SME

Question 1

SME characteristics

Answer 1

Owner-managed (small shareholder base)
Small number of employees
Simple transactions
Not generally published

Full IFRS are designed for quoted entities

Question 2

Differences from full IFRS

What has been removed

Answer 2

EPS
Interim reporting
Segmental reporting
Assets held for sale / discontinued operations

Question 3

Differences from full IFRS

Accounting treatment differences
Investment property
Intangible assets
Government grants

Answer 3

SME vs Full IFRS

Investment property = FVTPL unless not able then use cost - choice between FV or cost
Intangible assets = Cost less amortisation - allowed to revalue when active market
Government grants = recognise as income when grant is receivable or when performance conditions are met

Question 4

Differences from full IFRS

Accounting treatment differences
Borrowing costs
Development costs

Answer 4

SME vs Full IFRS

Borrowing costs = expensed when incurred - capatalised
Development costs = expensed when incurred - capatalised (when IAS 38 are met)

Question 5

Differences from full IFRS

Accounting treatment differences
Pension actuarial gains/losses
Financial instruments

Answer 5

SME vs Full IFRS

Pension actuarial gains/losses = remeasure through P&L - remeasure through OCI
Financial instruments = All at cost (amortised) /FVTPL - OCI/P&L/amortised cost

Question 6

Presentation differences

Answer 6

SME allows

Combined P&L and OCI and SOCIE allowed where no movements beside P&L

Question 7

Differences from full IFRS

Recognition differences:
Revenue
Intangible assets

Answer 7

SME vs Full IFRS

Revenue = goods: when risks and rewards of ownership are transferred - when performance obligations are satisfied
Intangible assets = all intangible assets are amortised (inc. goodwill), useful life cannot exceed 10 years if it cannot be reliably identified. Impairment only required if there is an indication of impairment - only amortise if finite useful life (no limit), annual impairment test is required for goodwill and any intangibles with indefinite useful life

Question 8

Differences from full IFRS

Recognition differences:
Separate financial statements
Consolidated FS

Reminder: what is the equity method

Answer 8

SME vs Full IFRS

Separate financial statements = investments in subs/associate/JV can be held at cost (less impairment) or at FVTPL - same or if an election was made at purchase through OCI . Both can also use equity method.
Consolidated FS = Only partial goodwill allowed and to be amortised. Exchange differences recognised in OCI and not reclassified to P&L. Subs purchased and planned to sell within a year are not consolidated - choice of full or partial goodwill, compulsory annual test for impairment. FX differences recognised in OCI and reclassified to P&L on disposal of operations. Held for sale of sub.

Equity method = cost plus share of post acq’n increase in net assets