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Banking, 2006
Corporate, 2008
Insurance, 2008
Introduction
Executive summary
Contents
Contents
5
7
10
2.
14
20
Business combinations
20
Consolidation
22
Investments in associates
25
26
5.
6.
7.
8.
29
Income
29
Expenses
33
37
37
38
41
45
Inventories
45
Investment property
46
47
49
51
54
54
Equity
55
Employee benefits
56
Income taxes
60
63
Leases
63
Foreign currencies
65
Hyperinflation
66
67
Related-party disclosures
67
Specialised activities
68
69
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Introduction
Introduction
The International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs)
applies to all entities that do not have public accountability. An entity has public accountability if it files
its financial statements with a securities commission or other regulatory organisation for the purpose
of issuing any class of instrument in a public market, or if it holds assets in a fiduciary capacity for
a broad group of outsiders for example, a bank, insurance entity, pension fund, securities broker/
dealer. The definition of an SME is therefore based on the nature of an entity rather than on its size.
The standard is applicable immediately. It is a matter for authorities in each territory to decide which
entities are permitted or even required to apply IFRS for SMEs.
The IASB developed this standard in recognition of the difficulty and cost to private companies of
preparing fully compliant IFRS information. It also recognised that users of private entity financial
statements have a different focus from those interested in publically listed companies. IFRS for SMEs
attempts to meet the users needs while balancing the costs and benefits to preparers. It is a standalone standard; it does not require preparers of private entity financial statements to cross-refer to full
IFRS.
The more modest disclosure requirements will also appeal to users and preparers. Embedding the
standard across a private group with extensive global operations that use a variety of local reporting
standards will significantly ease the monitoring of financial information, reduce the complexity of
statutory reconciliations (thereby reducing the risk of error), make the consolidation process more
efficient and streamline reporting procedures across group entities.
This publication is a part of the PricewaterhouseCoopers ongoing commitment to help companies
navigate the switch from local GAAP to IFRS for SMEs. For information on other publications in our
series on IFRS for SMEs, see the inside front cover.
Note: This publication is for those who wish to gain a broad understanding of the significant differences
between International Financial Reporting Standards for Small and Medium-sized Entities (IFRS for
SMEs) and full IFRS. It is not comprehensive. It focuses on a selection of those differences most
commonly found in practice. When applying the individual accounting frameworks, companies should
consult all of the relevant accounting standards and, where applicable, national law.
Where this publication states Same as IFRS for SMEs, this means that the IASB guidance is identical
in full IFRS as IFRS for SMEs. Where it states Similar to IFRS for SMEs, this means that the guidance
is not identical and there are minor differences.
While every effort has been made to ensure accuracy, information contained in this publication may not
be comprehensive or may have been omitted that may be relevant to a particular reader. In particular,
this publication is not intended as a study of all aspects of IFRS, or IFRS for SMEs, or as a substitute
for reading the standards and interpretations when dealing with specific issues. No responsibility for
loss to any person acting or refraining from acting as a result of any material in this publication can
be accepted by PricewaterhouseCoopers. Recipients should not act on the basis of this publication
without seeking professional advice.
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Similarities and differences A comparison of full IFRS and IFRS for SMEs
This executive summary aims to demonstrate how converting to IFRS for SMEs has implications far
beyond the entitys financial reporting function; to highlight some of the key differences between IFRS
for SMEs and IFRS; and to encourage early consideration of what IFRS for SMEs means to the entity.
These and other issues are expanded upon in the main body of this publication. It takes into account
authoritative pronouncements issued under IFRS for SMEs and full IFRSs published up to 9 July 2009.
Financial statements
Business combinations
Investments in associates
and joint ventures
Expense recognition
Financial instruments
derivatives and hedging
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Executive summary
Executive summary
Executive summary
The hedging models under IFRS and IFRS for SMEs are based on
the principles in full IFRS. However, there are a number of detailed
application differences, some of which are more restrictive under
IFRS for SMEs (for example, a limited number of risks and hedging
instruments are permitted). However, no quantitative effectiveness
test required under IFRS for SMEs.
Non-financial assets and
goodwill
Employee benefits
defined benefit plans
Income taxes
Full IFRS: A deferred tax asset is only recognised to the extent that
it is probable that there will be sufficient future taxable profit to
enable recovery of the deferred tax asset.
IFRS for SMEs: A valuation allowance is recognised so that the net
carrying amount of the deferred tax asset equals the highest amount
that is more likely than not to be recovered. The net carrying amount
of deferred tax asset is likely to be the same between full IFRS and
IFRS for SMEs.
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Executive summary
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Scope
Full IFRS
Definitions
Asset
Refer to chapter 7:
Non-financial liabilities and
equity.
Income
Expenses
10
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Underlying
assumptions
Similarities and differences A comparison of full IFRS and IFRS for SMEs
11
Recognition
of the
elements of
the financial
statements
Fair
presentation
Full IFRS
First-time adoption
Transition
to IFRS for
SMEs/IFRS
Date of
transition
Reconciliation
12
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Optional
exemptions
General
exemption
Not applicable.
Similarities and differences A comparison of full IFRS and IFRS for SMEs
13
2. Financial statements
2. Financial statements
(Sections 3, 4, 5, 6, 7, 8 and 10)
These sections of the IFRS for SMEs are based on IAS 1, Presentation of financial statements
(revised 2007, effective from 1 January 2009) and IAS 8, Accounting policies, changes in accounting
estimates and errors. They set the requirements for the presentation of financial statements,
guidelines for their structure and minimum requirements for their content.
Full IFRS
General requirements
Compliance
Going
concern
Departure
from the
standard
Comparative
information
Components
of financial
statements
14
In addition, management
includes a statement
of financial position as
at the beginning of the
earliest comparative
period when an entity
applies an accounting
policy retrospectively or
makes a retrospective
restatement or when it
reclassifies items in its
financial statements.
[IAS 1.10]
Similarities and differences A comparison of full IFRS and IFRS for SMEs
2. Financial statements
Full IFRS
Current/
non-current
distinction
Liabilities included in
disposal groups
classified as held for
sale.
15
2. Financial statements
Line items
Full IFRS
16
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Not permitted.
2. Financial statements
(Combined)
statement
of income
and retained
earnings
Reporting
cash flow
from investing
and financing
activities
Foreign
currency cash
flows
Similarities and differences A comparison of full IFRS and IFRS for SMEs
17
2. Financial statements
Full IFRS
Consistency
of accounting
policies
Changes in
accounting
policies
Changes in
accounting
estimates
Correction of
prior-period
errors
18
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
General
Structure
Information
about key
sources of
estimation
uncertainty
Similarities and differences A comparison of full IFRS and IFRS for SMEs
19
2. Financial statements
3. Business combinations, consolidated financial statements and investments in associates and joint ventures
Full IFRS
Business
Acquisition
date
Scope of the
standard
Definitions
Accounting
Purchase
accounting
1. Identifying
the acquirer
20
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Share-based
consideration
Adjustments
to the cost of
a business
combination
contingent on
future events
(contingent
consideration)
3. Allocating
the cost of
a business
Restructuring
provision
Similarities and differences A comparison of full IFRS and IFRS for SMEs
21
3. Business combinations, consolidated financial statements and investments in associates and joint ventures
3. Business combinations, consolidated financial statements and investments in associates and joint ventures
Full IFRS
Goodwill
Negative
goodwill
Contingent
liabilities
Goodwill
Areas covered in full IFRS but not in IFRS for SMEs include:
Employee benefits.
Consolidation
The following comparisons have been made based on IAS 27 (revised), Consolidated and separate
financial statements, issued in 2008. IAS 27 (revised) applies to annual periods beginning on or after
1 July 2009. Earlier application is permitted. IAS 27 (revised) does not change the presentation of
non-controlling interests from the previous standard; however, all transactions with non-controlling
interests are now equity transactions and do not affect goodwill or the profit or loss.
Full IFRS
Control
Subsidiary
Definitions
22
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Requirements
to prepare
consolidated
financial
statements
Scope of
consolidated
financial
statements
Similarities and differences A comparison of full IFRS and IFRS for SMEs
23
3. Business combinations, consolidated financial statements and investments in associates and joint ventures
3. Business combinations, consolidated financial statements and investments in associates and joint ventures
Full IFRS
Accounting
policies
Intra group
balances and
transactions
Reporting
periods
24
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Definition
Significant
influence
Measurement
after initial
recognition
Cost model
Similarities and differences A comparison of full IFRS and IFRS for SMEs
25
3. Business combinations, consolidated financial statements and investments in associates and joint ventures
Investments in associates
3. Business combinations, consolidated financial statements and investments in associates and joint ventures
Full IFRS
Classification
and
presentation
Definition
26
Full IFRS
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Accounting
for jointly
controlled
entities
Cost model
Not permitted.
Equity
method
Proportionate
consolidation
Not permitted.
Fair value
Not permitted.
Separate
financial
statements
Accounting for
contributions
to a jointly
controlled
entity
Similarities and differences A comparison of full IFRS and IFRS for SMEs
27
3. Business combinations, consolidated financial statements and investments in associates and joint ventures
3. Business combinations, consolidated financial statements and investments in associates and joint ventures
Full IFRS
Accounting
for jointly
controlled
operations
Accounting
for jointly
controlled
assets
28
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Income
Revenue
Definitions
Revenue
Recognition
general
Similarities and differences A comparison of full IFRS and IFRS for SMEs
29
Multipleelement
arrangements
Full IFRS
Rendering of
services
30
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Royalties
Dividends
Construction contracts
General
Other topics
Barter
transaction
Similarities and differences A comparison of full IFRS and IFRS for SMEs
31
Full IFRS
Government grants
Definition
Recognition
and
measurement
32
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Expenses
The table below includes comparisons for certain key topics such as borrowing costs (Section 25),
share-based payments (Section 26) and employee benefits (Section 28). For employee benefits, the
Section 28 only focuses on the expense recognition and not on other topics, such as the distinction
between defined contribution plans and defined benefit plans, definitions, and recognition and
measurement principles of pension obligations and plan assets. These topics are addressed in
chapter 7 of this publication.
Full IFRS
Definition of
expense
Expense
recognition
general
Borrowing
costs
Recognition
Measurement
equitysettled
share-based
transactions
Similarities and differences A comparison of full IFRS and IFRS for SMEs
33
Full IFRS
34
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Past-service
costs
Curtailments
and
settlements
Similarities and differences A comparison of full IFRS and IFRS for SMEs
35
Actuarial gains
and losses
Full IFRS
36
Similarities and differences A comparison of full IFRS and IFRS for SMEs
IFRS for SMEs contains two sections dealing with financial instruments. Section 11 addresses simple
payables and receivables and other basic financial instruments. It is relevant to all SMEs. Section 12
applies to other, more complex financial instruments and transactions. If an entity enters into only
basic financial instrument transactions, Section 12 is not applicable. However, even entities with only
basic financial instruments should consider the scope of Section 12 to ensure they are exempt. An
entity could apply either (a) Section 11 and Section 12 in full, or (b) the recognition and measurement
requirements of IAS 39 Financial instruments: Recognition and measurement, and the disclosure
requirements of IFRS for SMEs (Section 11 and 12). IFRS 7, Financial instruments: Disclosures, is not
applicable to SMEs under either option.
Full IFRS
Not applicable.
Categories
Scope
Examples
of basic and
more complex
financial
instruments
Not applicable.
Examples of financial instruments that
normally qualify as being basic are:
Cash
Trade accounts and notes receivable
and payable.
Loans from banks or other third
parties.
Similarities and differences A comparison of full IFRS and IFRS for SMEs
37
Full IFRS
Initial recognition
A financial instrument is recognised
only when the entity becomes a party
to its contractual provision.
[IFRS for SMEs 11.12, 12.6]
Full IFRS
Definition
Basic financial
instruments
Measurement
Initial
measurement
38
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
market rate.
[IFRS for SMEs 11.13]
Amortised
cost
Effective
interest
method
Fair value
investments
in ordinary or
preference
shares
Fair value
valuation
technique
39
Subsequent
measurement
Full IFRS
Assets
measured at
amortised
cost
Assets
measured
at cost less
impairment
Derecognition
Financial
assets
40
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Financial
liabilities
Full IFRS
Initial
measurement
Subsequent
measurement
Measurement
Fair value
Derecognition
Financial
assets and
liabilities
Hedge accounting
General
Similarities and differences A comparison of full IFRS and IFRS for SMEs
41
Criteria
for hedge
accounting
Full IFRS
Risks for
which hedge
accounting is
permitted
Hedging
instruments
for which
hedge
accounting is
permitted
42
A hedging instrument:
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Effectiveness
testing
Hedges of
variable
interest rate
risk, foreign
exchange risk,
commodity
price risk
and net
investment
in a foreign
operation
Similarities and differences A comparison of full IFRS and IFRS for SMEs
43
Hedge of a
fixed interest
rate risk or
commodity
price risk of
a commodity
held
Full IFRS
[IAS 39.89-39.94]
44
Similarities and differences A comparison of full IFRS and IFRS for SMEs
6. Non-financial assets
6. Non-financial assets
(Sections 13, 16, 17, 18 and 27)
Inventories
IFRS for SMEs
Full IFRS
Scope of the
standard
Measurement
and
impairment
Cost of inventories
Costs of
purchase
Similarities and differences A comparison of full IFRS and IFRS for SMEs
45
6. Non-financial assets
Full IFRS
Costs of
conversion
Other costs
Cost formulas
Techniques
for measuring
cost
Investment property
Definition
Full IFRS
46
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Fair value
Cost model
Transfers
6. Non-financial assets
Subsequent
measurement
Definition
Initial
measurement
Full IFRS
Similarities and differences A comparison of full IFRS and IFRS for SMEs
47
6. Non-financial assets
Full IFRS
Subsequent
measurement
Major
inspection
Impairment
Depreciation
definition
Components
approach
Depreciation
charge
Depreciable
amount and
depreciation
period
48
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Full IFRS
Definition
General
principles for
recognition
Expenditure on intangibles is
recognised as an asset when it meets
the recognition criteria of an asset.
[IFRS for SMEs 18.4 -18.7]
Recognition
as an expense
Initial measurement
Separately
acquired
intangible
assets
Similarities and differences A comparison of full IFRS and IFRS for SMEs
49
6. Non-financial assets
6. Non-financial assets
Full IFRS
Intangible
assets
acquired
as part of
a business
combination
Research and
development
costs
Subsequent measurement
Measurement
after initial
recognition
Useful life
Intangible
assets with
finite useful
life
50
Similarities and differences A comparison of full IFRS and IFRS for SMEs
6. Non-financial assets
Full IFRS
Change in the useful life assessment
from indefinite to finite is an indicator
that an asset may be impaired and is
accounted for as a change in estimate.
[IAS 38.107, 38.109, 38.110]
Impairment
Full IFRS
Scope
Impairment of assets
Impairment
formula
Impairment
losses
Similarities and differences A comparison of full IFRS and IFRS for SMEs
51
6. Non-financial assets
Full IFRS
treated as a revaluation decrease in
accordance with that other standard.
[IAS 36.60]
Annual
assessment
of indicators
Indicators of
impairment
Value in use
52
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
6. Non-financial assets
Reversal of
impairment
Similarities and differences A comparison of full IFRS and IFRS for SMEs
53
Full IFRS
Scope of the
standard
Provisions
Recognition
Reimbursement When some or all of the amount required Similar to IFRS for SMEs.
to settle a provision is reimbursed by
[IAS 37.53-37.58]
another party, management recognises
the reimbursement as a separate
asset only when it is virtually certain
that it will receive the reimbursement
on settlement of the obligation. The
reimbursement receivable is presented
on the statement of financial position
as an asset and is not offset against
the provision. The amount of any
expected reimbursement is disclosed.
Net presentation is permitted in the
statement of comprehensive income.
[IFRS for SMEs 21.9]
54
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Subsequent
measurement
Contingencies
Contingent
liabilities
Equity
IFRS for SMEs includes a separate section on equity. Under full IFRS, equity instruments are
addressed in various different standards.
Definition
Full IFRS
Similarities and differences A comparison of full IFRS and IFRS for SMEs
55
Full IFRS
Puttable
financial
instruments
and
obligations
arising on
liquidation
Compound
financial
instruments
Treasury
shares
Noncontrolling
interest
Employee benefits
The section on defined benefit plans focuses only on the recognition and measurement of the defined
benefit liability on statement of financial position. The recognition and measurement of the related
income and expenses are addressed in chapter 4, Income and expenses.
Full IFRS
Employee
benefits
Short-term
employee
benefits
56
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Distinction
between
defined
contribution
(DC) plans
and defined
benefit (DB)
plans
Similarities and differences A comparison of full IFRS and IFRS for SMEs
57
Full IFRS
Measurement
of defined
contribution
plans
Defined
benefit plans
Defined
benefit liability
Actuarial
valuation
method
58
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Fair value of
plan assets
Expected
return on plan
assets
[IAS 19.105-19.106]
Similarities and differences A comparison of full IFRS and IFRS for SMEs
59
Income taxes
IFRS for SMEs
Full IFRS
Definition
Recognition
Current taxes
Deferred taxes
60
Definition of
deferred tax
liabilities /
(assets)
Tax basis
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Recognition
and
measurement
Similarities and differences A comparison of full IFRS and IFRS for SMEs
61
Full IFRS
Withholding
tax on
dividend
Uncertain tax
position
Offsetting
Recognition
directly in
comprehensive
income
Other topics
62
Similarities and differences A comparison of full IFRS and IFRS for SMEs
8. Other topics
8. Other topics
(Sections 20, 30, 31, 32, 33 and 34)
Leases
IFRS for SMEs
Full IFRS
Scope of the
standard
Lease classification
General
characteristics
Examples
of situations
that would
normally
lead to a
lease being
classified as a
finance lease
Similarities and differences A comparison of full IFRS and IFRS for SMEs
63
8. Other topics
Sale-andlease-back
transactions
Full IFRS
The assets and liabilities are recognised Same as IFRS for SMEs.
at fair value or, if lower, at the present
[IAS 17.20, 25, 27]
value of the minimum lease payments at
the inception of the lease. The present
value of minimum lease payment is
discounted using the interest rate
implicit in the lease.
Subsequent measurement: assets
are depreciated in accordance with
relevant IFRS for SMEs section or over
the lease term if shorter. The lessee
apportions minimum lease payments
between finance charge and reduction
of outstanding liability.
[IFRS for SMEs 20.9-20.12]
Operating
lease
64
Financial lease
Operating
lease
Similarities and differences A comparison of full IFRS and IFRS for SMEs
8. Other topics
Foreign currencies
IFRS for SMEs
Full IFRS
Functional
currency
Presentation
currency
Definitions
Functional currency
General
Foreign
currencies
transactions
65
8. Other topics
Change in
functional
currency
Full IFRS
Presentation currency
General
Translation
to the
presentation
currency
Hyperinflation
66
Full IFRS
Definition
Hyperinflation is indicated by
characteristics of the economic
environment of a country. One of the
indicators is if the cumulative inflation
rate over three years is approaching or
exceeds 100%.
[IFRS for SMEs 31.2]
Presentation
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
Events after
the end of
the reporting
period
Adjusting
event
Non-adjusting
event
8. Other topics
Definitions
Date of
authorisation
for issue
Related-party disclosures
Definition
Full IFRS
Similarities and differences A comparison of full IFRS and IFRS for SMEs
67
8. Other topics
Full IFRS
Specialised activities
IFRS for SMEs
Full IFRS
Definitions
Recognition
and
measurement
Agriculture
Extractive industries
Recognition
and
measurement
68
Similarities and differences A comparison of full IFRS and IFRS for SMEs
Full IFRS
8. Other topics
Categories
and
accounting
Discontinued
operations
definition
Full IFRS
Similarities and differences A comparison of full IFRS and IFRS for SMEs
69
8. Other topics
Presentation
Non-current
assets held
for sale
Full IFRS
IFRS for SMEs does not include sections on topics for which IFRS for SMEs does not have a specific
requirement to present such information. Those topics are:
Segment reporting (IFRS 8).
Earnings per share (IAS 33).
Interim financial reporting (IAS 34).
70
Similarities and differences A comparison of full IFRS and IFRS for SMEs
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