PFRS for SMEs – Part 1

Jeff-Mike Smith Sule CIA, FRIAcc, EnP, REB, REA, CPA, MICB
Lecturer
 IFRS for SMEs

Entities that qualify to use PFRS

for SMEs:
• Entities that do not have public
accountability, and
• Publish general purpose financial
statements for external users.
 IFRS for SMEs

Section 1 of PFRS for SMEs:

• “A subsidiary whose parent uses
full PFRSs, or that is part of a
consolidated group that uses full
PFRSs, is not prohibited from
using PFRS for SMEs in its own
financial statements if that
subsidiary by itself does not have
public accountability.”
 IFRS for SMEs

IFRS IFRS for SMEs

Investments in Affiliates (IAS 28.13) Investment in affiliates (Section 14.4)
Use of equity method required, when Accounting policy election: cost, equity or fair
applicable value

Joint ventures (IAS 31.30 and 31.38) Joint venture (Section 15.9)
Proportionate consolidation or equity method Same as investment in affiliates.
may be used Proportionate consolidation not available

Intangibles (IAS 38.88) Intangibles (Section 18.19)

Useful lives may be finite or indefinite All intangible assets shall be considered to
have a finite useful life

Goodwill (IFRS 3.B63(a)) Goodwill (Section 19.23)

Measured at acquisition date less accumulated Measure at cost less accumulated amortization
impairment losses (under IAS 36) and accumulated impairment losses

Borrowing costs (IAS 23.8) Borrowing costs (Section 25.2)

Borrowing costs shall be capitalized when Borrowing costs are expensed as incurred
directly attributable to the acquired asset
 IFRS for SMEs

o Completed contract method for revenue

recognition is prohibited.
o Hedge accounting is limited under IFRS
for SMEs. Only permitted for the
following hedge risks:
• Interest rate risk of a debt instrument
• Foreign exchange interest rate risk in a firm
commitment or highly probable forecasted
transaction
• Foreign exchange risk in a net investment
• Price risk of a commodity
 IFRS for SMEs

IFRS IFRS for SMEs

Consolidated financial statements Consolidated financial statements
(IAS 27.9 and 27.10) (Section 9.3)
*Most likely will not meet exemption as the *May not meet the exemption if the
ultimate or intermediate parent’s financial intermediate parent does not produce
statements are NOT publicly available consolidated general purpose financial
statements that comply with full IFRS
Receivables (IFRS 7.37) Receivables
Aging of receivables No similar disclosure requirements

Investment in Associates (IAS 28.37(b)) Investment in Associates (Section 14.12 and

14.15)
Disclose summarized financial data, including
assets liabilities, revenues and profit (loss) No similar disclosure requirements

Income taxes (IAS 12.81) Income taxes (Section 29.32)

Numerical tax rate reconciliation Explanation of changes in applicable tax rate

Capital management and risk Capital management and risk

management (IAS 1.134 and IFRS 7.31) management
No similar disclosure requirements
PFRS for SMEs

Jeff-Mike Smith Sule CIA, FRIAcc, EnP, REB, REA, CPA, MICB
Lecturer