The amendments to the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) which are effective from annual periods beginning on or after 2017 are likely to reduce the cost of producing financial statements for SMEs.
The positive changes are applicable to companies and close corporations with a public interest score below 350, as determined in terms of the Companies Act 71 of 2008 (Companies Act), that have opted to apply IFRS for SMEs and other entities that are not compelled to comply with a prescribed financial reporting standard but have elected to apply IFRS for SMEs in preparing their financial statements.
The revisions simplify the application of the IFRS for SMEs in that it introduces several exemptions, clarifies guidance in the standard and aligns the requirements of this standard with the IFRS in areas where IFRS for SMEs is considered more complex than IFRS.
The exemptions introduced include:
- The exemption from accounting for its investments in shares on its balance sheet at market value;
- The exemption from measuring a liability to pay a non-cash dividend at the market value of the assets to be distributed; and
- The exemption from consolidating subsidiaries in its financial statements, which are acquired with the intention to dispose of within one year of acquisition.
The amendments clarify the scope of the standard such that it is clear which entities are permitted to apply the standard. Requirements on the accounting for tax and exploration and evaluation assets (by mining companies, for example) have been aligned with IFRS.
Impact
In addition to easing the reporting requirements for SMEs, these changes are likely to have a positive impact on the balance sheet of SMEs as companies will be permitted to account for fixed assets at market value.
The current standard prohibits this and companies can only account for the fixed assets at their carrying value.
These changes to the IFRS for SMEs came into effect for annual periods beginning on or after 1 January 2017 and companies should ensure that they consider these amendments in preparing their financial statements to ensure compliance with the Companies Act.
For more information on the amendments to the IFRS for SMEs – CLICK HERE.
Bongeka Nodada | Project Director: Financial Reporting | SAICA | bongekan@saica.co.za | www.saica.co.za |
