IFRS for SME

Question 1

IFRS for SME Objectives

Answer 1

1. Provide info about financial position for economic decision-making by broad range users not in position to demand reports tailored to meet particular info needs
2. Show results of stewardship of mgmt (accountability of mgmt for resources entrusted to it

Question 2

What are IFRS for SME’s

Answer 2

Not “other comprehensive basis of account” are GAAP, can be used by U.S. companies as basis for preparing FS. If company doesn’t have to follow standard US GAAP or full IFRS may use either OCBOA or IFRS for SME’s

Question 3

Who may/may not use

Answer 3

1. Entities that DO NOT HAVE “public accountability”
   MAY NOT:
2. Entities required to file FS w/ securities commission or other reg body
3. Entities that hold assets in fiduciary capacity for broad group of outsides (banks, insurance company, brokers/dealers in securities, pension funds, mutual funds
4. not-for-profit or governmental

Question 4

Characteristics of FS under IFRS for SMEs

Answer 4

1. Based on Accrual Acct - simpler than US GAAP
2. Accting for financial assets/liabilities makes greater use of cost
3. Investments-cost method over which investor has significant influence is permitted/so is equity method
4. Inventories: valued using FIFO or Weighted-average cost–no LIFO
5. Interest: Capitalization incurred during construction of asset not required
6. PPE: When major components have different patterns of consumption, depreciation must be based on components approach
7. Goodwill: amortized & assumed to have limited life, life not estimated, 10 yr period must be used for amort purposes–impairment of Goodwill is assessed using one-step process instead of two-step
8. Income Tax: simplified approach to temp difference is used
9. If certain criteria met, reversal of impairment charges is allowed-including for financial asset
10. Head Types: only certain ones are allowed & conditions conditions for use of hedge accting for those types are less restrictive
11. EPS: No requirement for EPS or segment disclosures
12. Disclosure: simplified into several areas: financial instruments, leases, pensions