October 2019 IFRS for SMEs Update

The IFRS for SMEs Standard Update is a staff summary of news, events and other information about the IFRS for SMEs Standard and related SME activities. The staff summary has not been reviewed by the International Accounting Standards Board (Board).

• Feedback on the draft SMEIG Q&A published in August 2019
• Feedback from the World Standard-setters Conference
• Update on the 2019 Comprehensive Review of the IFRS for SMEs Standard
• Applying the principles for alignment

Feedback on the draft SMEIG Q&A published in August 2019

In August 2019, the IFRS Foundation published draft guidance on Section 35 of the Transition to the IFRS for SMEs in the form of a draft question and answer (Q&A) document. The draft guidance addresses the application of the undue cost or effort exemption for investment property on an entity’s transition to the IFRS for SMEs Standard.

The consultation period on draft SMEIG Q&A 35.1 Application of the undue cost or effort exemption for investment property on transition to the IFRS for SMEs Standard ended on 7 October 2019. Seven comment letters were received and are available here. The SMEIG is considering the responses received.

Feedback from the World Standard-setters (WSS) conference

In October 2019, the IFRS Foundation held its annual WSS conference in London. During stakeholder group sessions, the staff presented the Board’s proposed approach to the 2019 Comprehensive Review of the IFRS for SMEs Standard (2019 Review). As part of its approach, the Board considered applying three principles to decide whether and how to align the IFRS for SMEs Standard with full IFRS Standards and amendments included in the scope of 2019 Review. The staff demonstrated how the three principles—relevance, simplicity and faithful representation—have been applied by the Board in developing the Request for Information (RFI).

The feedback from stakeholder group sessions was as follows:

• mixed views were expressed on whether amending the scope of the IFRS for SMEs Standard should be discussed during the 2019 Review;
• mixed views were expressed on the Board’s decision to seek views on aligning certain topics in Section 11 Basic Financial Instruments and Section 12 Other Financial Instrument Issues with IFRS 9 Financial Instruments;
• some attendees said alignment with new and amended full IFRS Standards might result in the IFRS for SMEs Standard becoming more complex;
• some attendees found it burdensome to apply the undue cost or effort exemption set out in paragraphs 2.14A–2.14D of the IFRS for SMEs Standard;
• attendees expressed a need for more information before forming views on potential amendments to align the IFRS for SMEs Standard with IFRS 11 Joint Arrangements; and
• all attendees agreed with the alignment principles for deciding whether and how to align the IFRS for SMEs Standard with IFRS Standards and amendments included in the scope of the 2019 Review.

Update on the 2019 Comprehensive Review of the IFRS for SMEs Standard

In addition to the outreach conducted at the WSS conference, the Board considered the final set of topics for the 2019 Review, including the scope of the IFRS for SMEs Standard, IFRS 11 Joint Arrangements, IAS 19 Employee Benefits, IAS 23 Borrowing Costs, cryptocurrency and the SMEIG Q&A. Read about the Board’s decisions on these topics here.

Applying the principles for alignment

As part of the 2019 Comprehensive Review of the IFRS for SMEs Standard, the Board has considered whether and how to align the IFRS for SMEs Standard with IFRS Standards and amendments that fall within the scope of the 2019 Review. These Standards include IFRS 3 Business Combinations, IFRS 9 Financial Instruments, IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases. The table below sets out how the Board has applied the alignment principles to these Standards during the first phase of the 2019 Review.