mesfin yemer

FULL IFRS and IFRS for SME’s

Instructor: Mesfin Yemer
Assistant Professor of Accounting and Finance
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o Email: mesfinyemer34@gmail.com
o Phone:+2519121728303

Prepared by Ass. Professor Mesfin

Yemer, @ Dire Dawa University.....
CHAPTERS
REVIEWS
Course Lecture Outlines….

After studying this chapters you should be able to

▪ Definition of IFRS
▪ Objective of IFRS
▪ Benefit and Drawback of IFRS
▪ Users of IFRS.
▪ Eligiable Entities to use IFRS for SME’s
▪ Eligiable Entities to use Full IFRS.

Prepared by Ass. Professor Mesfin

Yemer, @ Dire Dawa University.....
 What are IFRS?
 It is collective name of:
▪ Standards & Interpretation issued by
IASB and by IFRIC
▪ Also includes standards& Interpretation
issued by IASC and SIC.
Fixed set of international accounting standards
maintaining how certain kinds of transactions and
other proceedings should be stated in financial
statements.
Prepared by Ass. Professor Mesfin
Yemer, @ Dire Dawa University.....
 What are IFRS?
Objective is to develop International Financial
Reporting Standards (IFRS) that bring transparency,
accountability and efficiency to financial markets
around the world.

 The standards are:

1. Full IFRSs
2. The IFRS for SMEs

Prepared by Ass. Professor Mesfin

Yemer, @ Dire Dawa University.....
 Benefit of IFRS: -
▪ It would allow a freely flow of information among national
and international business.
▪ Both investors and organizations are put more faith in these
companies and their practices.
▪ It would cut costs of individual investigations. Moreover,
the cost of each individual investment tends to be lower in
these countries.
▪ Create an actively involved of investor in foreign business
etc.
▪ Able to prepare report better reflect economic substance of
transaction.
▪ Able to set a comparable benchmark of disclosure in the
footnotes…Etc..
Prepared by Ass. Professor Mesfin
Yemer, @ Dire Dawa University.....
 Draw back of IFRS….
▪ Lack of comparability's, as a result of the same companies
may apply different judgement on the same events..
▪ Affect certain accounting/reporting methods (For eg..LIFO
etc..)
▪ High conversation cost (affect resource):-Less efficient and
cost effective (Retaining GAAP)……..
▪ Time consuming project..etc…

Prepared by Ass. Professor Mesfin

Yemer, @ Dire Dawa University.....
Who is eligible to use IFRS for SME’s?
 Any entity that does not have public accountability...
osecurities not publicly traded
onot a financial institution
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 ... and is required or chooses to produce General
Purpose Financial Statements (GPFS)
o GPFS present fairly financial position, results of
operations, and cash flows

IFRS for SME’s Prepared by Ass. Professor Mesfin

Yemer, @ Dire Dawa University.....
 The objective of the IFRS for SMEs
▪ It is intended to produce the general-purpose
financial reporting. General purpose financial
statements provide information about an entity’s
financial position, performance and cash flows.
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o However, it is not intended to produce a special purpose financial
report for:
✓ determination of taxable income and
✓ determination of distributable income and to provide
information to owner-managers to help them make management
decisions

Prepared by Ass. Professor Mesfin

Yemer, @ Dire Dawa University.....
 External Users of IFRS for SMEs
❑ The IFRS for SMEs is intended for non-publicly
accountable entities that publish general purpose financial
statements for external users. The main groups of external
users include:
o banks that make loans to SMEs.
o vendors that sell to SMEs and use SMEs’ financial
statements to make credit and pricing decisions.
o credit rating agencies and others that use SMEs’
financial statements to rate SMEs.
o customers of SMEs that use SMEs’ financial statements
to decide whether to do business.
o SMEs’ shareholders that are not also managers of their
SMEs
Prepared by Ass. Professor Mesfin
Yemer, @ Dire Dawa University.....
 Who is SME’s?
As per IASB:-SME’s Entities
• Private & non public accountable,
• Trade small amount of security with minimum capital, small amount
of employee
• No, determined quantified criteria (on basis of criteria), depend
countries legislations…

As Ethiopian:-SME’s..
Criteria Figures Rem
Total Assets Br 20m-Br.200 Million
Total Labilities Br. 20-Br.200 Million
T/turn over/sales Br.200 Million
Total Employee 20-200
Prepared by Ass. Professor Mesfin
Yemer, @ Dire Dawa University.....
 International Financial Reporting Standards
(Full IFRS)*
 Designed for general purpose financial reporting by profit-
oriented entities…..
◦ might be found to be appropriate for not-for-profit activities too
 Focused on information needs of (primary users) existing and
potential investors, lenders and other creditors who
cannot require information from the entity
◦ information to enable primary users to make their own
assessments of the reporting entity’s prospects for future net cash
inflows
◦ as a basis for their decisions to buy, hold, sell equity and debt
instruments or to provide a loan or to require settlement of a loan

Prepared by Ass. Professor Mesfin

Yemer, @ Dire Dawa University.....
 Who is public accountable?
As per IASB:-Entities is publicly accountable if they are:-
• provide an essential public service,
• economically significant in their home jurisdiction (on basis of
criteria)
• its debt or equity trades in a public market either on exchange or
OTC.
• holds assets in a fiduciary capacity as one of its primary businesses
but not as incidental part of business.

As Ethiopian:-publicly accountable
Criteria Figures Rem
Total Assets Br.200 Million & above
Total Labilities Br.200 Million & above
T/turn over/sales Br.300 Million & above
Total Employee AbovePrepared
200 by Ass. Professor Mesfin
Yemer, @ Dire Dawa University.....
 Who decides to uses which framework?
 Decisions on which entities are required or
permitted to use particular financial
reporting frameworks rest with legislative
and regulatory authorities in individual
jurisdictions.
 For example in Ethiopia see:
◦ Financial Reporting Proclamation 847/2014; and
◦ Council of Ministers Regulation 332/2014.
◦ AABE…

Prepared by Ass. Professor Mesfin

Yemer, @ Dire Dawa University.....
 Test your understanding
For each company below, once the IFRS implementation roadmap is
14 or
implemented in full, which financial reporting framework is it required
permitted to use when preparing its financial statements? Choose:
1) if it uses IFRS; 2) if it uses IFRS for SMEs;

Company 1 (IFRS) 2 (SMEs)

1. Company A: Ethiopian Airlines

1. Company B: Raya Brewery S.C.
1. Company C: Menshen for Menshen
2. Company D: Ambassador Retailers PLC

© Michael JC Wells

Prepared by Ass. Professor Mesfin

Yemer, @ Dire Dawa University.....