In July, the International Accounting Standards Board (IASB) published its long-awaited simplified version of International Financial Reporting Standards for Small and Medium Size Enterprises (IFRS for SMEs). During the discussions that preceded the publication we argued in favour of the standard, while stressing that its adoption in the UK must not impose a disproportionate regulatory burden on companies within the SME sector.
The final standard takes on board almost all of the major recommendations we put forward. It is far shorter than full IFRS, written generally in a more accessible style, with many significant relaxations in the accounting requirements and greatly reduced disclosure provisions. The prize here is a common financial language for SMEs without the weight of reporting requirements you would expect across the listed company sector – something that will be welcome across the many jurisdictions around the world struggling to implement the requirements of full IFRS.
In the UK the advent of the new standard has prompted the Accounting Standard Board (ASB) to inaugurate perhaps the single most important debate affecting UK private companies and not-for-profit entities for a generation: the future of UK GAAP in an IFRS world.
The outcome of that debate may well be that the new standard is regarded as suitable for large private companies, and perhaps medium-sized ones too. This transition would inevitably involve some cost and disruption, but the current stop: start process of convergence does not seem sustainable. Our tentative view is that for the very smallest entities there are cost: benefit grounds for preserving the generally well-regarded FRSSE, albeit over time its provisions would no doubt become more closely aligned with the principles of IFRS.
This is a debate that is happening now and I am keen to hear your views. The ASB and experts from our Financial Reporting Faculty will be discussing the proposals on the 26th November at Chartered Accountants Hall, providing an opportunity for public debate ahead of the ASB’s submission deadline of 1 February.