Much of the debate about the IASB’s draft ‘IFRS for SMEs’ has been over its
suitability – or unsuitability – for use by ‘micro’ companies around the world.
But could there be a place for the standard in the UK accounting framework,
as part of the solution to the unresolved debate over the future of UK GAAP in
the new international environment?
And, more controversially perhaps, might it in due course provide a
replacement for the UK standard for smaller entities, the FRSSE?
Users of the FRSSE who read through the draft IFRS might note some familiar
features. The IASB has gone a long way towards providing a ‘one stop shop’, a
single standard similar in concept to the UK standard. The proposed
international standard is structured by topic with a separate section on, for
example, property, plant and equipment.
There is a considerable reduction in disclosure requirements, and some
significant measurement simplifications. Overall, the IASB has reduced the
volume of material in its full standards substantially whilst – crucially – not
requiring a mandatory ‘fallback’ to full IFRS for transactions not dealt with in
the SME version.
Many will, however, be unenthusiastic about the prospect of the SME IFRS
replacing the FRSSE, at least without significant changes. Even the ‘typical’ 50
employee company alluded to in the draft standard found application of the
requirements onerous, and may conclude that for the foreseeable future the FRSSE
should be retained as part of a three tier solution to UK GAAP.
However, the ‘IFRS for SMEs’ – perhaps an unhelpful title if the standard is
not suitable for most small companies – might still provide part of the solution
to the ‘UK GAAP question’. It might provide a suitable replacement for GAAP for
unlisted companies ineligible to use the FRSSE, either on a compulsory basis or
perhaps as an option for private companies with an international outlook. The
ASB could still keep the FRSSE simple – indeed, it should take the opportunity
to review its current requirements with a view to turning back the tide of
complexity that threatens to undermine its success.
This debate will rumble on for some time, but those wishing to influence it
should get involved now.
Dr Nigel Sleigh-Johnson is head of financial reporting
at the ICAEW
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