IASB Publishes IFRS For SMEs

Updating our post from earlier today, the IASB has now published its final standard entitled: IFRS for SMEs. As noted in this FEI Summary, the IASB's definition of SME hinges on whether an entity has 'public accountability,' not a size test. (In simple terms, although reference should be made to the IFRS for SMEs standard for the official definition - I would describe it as a two tier test: first, the entity can have no publicly traded debt or stock, and second, the entity cannot be deemed as having 'public accountability' wherein it it "holds assets in a fiduciary capacity for a broad group of outsiders....which is typically the case for banks, credit unions, insurance companies, securities brokers/dealers, mutual funds and investment banks." Charitable institutions and certain other institutions that hold money in a fiduciary capacity for reasons incidental to their business are not deemed publicly accountable, but once again, refer to the standard for the precise definitions.

The IASB notes that the decision whether to permit use of IFRS for SMEs vs. full IFRS is a jurisdictional decision, and some jurisdictions may apply a size test in this decision, although the IASB's core definition of SME does not use a size test.

Read more about IFRS for SMEs on the IASB website, http://www.iasb.org/ and in the FEI Summary. (Note: this particular FEI summary is available to the public, not only FEI members.)

See also the AICPA's Q&A document on IFRS for SMEs, which notes: "The AICPA's governing Council recognizes the IASB as an accounting body for purposes of establishing international financial accounting and reporting principles. Full IFRS and IFRS for SMEs are not an other comprehensive basis of accounting. Rather, they are generally accepted accounting principles." The AICPA Q&A also includes such questions as: "Why would a private company in the United States choose to prepare its financial statements in accordance with IFRS for SMEs?" and "Does the AICPA Support Use of IFRS for SMEs in the United States?"

IFRS For SMEs To Be Issued Tomorrow

Visitors to the International Accounting Standards Board's website, www.iasb.org, have recently been greeted with a prominent message in the upper right hand corner of the website that IASB's IFRS for SMEs - International Financial Reporting Standards for Small and Medium-Sized Entities - is "coming soon."

IASB Director of Communications Mark Byatt has confirmed to us that IFRS for SMEs will be published tomorrow (July 9).

The objective of IFRS for SMEs (formerly entitled in an earlier draft version "IFRS for Private Entities") was described in an IASB staff summary of the Feb. 2007 IFRS for SMEs Exposure Draft as follows:

• The aim of the proposed standard isto provide a simplified, self-contained set of accounting principles that are appropriatefor smaller, non-listed companies and are based on full International Financial Reporting Standards (IFRSs), developed primarily for listed companies.
• By removing choices for accounting treatment, eliminating topics that are notgenerally relevant to SMEs and simplifying methods for recognition and measurement,the resulting draft standard reduces the volume of accounting guidance applicable toSMEs by more than 85 per cent when compared with the full set of IFRSs.
• As a result,the exposure draft offers a workable, self-contained set of accounting standards that would allow investors for the first time to compare SMEs’ financial performance acrossinternational boundaries on a like for like basis.

Watch for further information about the release of IFRS for SMEs on www.iasb.org; we will post related information on FEI's website as well.

FASB Adds Project On Disclosure Framework, Will Not Be 'Additive,' Says Herz

Prompted by concerns raised by FASB's Investors Technical Advisory Committee (ITAC), the SEC Advisory Committee on Improvements to Financial Reporting (CIFiR), and others, FASB Chairman Robert Herz announced at today's board meeting that FASB has added a project to its agenda on the Disclosure Framework.

Project Not Intended To Be 'Additive'
As noted in Herz' remarks and this FASB press release, the project is: "aimed at establishing an overarching framework intended to make financial statement disclosures more effective, coordinated, and less redundant." In addition, the project was prompted, in part, by concerns about ‘disclosure overload,’ and Herz said the project is not intended to be ‘additive.’

Private vs. Public Co. Scope To Be Determined
One of the issues FASB will consider is whether the disclosure framework developed under this project should apply to all entities, or perhaps exclude private or nonprofit entities.

Holistic Approach to SEC, FASB Disclosures
More generally, it appears FASB's Disclosure Framework project has the goal of taking a holistic approach with respect to public company disclosures required by FASB and the SEC.

The press release issued by FASB describing the project notes: "the [disclosure] framework would enable all entities to focus on making more coherent disclosures in their annual reporting package, move away from what some assert has become a compliance exercise, and perhaps facilitate XBRL electronic tagging of information." Besides the public/private company scope issue, other issues to be addressed in the project, according to the press release, include whether the disclosure framework should apply to interim reporting, focus only on high-level principles, focus only on notes to financial statemetns or extend to ways to better integrate information provided in financial statements, MD&A, and other parts of a company's public reporting package."

On potential timing of this project, which is being launched this quarter, Herz said at the board meeting “my best guess is we would issue a preliminary views type document some time in the first half of 2010.”

See also our separate blog post about today's FASB board meeting, regarding additional guidance coming on FIN 48, which is focused on (but does not exclusively apply to) pass-through entities.