisation and
or loss. If a property interest held under a lease is classified as
impairment losses.
investment property, the item accounted for at fair value is that
interest and not the underlying property. An entity accounts for
all other investment property as property, plant and equipment
using the cost depreciation impairment model in Section 17.
IFRS for SMEs differs from IFRS in that it requires the use of the
fair value model, where fair value can be measured reliably
without undue cost or effort.
Transfers
An entity must transfer a property to, or from, investment
property only when the property first meets, or ceases to meet,
the definition of investment property.
IFRS
IAS 38 Intangible Assets
Impact assessment
IFRS explicitly excludes all intangible assets that are dealt with
under other standards. This would be a natural presumption in
Section 18 as other intangible assets, such as lease rights, etc.,
have their own applicable sections.
Scope
This section is applicable to all intangible assets other than
goodwill and intangible assets held for sale in the ordinary course
of business. Furthermore, the scope excludes financial assets and
mineral rights and mineral reserves.
One difference, for those entities in the oil and mining sectors, is
the inclusion of exploration and evaluation intangible assets
within the scope of Section 18.
Initial measurement
Initial measurement is dependant on the manner in which the
intangible asset is acquired:
IFRS
IAS 38 Intangible Assets
Impact assessment
IFRS for SMEs differs for IFRS in that it does not permit the
application of the revaluation model to intangible assets.
Subsequent measurement
Intangible assets are measured at cost less accumulated
amortisation and impairment losses.
Amortisation
Intangible assets must be amortised over there useful lives. If the
useful life is not determinable then it is presumed to be 10 years.
The depreciable amount is allocated over the life of the asset that
reflects the pattern in which the assets future economic benefits
are expected to be consumed. If the pattern cannot be reliably
determined, then the straight-line method is utilised.
IFRS for SMEs differs from IFRS in that it does not permit
intangible assets to be classified as an asset with an indefinite
life. A useful life is required to be established for all intangible
assets, or it is assumed to be 10 years.
The entity will review at each reporting date whether there has
been a change in useful life, residual amount or amortisation
method. If there is an indicator, this will be adjusted as a change
in estimate.
Residual values
Residual values are permitted if there is a commitment by a third
party to purchase the asset, or there is an active market and
residual value can be determined by reference to this market and
the market is expected to be in existence at the end of the assets
useful life.
Review of amortisation
The entity will consider at each reporting date whether there are
any indicators that there has been a change in useful life, residual
amount or amortisation method. If there is an indicator, this will
be adjusted as a change in estimate.
Derecognition
An intangible asset is derecognised on disposal, or when there
are no future benefits expected from its use or disposal.
35: Transition
to the IFRS for SMEs
Section 20:
Leases
IFRS for SMEs
Section 20 Leases
IFRS
IAS 17 Leases
Impact assessment
Scope
Definitions
A lease is an agreement that transfers the right to use assets in
return for payment. A finance lease transfers substantially all the
risks and rewards incidental to ownership and an operating lease
does not transfer substantially all the risks and rewards incidental
to ownership.
Recognition
Leases are classified as either finance leases or operating leases
at inception based on whether substantially all of the risks and
rewards incidental to ownership of the leased asset have been
transferred from the lessor to the lessee. Indicators are also used
to determine classification.
Manufacturer or dealer lessors offer customers a choice to either
buy or lease an asset which gives rise to two types of income,
profit or loss from the sale of the leased asset and finance
income over the lease term.
Lessees recognise the rights of use and obligations under finance
leases as assets and liabilities in the statement of financial position
and lease payments under operating leases as an expense.
IFRS
IAS 17 Leases
Impact assessment
Initial measurement
Lessees finance leases:
Finance leases are initially measured at amounts equal to the fair
value of the leased property or, if lower, the present value of
minimum lease payments.
Lessees operating leases:
Operating leases are expensed on a straight-line basis or another Operating lease payments are expensed on a straight line basis
basis that represents the use of the asset, unless payments to the over the lease term unless another systematic basis is more
lessor increase with expected inflation in which case the
representative of the use of the asset.
payments are expensed when payable.
IFRS
IAS 17 Leases
Impact assessment
Derecognition
Leases are classified at inception of the lease and this is not
changed during the term unless there is agreement between the
lessee and lessor, in which case the classification is re-evaluated.
IFRS
IAS 36 Impairment of Assets
Impact assessment
Scope
Deferred tax assets
Assets arising from employee benefits
Financial assets
Investment property measured at fair value
Biological assets.
General principles
If, and only if, the recoverable amount of an asset is less than its
carrying amount, the entity must reduce the carrying amount of
the asset to its recoverable amount. The recoverable amount of
an asset or a cash generating unit is the higher of its fair value
less costs to sell and its value in use.
IFRS for SMEs differs from IFRS in that it does not permit the
application of revaluation models and therefore all losses are
immediately recognised in profit or loss.
IFRS
IAS 36 Impairment of Assets
Impact assessment
IFRS for SMEs differs from IFRS in that it does not require an
annual impairment test for intangible assets and goodwill.
Instead these assets are tested for impairment only if there are
indicators that an impairment may exist.
Indicators of impairment
Value in use
Value in use is the present value of the future cash flows
expected to be derived from an asset.
IFRS
IAS 36 Impairment of Assets
Impact assessment
Goodwill impairment
Goodwill acquired in a business combination must be allocated to
each of the acquirers cash-generating units that is expected to
benefit from the synergies of the combination.
If goodwill cannot be allocated to individual cash-generating units Each unit or group of units to which the goodwill is so allocated
on a non-arbitrary basis, then for the purposes of testing goodwill must:
the entity tests the impairment of goodwill by determining the
a) Represent the lowest level within the entity at which the
recoverable amount of:
goodwill is monitored for internal management purposes
b)
Not be larger than an operating segment determined in
a) The acquired entity in its entirety
accordance
with IFRS 8 Operating Segments.
or
b) The entire group of entities.
An impairment loss recognised for goodwill must not be reversed
in a subsequent period.
IFRS
IAS 2 Inventories
Impact assessment
Scope
Definition
Inventories are assets:
a) Held for sale in the ordinary course of business
b) In the process of production for such sale
or
c) In the form of materials or supplies to be consumed in the
production process or in the rendering of services.
Lower of cost and net realisable value. Net realisable value is the
estimated selling price less costs of completion and costs
necessary to make the sale.
Measurement
Lower of cost and estimated selling price less costs to complete
and sell.
Cost of inventories
All costs of purchase, costs of conversion and other costs
incurred in bringing the inventories to their present location and
condition.
IFRS
IAS 2 Inventories
Impact assessment
Standard cost method, the retail method or most recent purchase Standard cost method, the retail method or most recent purchase There is no difference between IFRS for SMEs and IFRS.
price for measuring the cost of inventories if the result
price for measuring the cost of inventories if the result
approximates cost.
approximates cost.
First-in, first-out (FIFO) or weighted average cost formula.
The same cost formula must be used for all inventories having a
similar nature and use.
The same cost formula must be used for all inventories having a
similar nature and use.
Impairment
Assess at the end of each reporting period whether any
inventories are impaired, i.e., the carrying amount is not fully
recoverable (e.g., because of damage, obsolescence or declining
selling prices). If inventory is impaired, it is measure at its selling
price less costs to complete and sell. The impairment loss is
recognised in profit or loss.
When inventories are sold, the entity must recognise the carrying
amount of those inventories as an expense in the period in which
the related revenue is recognised.
IFRS
IAS 12 Income Taxes
Impact assessment
Scope
Income tax includes all domestic and foreign taxes that are based
on taxable profit. It also includes taxes payable by a subsidiary,
associate or joint venture on distributions to the reporting entity.
The tax base of a liability is its carrying amount, less any amount
that will be deductible for tax purposes in respect of that liability
in future periods.
IFRS
IAS 12 Income Taxes
Impact assessment
IFRS
IAS 12 Income Taxes
Impact assessment
IFRS for SMEs does not describe how to account for temporary
differences on the initial recognition of items that are not
goodwill. Therefore, entities will need to develop an accounting
policy to deal with these differences.
Backward tracing
An entity must recognise tax expense in the same component of
total comprehensive income or equity as the transaction or other
event that resulted in the tax expense.
IFRS
IAS 12 Income Taxes
Impact assessment
Investments
An entity must not recognise a deferred tax asset or liability for
temporary differences associated with unremitted earnings from
foreign subsidiaries, branches, associates and joint ventures to
the extent that the investment is essentially permanent in nature,
unless it is apparent that the temporary difference will reverse in
the foreseeable future.
Classification
When an entity presents current and non-current assets, and
current and non-current liabilities, as separate classifications in
its statement of financial position, it must not classify any
deferred tax assets (liabilities) as current assets (liabilities).
IFRS
IAS 12 Income Taxes
Impact assessment
An entity must measure tax assets and liabilities using the tax
rate applicable to undistributed profits.
Deferred taxes are measured based on the tax rates and tax laws
that are enacted or substantively enacted at the reporting date.
IFRS
IAS 32 Financial Instruments: Presentation
Impact assessment
Scope
The section establishes classification of financial instruments as
either liabilities or equity and addresses accounting for equity
instruments issued to individuals as investors in equity
instruments.
While IFRS for SMEs does not exclude insurance liabilities in this
section of the standard, they are excluded in the section dealing
with the measurement of financial instruments.
Unlike IAS 32, IFRS for SMEs provides no application guidance
when applying this section of the standard.
IFRS
IAS 32 Financial Instruments: Presentation
Impact assessment
Definitions
The appendix to IFRS for SMEs contains the definition of a
financial liability as any liability that is:
a) A contractual obligation:
To deliver cash or another financial asset
a) A contractual obligation:
or
To deliver cash or another financial asset
To exchange financial assets or financial liabilities
or
under unfavourable conditions
To exchange financial assets or financial liabilities
or
under unfavourable conditions
b) A contract that will or may be settled in the entitys own equity
or
instruments and is:
b) A contract that will or may be settled in the entitys own equity
A non-derivative for which the entity is or may be
instruments and:
obliged to deliver a variable number of the entitys
The entity is or may be obliged to deliver a variable number
own equity instruments
of its own equity instruments
or
or
A derivative that will or may be settled other than by the
Will or may be settled other than by the exchange of a fixed
exchange of a fixed amount of cash or another financial
amount of cash or another financial asset for a fixed
asset for a fixed number of the entitys own equity
number of the entitys own equity instruments. For this
instruments. For this purpose the entitys own equity
purpose, the entitys own equity instruments do not include
instruments do not include puttable financial instruments
instruments that are contracts for the future receipt or
and instruments that impose on the entity an obligation to
delivery of the entitys own equity instruments.
deliver a pro rata share of the net assets on liquidation, or
Equity is the residual interest in the assets of an entity after
instruments that are contracts for the future receipt or
deducting all of its liabilities.
delivery of the entitys own equity instruments.
IFRS
IAS 32 Financial Instruments: Presentation
Impact assessment
IFRS
IAS 32 Financial Instruments: Presentation
Impact assessment
Equity transactions
An entity recognises the issue of shares or other equity
instruments as equity (including sale of options, rights and
warrants) when the other party is obliged to provide cash or
other resources in exchange for the instruments.
The entity measure these instruments at the fair value of cash or
resources received or receivable, net of any transaction costs
(net of any tax benefit).
Presentation in statement of financial position is determined by
applicable laws of the jurisdiction.
Capitalisation issues, bonus issues and share splits that are
performed on a pro rata basis do not change equity. Equity
would, however, be reclassified in such instances in terms of
applicable laws.
Where treasury shares are reacquired, the entity deducts the fair
value of the consideration given from equity no gain or loss is
recognised in profit or loss.
Convertible debt
IFRS
IAS 32 Financial Instruments: Presentation
Impact assessment
IFRS for SMEs has aligned itself to the principles that are
contained in IAS 27 (revised 2008) see excerpts in IFRS
column. After the effective date of the revised IAS 27,
differences between IFRS for SMEs and full IFRS should be
minimal.
Distributions to owners
An entity reduces equity for amounts of distributions to owners.
When non-cash assets are to be distributed, a liability is
recognised. The liability is stated at fair value at the end of each
reporting period and at date of settlement. Changes are
recognised in equity as adjustments to the amount of the
distribution.
Non-controlling interests
In consolidated financial statements, a non-controlling interest in
the net assets of a subsidiary is included in equity.
An entity treats changes in controlling interest in a subsidiary
that does not result in a loss of control, as transactions with
equity holders in their capacity as shareholders. Any differences
between the consideration paid or received and the fair value is
recognised in equity. No gains or losses are recognised on such
transactions.
Section 11: Basic financial instruments and Section 12: Other financial instrument issues
IFRS for SMEs
Section 11 Basic Financial Instruments
Section 12 Other Financial Instrument Issues
IFRS
IAS 39 Financial Instruments: Recognition
and Measurement
Impact assessment
This is the only direct link that is created between IFRS for SMEs
and full IFRS. If the choice to follow IAS 39 is adopted, the
provisions of IAS 32 are not taken into account as IFRS for SMEs
has its own section that considers debt and equity instruments
issued. This may create some conflict with IAS 39.
Accounting policy
An entity makes a policy choice to either:
Comply with Section 11 Basic Financial Instruments
and Section 12 Other Financial Instruments Issues of
IFRS for SMEs
or
Use the recognition and measurement provisions of
IAS 39 Financial Instruments: Recognition and Measurement
and apply the disclosure requirements of IFRS for SMEs.
Section 11: Basic financial instruments and Section 12: Other financial instrument issues continued
IFRS for SMEs
Section 11 Basic Financial Instruments
Section 12 Other Financial Instrument Issues
IFRS
IAS 39 Financial Instruments: Recognition
and Measurement
Impact assessment
Scope
Section 11: Basic financial instruments and Section 12: Other financial instrument issues continued
IFRS for SMEs
Section 11 Basic Financial Instruments
Section 12 Other Financial Instrument Issues
IFRS
IAS 39 Financial Instruments: Recognition
and Measurement
Impact assessment
Embedded derivatives
There is no concept of embedded derivatives under
IFRS for SMEs.
Cash
A debt instrument that satisfies specific criteria
A commitment to receive a loan that
Cannot be settled net in cash
and
When the commitment is executed, is expected to
meet the conditions of a debt instrument above
An investment in non-convertible preference shares
and non-puttable ordinary shares or preference shares.
Section 11: Basic financial instruments and Section 12: Other financial instrument issues continued
IFRS for SMEs
Section 11 Basic Financial Instruments
Section 12 Other Financial Instrument Issues
IFRS
IAS 39 Financial Instruments: Recognition
and Measurement
Impact assessment
Recognition
Basic and other financial assets and liabilities are recognised
when the entity becomes a party to the contracts.
Initial measurement
Basic financial instruments are measured at their transaction
price including transactions costs.
IFRS for SMEs has simplified the initial measurement for basic
financial insruments by basing it on the transaction price.
IFRS for SMEs recognises that financing arrangements need to
be taken into account. The issue of low interest rate loans will be
particularly important for intra-group loans, which are often
carried at cost under non-IFRS GAAPs.
Full IFRS considers transaction price as a proxy for fair value, and
if necessary, adjusts this price. This introduces the concepts of
Day-1 gains/losses. Other financial instruments would be
measured on the same basis by IFRS for SMEs. It should be noted
that the IFRS for SME standard does not consider Day-1 gains
and losses and hence an IFRS for SMEs reporter would have to
develop an accounting policy to deal with these items.
Section 11: Basic financial instruments and Section 12: Other financial instrument issues continued
IFRS for SMEs
Section 11 Basic Financial Instruments
Section 12 Other Financial Instrument Issues
IFRS
IAS 39 Financial Instruments: Recognition
and Measurement
Impact assessment
Subsequent measurement
For basic financial instruments, at the end of each reporting
period:
Debt instruments are measured at amortised cost using the
effective interest rate
Commitments to receive a loan are measured at cost less
impairment
Investments in non-convertible preference shares and
non-puttable ordinary, and preference shares that are
publically traded or their fair value can otherwise be reliably
measured, are measured at fair value through profit and loss
if a public market exists, otherwise at cost less impairment.
All other financial instruments are measured at fair value at
reporting date. The only exception are equity instruments
(and related contracts that would result in delivery of such
instruments) that are not publically traded and whose fair
value cannot be reliably determined are measured at cost
less impairment.
Amortised cost
The effective interest method is used to calculate the amortised
cost of a financial asset or a financial liability and to allocate the
interest income or interest expense over the relevant period.
Section 11: Basic financial instruments and Section 12: Other financial instrument issues continued
IFRS for SMEs
Section 11 Basic Financial Instruments
Section 12 Other Financial Instrument Issues
IFRS
IAS 39 Financial Instruments: Recognition
and Measurement
Impact assessment
IAS 39 is clear that future credit loss events are not taken
into account when estimating future cash flows. However,
IFRS for SMEs does not consider this point. As this is an
incurred loss model IFRS for SMEs should also ignore future
loss events when calculating an impairment loss.
Section 11: Basic financial instruments and Section 12: Other financial instrument issues continued
IFRS for SMEs
Section 11 Basic Financial Instruments
Section 12 Other Financial Instrument Issues
IFRS
IAS 39 Financial Instruments: Recognition
and Measurement
Impact assessment
Both frameworks retain the same risks and rewards principles for
the purposes of derecognition of financial assets. No differences
would be expected between the frameworks.
Derecognition
IFRS for SMEs has similar requirements to full IFRS regarding the
need to document and designate the hedging relationship.
However, the requirements under IFRS for SMEs are less onerous,
although as explained below, SMEs are more restricted in the
circumstances in which they can apply hedge accounting.
Section 11: Basic financial instruments and Section 12: Other financial instrument issues continued
IFRS for SMEs
Section 11 Basic Financial Instruments
Section 12 Other Financial Instrument Issues
IFRS
IAS 39 Financial Instruments: Recognition
and Measurement
Impact assessment
IFRS for SMEs restricts the ability for an entity to use hedge
accounting to the four identified risks in the standard.
Hedged risks
IFRS for SMEs only permits hedge accounting when the hedged
risk is one of the following risks:
Interest rate risk of a debt instrument measured at
amortised cost
Foreign exchange or interest rate risk in a firm commitment
or a highly probable forecast transaction
Price risk of a commodity that it holds or in a firm
commitment or highly probable forecast transaction to
purchase or sell a commodity
Foreign exchange risk in a net investment in a foreign
operation.
Hedging instrument
The Hedge accounting is only permitted if the hedging
instrument meets all of the following:
It is an interest rate swap, a foreign currency swap, a foreign
currency forward exchange contract or a commodity forward
exchange contract that is expected to be highly effective
It involves a party external to the reporting entity
Its notional amount equals the designated amount of the
hedged item
It has a specified maturity date not later than:
The maturity of the hedged item
The expected settlement of the commodity commitment
The occurrence of the highly probable forecast transaction
It has no prepayment of early termination or extension
features.
Section 11: Basic financial instruments and Section 12: Other financial instrument issues continued
IFRS for SMEs
Section 11 Basic Financial Instruments
Section 12 Other Financial Instrument Issues
IFRS
IAS 39 Financial Instruments: Recognition
and Measurement
Impact assessment
IAS 39 has difference definitions for the types of hedge. However, Hedges of a fixed interest rate risk are treated in a similar way to
most hedges of fixed interest rate risk would be fair value hedges. fair value hedges under full IFRS.
Fair value hedges are accounted for as follows:
IFRS
IFRS 2 Share-based Payment
Impact assessment
While both IFRS for SMEs and full IFRS deal with the acquisition
of goods and services by an entity by means of a share-based
payment arrangement, the scope of the frameworks are
different. The principle difference is that IFRS 2 specifically
includes within its scope those transactions settled by another
group entity (or shareholder). Under IFRS for SMEs it is
voluntary to account for an award made by the parent entity.
Scope
This section specifies the accounting for all share-based payment
transactions for the acquisition of goods or services, including
those that are equity-settled and those that are cash-settled or a
choice of either equity or cash.
Where an award is granted by a parent entity to the employees
of a subsidiary and the parent presents consolidated financial
statements using either the IFRS for SMEs or full IFRS, the
subsidiary may recognise and measure the share-based payment
expense based on a reasonable allocation of the expense
recognised for the group.
IFRS
IFRS 2 Share-based Payment
Impact assessment
Recognition
IFRS
IFRS 2 Share-based Payment
Impact assessment
Measurement
For equity-settled share-based payment transactions, the entity
measures the goods or services received and the corresponding
increase in equity at the fair value of the goods or services
received. If this fair value cannot be estimated reliably (includes
employee transactions), the entity measures the transaction by
reference to the fair value of the equity instruments granted.
The fair value of the equity instruments is measured at grant
date. The standard differentiates between a market vesting
condition and a non-market vesting condition for the purposes of
measurement. Non-market vesting conditions are not taken into
account to determine the fair value of the award. These
conditions are used to determine the number of shares that are
expected to vest. Market vesting conditions are used to
determine the value of the award at grant date.
For cash-settled share-based payment transactions, the entity
measures the goods or services acquired and the liability incurred
at the fair value of the liability. Until the liability is settled, the
entity remeasures the fair value of the liability, with any changes
in fair value recognised in profit or loss for the period.
For share-based transactions in which either the entity or the
counterparty has the choice of whether settlement is in cash or
equity instruments, the entity accounts for that transaction as a
cash-settled share-based payment transaction if the entity has
incurred a liability. The transaction is accounted for as an
equity-settled share-based payment transaction if the entity has
a past practice of settling in shares or the option to receive cash
has no commercial substance.
IFRS
IFRS 2 Share-based Payment
Impact assessment
IFRS
IAS 37 Provisions, Contingent Liabilities and
Contingent Assets
Impact assessment
Scope
This section applies to all provisions, contingent liabilities and
contingent assets other than those relating to construction
contracts, executory contracts unless they are onerous,
employee benefit obligations, income tax and leases.
Definitions
A provision is a liability of uncertain timing or amount.
Initial measurement
An entity measures a provision at the best estimate of the
amount required to settle the obligation at the reporting date,
which is the amount it would rationally pay to settle the
obligation at the end of the reporting period or to transfer it to a
third party at that time.
The amount recognised as a provision is the best estimate of the There is no difference between IFRS for SMEs and IFRS.
expenditure required to settle the present obligation at the end of
the reporting period, which is the amount that it would rationally
pay to settle the obligation at the end of the reporting period or
to transfer it to a third party at that time.
IFRS
IAS 37 Provisions, Contingent Liabilities and
Contingent Assets
Impact assessment
Subsequent measurement
Contingent liabilities
A contingent liability is either a possible but uncertain obligation
that is not recognised because it fails to meet either the
probability that economic benefits will transfer or the amount
cannot be reliably estimated.
Contingent assets
An entity does not recognise a contingent asset. However, when
the inflow of resources is virtually certain, an asset is recognised.
Derecognition
A provision is derecognised when all obligations are settled.
IFRS
IAS 19 Employee Benefits
Impact assessment
Scope
Employee benefits are all forms of consideration given by an
entity in exchange for service rendered by employees, including
directors and management. This section applies to all employee
benefits, except for share-based payment transactions.
Recognition
IFRS
IAS 19 Employee Benefits
Impact assessment
Other than the provisions for discounting under full IFRS, the
requirements of both frameworks are the same.
An entity recognises:
IFRS
IAS 19 Employee Benefits
Impact assessment
IFRS
IAS 19 Employee Benefits
Impact assessment
However, IFRS for SMEs does not specify how the defined benefit
obligation is measured. Therefore, it is assumed that a the
projected credit unit method is not required, which leads to a
difference between the two frameworks.
IFRS
IAS 41 Agriculture
Impact assessment
Scope
The subsection applies to agricultural activity undertaken by
an entity. While the scope deals with biological assets, the
recognition and measurement of agricultural produce at the point
of harvest is also dealt with under recognition and measurement.
Definitions
Agricultural activity is defined as the management by an entity
of the biological transformation of biological assets for sale, into
agricultural produce or into additional biological assets.
Agricultural produce is defined as the harvested product of the
entitys biological assets.
A biological asset is defined as a living animal or plant.
Recognition
An entity may recognise a biological asset or agricultural
produce when:
The entity controls the asset as a result of past events
It is probable that future economic benefits associated with
the asset will flow to the entity
and
The fair value or cost of the asset can be measured reliably
without undue cost or effort.
The only difference between full IFRS and IFRS for SMEs is
the exemption provided in the third criterion, i.e., undue cost
or effort.
IFRS
IAS 41 Agriculture
Impact assessment
Measurement
An entity measures a biological asset on initial recognition and
at each reporting date at its fair value less costs to sell unless fair
value cannot be reliably measured without undue cost or effort.
Changes in fair value less costs to sell are recognised in profit or
loss.
Grants
Grants that do not impose future performance conditions are
recognised in income when they are receivable.
All grants are measured at the fair value of the asset receivable.
The grants are measured at the fair value less costs to sell of the
asset receivable.
IFRS
IFRS 6 Exploration for and Evaluation of
Mineral Resources
Impact assessment
Under IFRS for SMEs, any expenditure that does not meet the
recognition criteria of Section 17 and Section 18 would not be
recognised as an asset. This may cause significant differences to
full IFRS as costs such as exploration and evaluation expenditures
that may not be recognised as assets under these sections will
have to be expensed by SMEs but may be capitalised under
full IFRS.
Impact assessment
Scope
A service concession arrangement is an arrangement whereby a
government or other public sector body contracts with a private
operator to develop, operate and maintain the grantors
infrastructure assets.
In service concession arrangements the grantor controls or
regulates what services the operator must provide using the
assets, to whom, and at what price and also controls any
significant residual interest in the assets at the end of the term of
the arrangement.
Concession arrangements
The two categories of service concession arrangements are:
The operator receives a financial asset an unconditional
contractual right to receive a specified or determinable
amount of cash from the government
The operator receives an intangible asset a right to charge
for use of a public sector asset.
Chapter four
Elements of the
statement of comprehensive income
Executive summary
In this chapter, we consider the elements that make up the income statement and statement of
comprehensive income and compare the following sections of the IFRS for SMEs with the relevant
standard under full IFRS:
IFRS for SMEs
IFRS
Section 23 Revenue
IAS 18 Revenue
IAS 11 Construction Contracts
The principles of revenue recognition and foreign currency translation are the same under
IFRS for SMEs. However, there is generally significantly less guidance in IFRS for SMEs, which may
result in different entities taking different interpretations of the requirements in some cases.
The requirements for borrowing costs are significantly different to full IFRS, as IFRS for SMEs
requires all borrowing costs to be expensed as they are incurred. For some entities, particularly in
the construction industry this may result in significant expenses being recognised in profit or loss.
IFRS for SMEs does not give a choice of accounting policy for government grants, all grants are
measured at fair value and recognised in profit or loss.
IFRS
IAS 18 Revenue
IAS 11 Construction Contracts
Impact assessment
Scope
The section applies in accounting for revenue arising from the
following:
Definition of revenue
Revenue is the gross inflow of economic benefits during the
period arising in the course of the ordinary activities of an entity
when those inflows result in increases in equity, other than
increases relating to contributions from equity participants.
IFRS
IAS 18 Revenue
IAS 11 Construction Contracts
Impact assessment
Sale of goods
Rendering of services
When the outcome of a transaction involving the rendering of
services can be estimated reliably, revenue must be recognised
by reference to the stage of completion of the transaction at the
end of the reporting period.
IFRS
IAS 18 Revenue
IAS 11 Construction Contracts
Impact assessment
Construction contracts
IFRS
IAS 18 Revenue
IAS 11 Construction Contracts
Impact assessment
Barter transactions
When goods are sold or services are exchanged for dissimilar
goods or services in a transaction that has commercial
substance, the transaction must be measured at:
The fair value of the goods or services received adjusted by
the amount of any cash or cash equivalents transferred
If the fair value of the goods or services received cannot be
measured reliably, then it is measured at the fair value of the
goods and services given up adjusted by the amount of any
cash or cash equivalents transferred
or
If the fair value of neither the asset received nor the asset
given up can be measured reliably, then at the carrying
amount of the asset given up adjusted by the amount of any
cash or cash equivalents transferred.
IFRS
IAS 18 Revenue
IAS 11 Construction Contracts
Impact assessment
IFRS
IAS 21 The Effect of Changes in Foreign
Exchange Rates
Impact assessment
Definitions
Functional currency
All components of the financial statements are measured in the
functional currency. All transactions entered into in currencies
other than the functional currency are treated as transactions in
a foreign currency.
IFRS
IAS 21 The Effect of Changes in Foreign
Exchange Rates
Impact assessment
Presentation currency
An entity may choose to present its financial statements in any
currency. If the presentation currency differs from the functional
currency, an entity translates its items of income and expense
and financial position into the presentation currency.
IFRS
IAS 23 Borrowing Costs
Impact assessment
Borrowing costs are interest and other costs that an entity incurs
in connection with the borrowing of funds and include:
Borrowing costs are interest and other costs that an entity incurs
in connection with the borrowing of funds and may include:
Scope
IFRS
IAS 20 Accounting for Government Grants and
Disclosure of Government Assistance
Impact assessment
There are no differences between IFRS for SMEs and full IFRS in
terms of the definition of government grants. The main
difference in scope is that IFRS for SMEs applies to government
grants related to agriculture, which are dealt with in a separate
standard under full IFRS.
Scope
This section applies to all government grants.
Government grants are assistance by the government in the form
of transfers of resources to an entity in return for past or future
compliance with certain conditions relating to the operation
activities of the entity.
IFRS
IAS 20 Accounting for Government Grants and
Disclosure of Government Assistance
Impact assessment
Chapter five
Transition to the IFRS for SMEs
Executive summary
In this chapter, we consider the transition requirements for the first-time adoption of IFRS for SMEs.
The transition rules apply equally to all entities whether they have previously applied IFRS or another
GAAP. The rules are based on the requirements of IFRS 1 First-time Adoption of International Financial
Reporting Standards but in some cases the section has been altered to make the transition requirements
easier to apply.
Under the transition rules, restatements of the opening statement of financial position do not need to be
made if it is impractical to do so. In some cases this may relieve the need for restatement, although the
ability to meet the impracticability hurdle may prove difficult.
Business combinations
Share-based payment transactions
Fair value as deemed cost
Revaluation as deemed cost
Cumulative translation differences
Separate financial statements
Compound financial instruments
Deferred income tax
Service concession arrangements
Extractive activities
Arrangements containing a lease
Decommissioning liabilities included in the cost of property, plant and equipment.
Contents by section
Section
1
Small and medium-sized entities
2
Concepts and pervasive principles
3
Financial statement presentation
4
Statement of financial position
5
Statement of comprehensive income and income statement
6
Statement of changes in equity and statement of income and retained earnings
7
Statement of cash flows
8
Notes to the financial statements
9
Consolidated and separate financial statements
10 Accounting policies, estimates and errors
11 Basic financial instruments
12 Other financial instruments issues
13 Inventories
14 Investments in associates
15 Investments in joint ventures
16 Investment property
17 Property, plant and equipment
18 Intangible assets other than goodwill
6
7
9
12
13
14
15
17
36
18
79
79
67
47
42
57
54
59
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
28
61
92
74
104
112
111
88
64
94
69
109
24
20
21
98
116
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