IFRS For SMEs Archives – FAQ | IFRS

Small and Medium-sized Entities

Intended scope of this StandardSmall and Medium-sized Entities

1.1 The IFRS for SMEs is intended for use by small and medium-sized entities (SMEs). This section describes the characteristics of SMEs.

Description of small and medium-sized entities

1.2 Small and medium-sized entities are entities that: Small and Medium-sized Entities

  1. do not have public accountability; and Small and Medium-sized Entities
  2. publish general purpose financial statements for external users. Small and Medium-sized Entities

Examples of external users include owners who are not involved in managing the business, existing and potential creditors, and credit rating agencies.

1.3 An entity has public accountability if: Small and Medium-sized Entities

  1. its debt or equity instruments are traded in a public market or it is in the process of issuing such
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SME Concepts and Persuasive Principles

Section 2 Concepts and Persuasive PrinciplesConcepts and Persuasive Principles

Scope of this section

2.1 This section describes the objective of financial statements of small and medium-sized entities (SMEs) and the qualities that make the information in the financial statements of SMEs useful. It also sets out the concepts and basic principles underlying the financial statements of SMEs.

Objective of financial statements of small and medium-sized entities

2.2 The objective of financial statements of a small or medium-sized entity is to provide information about the financial position, performance and cash flows of the entity that is useful for economic decision-making by a broad range of users of the financial statements who are not in a position to demand reports tailored to meet their particular … Read more

SME Financial Statement Presentation

Section 3 Financial Statement PresentationFinancial Statement Presentation

Scope of this section

3.1 This section explains fair presentation of financial statements, what compliance with the IFRS for SMEs requires and what a complete set of financial statements is.

Fair presentation

3.2 Financial statements shall present fairly the financial position, financial performance and cash flows of an entity. Fair presentation requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in Section 2 Concepts and Pervasive Principles:

  1. the application of the IFRS for SMEs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation of the financial position,
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SME Statement of Financial Position

Section 4 Statement of Financial PositionStatement of Financial Position

Scope of this section

4.1 This section sets out the information that is to be presented in a statement of financial position and how to present it. The statement of financial position (sometimes called the balance sheet) presents an entity’s assets, liabilities and equity as of a specific date—the end of the reporting period.

Information to be presented in the statement of financial position

4.2 As a minimum, the statement of financial position shall include line items that present the following amounts:

  1. cash and cash equivalents;
  2. trade and other receivables;
  3. financial assets (excluding amounts shown under (a), (b), (j) and (k));
  4. inventories;
  5. property, plant and equipment;
    (ea) investment property carried at cost less accumulated
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SME Statement of Comprehensive Income and Income Statement

Section 5 Statement of Comprehensive Income and Income StatementStatement of Comprehensive Income and Income Statement

Scope of this section

5.1 This section requires an entity to present its total comprehensive income for a period—ie its financial performance for the period—in one or two financial statements. It sets out the information that is to be presented in those statements and how to present it.

Presentation of total comprehensive income

5.2 An entity shall present its total comprehensive income for a period either: Statement of Comprehensive Income and Income Statement

  1. in a single statement of comprehensive income, in which case the statement of comprehensive income presents all items of income and expense recognised in the period; or
  2. in two statements—an income statement and a statement of comprehensive income—in
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SME Statement of changes in Equity and Statement of Income and Retained earnings

SME Statement of changes in Equity and Statement of Income and Retained earnings

Section 6 Statement of Changes in Equity and Statement of Income and Retained EarningsStatement of changes in Equity and Statement of Income and Retained earnings

Scope of this section

6.1 This section sets out requirements for presenting the changes in an entity’s equity for a period, either in a statement of changes in equity or, if specified conditions are met and an entity chooses, in a statement of income and retained earnings.

Statement of changes in equity

Purpose

6.2 The statement of changes in equity presents an entity’s profit or loss for a reporting period, other comprehensive income for the period, the effects of changes in accounting policies and corrections of errors recognised in the period and the … Read more

SME Statement of Cash Flows

Section 7 Statement of Cash FlowsStatement of Cash Flows

Scope of this section

7.1 This section sets out the information that is to be presented in a statement of cash flows and how to present it. The statement of cash flows provides information about the changes in cash and cash equivalents of an entity for a reporting period, showing separately changes from operating activities, investing activities and financing activities.

Cash equivalents

7.2 Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. They are held to meet short-term cash commitments instead of for investment or other purposes. Consequently, an investment normally qualifies as a cash … Read more

SME Notes to the Financial Statements

Section 8 SME Notes to the Financial StatementsSME Notes to the Financial Statements

Scope of this section

8.1 This section sets out the principles underlying information that is to be presented in the notes to the financial statements and how to present it. Notes contain information in addition to that presented in the statement of financial position, the statement of comprehensive income (if presented), the income statement (if presented), the combined statement of income and retained earnings (if presented), the statement of changes in equity (if presented) and the statement of cash flows. Notes provide narrative descriptions or disaggregations of items presented in those statements and information about items that do not qualify for recognition in those statements. In addition to the requirements of this … Read more

SME Consolidated and Separate Financial Statements

Section 9 Consolidated and Separate Financial StatementsConsolidated and Separate Financial Statements

Scope of this section

9.1 This section defines the circumstances in which an entity applying this Standard presents consolidated financial statements and the procedures for preparing those statements in accordance with this Standard. It also includes guidance on separate financial statements and combined financial statements if they are prepared in accordance with this Standard. If a parent entity by itself does not have public accountability, it may present its separate financial statements in accordance with this Standard, even if it presents its consolidated financial statements in accordance with full IFRS or another set of generally accepted accounting principles (GAAP).

Requirement to present consolidated financial statements

9.2 Except as permitted or required by paragraphs … Read more

SME Accounting Policies Estimates and Errors

Section 10 Accounting Policies Estimates and ErrorsAccounting Policies Estimates and Errors

Scope of this section

10.1 This section provides guidance for selecting and applying the accounting policies used in preparing financial statements. It also covers changes in accounting estimates and corrections of errors in prior period financial statements.

Selection and application of accounting policies

10.2 Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.

10.3 If this Standard specifically addresses a transaction, other event or condition, an entity shall apply this Standard. However, the entity need not follow a requirement in this Standard if the effect of doing so would not be material.

10.4 If this Standard does not specifically address a … Read more