Ifrs vs Sme- Comparison
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Transcript of Ifrs vs Sme- Comparison
A highlight of the differences
WHY SEPARATE STANDARD FOR SMEs?
Differences in the types and needs of users of SME’s financial statements
Significant cost of applying full IFRS IFRS for SME’s:
is a stand-alone document is developed from full IFRS is a simplification of full IFRS
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Basic Features of IFRS for SME’s
Good financial reporting made simple Simplified IFRSs but built on full IFRS
foundation Much smaller, 230 pages vs 2,855 pages
in full IFRSS Designed specifically for SMEs Internationally recognized Organized by topic
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SIMPLIFICATIONS MADE TO FULL IFRS
Omission of some topics in IFRS if irrelevant to private entities
Where IFRSs have options, include only simpler options
Simplified recognition and measurement principles
Simplified and reduced disclosuresFull IFRSs – more than 3,000 items in
disclosure checklistIFRS for SMEs – roughly 300 disclosures
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Borrowing CostsSection 25 IAS 23All borrowing costs are
recognized as expense when incurred
Borrowing costs incurred in connection with the construction or production of a qualifying asset are capitalized as part of the cost of the asset
Employee BenefitsSection 28 IAS 19Expected rate of return is
used to determine the amount of expected return on plan asset
Actuarial gains or losses are recognized immediately in either profit or loss or other comprehensive income.
Projected unit credit method is used to measure defined benefit obligation and the related expense only if it is possible to do so without undue cost or effort.
Settlement rate and not expected rate of return is used to determine the amount of interest income
Actuarial gains or losses are recognized immediately in other comprehensive income
Projected unit credit method is required
Investment PropertySection 16 IAS 40 Investment property shall be
measured at fair value through profit or loss if the fair value can be measured reliably without undue cost or effort. Otherwise, the investment property shall be accounted for as property, plant and equipment using the cost-depreciation-impairment model.
IFRS for SMEs does not require disclosure of the fair value of investment property carried at cost.
Investment property may be accounted for using: Fair value model; or Cost-depreciation- impairment
model
Full IFRS requires disclosure of the fair value of investment property.
Property, plant and equipmentSection 17 IAS 16Scope of Section 17 includes:
Investment property whose fair value can not be measured reliably without undue costs or effort; and
Non-current assets held for sale
Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Revaluation is not permitted
IAS 16 applies only to Property, plant and equipment Investment property is
covered by IAS 40 Non-current asset held for
sale is covered by IFRS 5
Property, plant and equipment can be measured using: Cost-depreciation-impairment
model; or Revaluation model
Property, plant and equipmentSection 17 IAS 16Review of PPE’s useful life,
residual value, depreciation rate is made only if there is a significant change in the asset or how it is used
Requires annual review of PPE’s useful life, residual value, depreciation rate
Intangible AssetsSection 18 IAS 38All costs incurred to internally
develop intangible assets such as research and development costs are charged to expense
Intangible assets must be measured using cost-amortization-impairment model Revaluation of intangible asset
is not permittedAll intangible assets are
considered to have a finite life. If unable to estimate the useful life of an intangible asset, the life is presumed to be 10 years
Research costs are recognized as expense when incurred while developmental costs may be capitalized as part of cost of an intangible asset
Intangible asset may be accounted for using: Cost-amortization-impairment
model; or Revaluation model
Intangible asset with indefinite life is not amortized
Intangible AssetsSection 18 IAS 38Amortization periods and
methods, and the residual value of intangible assets shall be reviewed only if there is a significant change in the asset or how an intangible asset is used.
Directly attributable costs related to business combinations are included as part of the cost of the business combination.
Amortization periods and methods, and the residual value of intangible assets must be reviewed at each reporting period.
Directly attributable costs related to business combinations are recognized as expense.
Investment in AssociatesSection 14 IAS 28 Investment in associates
shall be accounted for using: Equity model; Fair value model; or Cost model
Investment in associates must be accounted for using the equity method
Investment in Joint VenturesSection 15 IAS 31 Investment in joint
ventures shall be accounted for using: Equity model; Fair value model; or Cost model
Investment in joint ventures must be accounted for using the equity method
LeasesSection 20 IAS 17Lease payments under
operating leases shall be recognized as income/expense on a straight-line basis unless Another basis is more
representative of the timing of the benefits obtained by the user of the asset; or
the payments are structured to increase in line with expected general inflation.
Lease payments under operating leases shall be recognized as income/expense on a straight-line basis unless Another basis is more
representative of the timing of the benefits obtained by the user of the asset
Foreign Currency TranslationSection 30 IAS 21 When a foreign operation is
disposed of, any cumulative amount in equity is recognised in comprehensive income – not in profit or loss
When a foreign operation is disposed of, any cumulative amount in equity is recognised in profit or loss
Basic Financial InstrumentsSection 11 IAS 39/ IFRS 9
Debt instruments are measured at amortised cost
Debt instruments that are classified as current are measured at the undiscounted amount
Investments in non-convertible preference shares and non-puttable ordinary or preference shares are measured at fair value through profit or loss
Financial assets are classified as either FVTPL; FVTOCI Amortized cost
Complete Set of Financial StatementsIFRS for SMEs Full IFRS Complete set of FS includes:
Statement of Financial Position Statement of Income Statement of Cash Flows Statement of Changes in
Equity Statement of Comprehensive
Income Notes to Financial Statements
Statement of income and retained earnings may be presented in place of Statement of changes in equity and Statement of comprehensive income
Complete set of FS includes: Statement of Financial
Position Statement of Income Statement of Cash Flows Statement of Changes in
Equity Statement of
Comprehensive income Notes to Financial
Statements
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