INSIGHTS

IASB issued exposure draft on proposed amendments

in IFRS for SMEs Accounting Standard (Part 1 of 3)

Background
 IFRS for Small and Medium enterprises (SMEs) Accounting Standard is developed out of the full IFRSs and is a
simplified version of the same to reflect the needs of SMEs and users of their financial statements.
 In 2009, the International Accounting Standards Board (IASB) issued first edition of IFRS for SMEs accounting
standard.
 In 2015, IASB post its first review of the standard along with second edition of standard with limited amendments.

Scope
 Primarily, the scope for the IASB’s second comprehensive review of the standard was:
o Amendments in full IFRS issued since its (IASB) first review of the IFRS for SMEs Accounting Standard.
o Requirements in full IFRS issued before its first review, but which were not considered in the previous
amendment issued in 2015.
 IASB considered 9+ full IFRS Accounting Standards, 29+ minor amendments to IFRS Accounting Standards, and
interpretations of the IFRIC (IFRS Interpretation Committee).

Proposed Amendments
1. Section 2 – Concepts and Pervasive Principles:
 The section sets out the concepts based on the old 1989 Framework for Preparation and Presentation of Financial
Statements. Amendments propose alignment of the section with the new Conceptual Framework for Financial
Reporting issued in 2018.
 The concept of ‘undue cost or effort’ has been retained, which continues to provide relief to the SMEs. It is an
exemption in specified circumstances for SMEs where they are exempted from obtaining an information if
incremental cost / additional efforts exceed the benefits to users of SMEs Financial Statements.
2. Section 19 – Business Combinations and Goodwill (Corresponding IFRS 3):
 The section sets out requirements for SMEs undertaking Business Combinations and is proposed to be amended in
line with the latest version of IFRS 3 Business Combinations.
 A simpler definition of business with illustrative examples is intended to help the SMEs to check the applicability of
Section 19.
 Now, every business combination has to be accounted for in accordance with the acquisition method rather than
purchase method (which was provided earlier), which involves additional requirements as determination of the
acquisition date and recognition and identification of the assets, liabilities and non-controlling interest among other
requirements.
 Requirement for step-acquisition has been introduced whereby, if an entity holds a non-controlling interest in another
entity immediately before the acquisition date, the former shall remeasure the previously held equity interest on its
acquisition-date fair value and shall recognise the gain or loss in the Profit or Loss.
 The provisions with respect to contingent consideration have been clarified whereby, the acquirer shall account for
acquisition date fair-value of the contingent consideration if it can be measured reliably without undue cost or efforts.

SW’s Remarks:
In the afore-mentioned update, we have covered the proposed amendments made in Section 2 and Section 19 of IFRS for
SMEs. Amendments proposed in other sections will be covered in the further upcoming updates. Meanwhile, the exposure
draft is open for comments till March 7, 2023 at “IFRS for SMEs”.

Catalyst for Nitin, Audit Associate, SW

Success