Thursday, June 23, 2011

IASB Issues Additional Guidance For Private Co’s On IFRS for SMEs

Earlier today, the IASB published additional guidance relating to IFRS for Small and Medium-Sized Entities, in the form of the first set of final Q&As developed by the IFRS for SMEs Implementation Group. The IASB's action is detailed below, as well as an update on FAF/FASB consideration of private company standard setting.

The thrust of IFRS for SMEs, published in July, 2009, is to provide a simplified set of self-contained GAAP for private companies; that is, the essense of the definition of 'SME' set forth in the IASB's IFRS for SMEs is not so much based on size per se, but based on companies that are not publicly listed and do not have 'public accountability' such as certain financial institutions and certain other types of companies, as defined in the IFRS for SMEs document. A good source of basic information, providing a basic walkthough of what IFRS for SMEs is all about, can be found on the IASB's About the IFRS for SMEs webpage.

The additional guidance published today, IFRS for SMEs Q&A 2011/01: Use of IFRS for SMEs in a Parent [Company's] Separate Financial Statements, was developed by the IFRS for SMEs Implementation Group (SMEIG), after being released in draft form earlier this year, and approved for publication by the IASB. Here is additional information about the role and composition of the SMEIG.

Additional information about IFRS for SMEs available on the IASB's website includes Presentations about the IFRS for SMEs. Among the presentations currently posted includes a January, 2011 presentation by IASB Board Member Paul Pacter (presented at a AAA meeting), provocatively entitled: Why the World Needs A Separate Standard for Private Companies, and Why the U.S. Does, Too.

FAF, FASB Consideration of Private Co. Standard-Setting
On the subject of the consideration of private company standard-setting in the U.S., the Financial Accounting Foundation, which oversees the FASB, has received over 800 comment letters regarding the January, 2011 recommendations of the Blue Ribbon Panel on Standard-Setting for Private Companies.

Many of those letters, beginning with Comment Letter # 5 filed in early June, follow from points suggested by the AICPA to its members, supporting the recommendation made by a majority of the Blue Ribbon Panel to have not only differential standards for private vs. public companies, but a separate standard-setter, side by side with the FASB.

In contrast, the comment letter filed by FEI's Committee on Private Company Standards in April, as previously reported here, suggests that an alternative path to providing focus on the needs of private companies and the users of their financial statements, without forming a separate standards-setting board, could potentially be achieved by forming a Private Company Task Force (PCTF), empowered with the ability to establish guidance, modelled after the Emerging Issues Task Force (EITF).

Additional information about the FAF's outreach on standard-setting for private companies can be found on the FAF's Standard-Setting for Nonpublic Entities webpage. You can also view the archived webcast of the FASB: In Focus webcast originally presented on June 17: FASB Update for Nonpublic Entities.

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Joel Ungar said...

Good post Edith. While I conceptually don't like the concept of two different sets of GAAP, from a practical standpoint this is definitely needed.

Edith Orenstein said...

Thanks Joel for your comment. Readers, Joel is the author of the Ungar Cover blog, one of our colleagues that appear on the AccountingWEB Blogger's crew

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