The International Accounting Standards Board (IASB) has issued a major update to the IFRS for SMEs Accounting Standard, which is currently required or permitted in 85 jurisdictions.
The IFRS for SMEs Standard is designed to balance the information needs of lenders and other users of SMEs’ financial statements with the resources available to SMEs. It applies to entities without public accountability that prepare general-purpose financial statements.
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The third edition of IFRS for SMEs represents the most comprehensive revision to date, incorporating changes from full IFRS standards since the first review. Notable updates include alignment with IFRS 3 (Business Combinations), IFRS 9 (Financial Instruments), IFRS 13 (Fair Value Measurement), and IFRS 15 (Revenue from Contracts with Customers).
Here are the key updates you should be aware of:
- Section 2: Concepts and Pervasive Principles – This section has been fully updated to assist SMEs in developing accounting policies when specific requirements are not provided within the standard.
- Section 9: Consolidated and Separate Financial Statements – A unified approach to assessing control has been introduced, replacing the previous two-model framework. This change enhances consistency in consolidated financial statements.
- Section 11: Financial Instruments – Previously titled “Basic Financial Instruments,” this section now merges with former Section 12. It introduces a classification principle aimed at simplifying financial instrument categorization and includes new requirements for issued financial guarantee contracts, particularly for intergroup financial guarantees.
- Section 12: Fair Value Measurement – A newly introduced section consolidating fair value measurement requirements, now aligned with IFRS 13.
- Section 19: Business Combinations – Revised to align with IFRS 3, featuring an updated definition of a business and new measurement guidelines.
- Section 23: Revenue from Contracts with Customers – Previously called “Revenue,” this section has been revised to align with IFRS 15.
It is noted that the update to the standard will enhance the quality of financial information provided to users while preserving the simplicity of the Standard.
This update is effective for annual periods beginning on or after 1 January 2027, with early application permitted.
