Since IFRS is supposed to be recognized in 2008 tax reporting it is important to ask how a small and medium sized enterprise will be defined in the incoming IFRS…
According to International Accounting Stardards Board the definition of an SME “states that the entity can have no publicly traded debt or stock, or the entity cannot be deemed as having “public accountability” such as holding assets in a fiduciary capacity for a broad group of outsiders (banks, credit unions, broker-dealers, mutual funds, and so forth). They apparently didn’t want to use the term “public accountability” in the title, as they felt it might cause more confusion. For example, Joe’s Hot Dog Stand may be publicly accountable to the health department, but obviously that isn’t the intent of the standard.”
Further
“The users of SME financial statements often differ from the users of financial statements based on full IFRS or U.S. GAAP. Users of the financial statements of private companies (generally, lenders, creditors, or owners) usually focus more on shorter-term cash flows, liquidity, balance sheet strength, interest coverage, and solvency issues. That means they do legitimately need an accounting standard for private companies that would meet the needs of their financial statement users while balancing the costs and benefits from a preparer perspective.”
The slimmed down version of IFRS is only 230 pages compared to the 17,000 pages for large corporations. Clearly hiring the right accountant is crucial in a successful transition when you have so much information to deal with… i.e. “General Electric had to endure (heat) over incorrectly implementing Financial Accounting Standard No. 133, Accounting for Hedging Activities -the grand dame of complex and convoluted standards, more than 800 pages long”…
In spite of the urgency to get started on adopting the new standards it is said that the market will drive acceptance of the new IFRS standards -especially in the Western world and America. For more details on the benefits of IFRS for SME check out this excellent report by Compliance Week Columnist Colleen Cunningham. http://bit.ly/t8d7l
The Hurclean feat of understanding and adopting the new IRFS lies ahead for not only accountants but SME! A Word to the Wise...Begin to Prepare today!
