to IFRS for SMEs? considered moving Have you

PwC

Have you considered moving to IFRS for SMEs?

21 April 2021

PwC | EC Virtual Touchpoint Series 4

Tammy MarshmanModerator

Email: [email protected]

Natasha StanhamKey presenter

Email:[email protected]

Meet today’s team

PwC | EC Virtual Touchpoint Series8

DD

Are the scoping requirements of IFRS for SMEs met?

Does the Companies Act permit the use of IFRS for SMEs?

Who can apply it?

12

PwC | EC Virtual Touchpoint Series

Type of company Prescribed Financial Reporting Standards

IFRS IFRS for SMEs

Public companies listed on an exchange ✔Public companies not listed on an exchange ✔ ✔Other companies - PI score ≥ 350 ✔ ✔Other companies - PI score < 350 ≥ 100 ✔ ✔Public Interest Score (“PI Score”)

● Introduced by the 2008 Companies Act● A function of employment, liabilities, turnover and individuals that have a beneficial interest in securities

9

Companies Act (2008)Regulation 27



● Meets with common information needs of a wide range of users

● For external users including:○ Owners not involved in

management○ Creditors○ Credit rating agencies

10

42 General purpose financial statements

1 No public accountability

● Debt/equity instruments traded in a public market

● Holds assets in fiduciary capacity

IFRS for SMEsScope


Stable reporting framework

Reduced disclosure requirements

Simplified recognitions and measurement principles

Undue cost or effort exemption

The Second Comprehensive review of the IFRS for SMEs standard could bring change. The Board is deciding on a way forward.

Disclosure initiative proposed for subsidiaries that are SMEs - the draft proposes to reduce disclosure.

Why convert to IFRS for SMEs?

11


The IFRS for SMEs standard contains a general ‘full IFRS’ fallback.

True False

12

True or false?


IFRS for SMEs only allows an entity to apply the requirements of full IFRS Standards (instead of SMEs) in one area - the recognition and measurement of financial instruments.

IFRS for SME

IAS 39

Apply IFRS for SME Section 11 and Section 12 in full

● Apply IAS 39 for recognition and measurement

● Apply Section 11 and Section 12 for disclosure

IFRS 16

There is no option to elect to apply IFRS 16: Leases within IFRS for SMEs

Accounting Policy Choice - Financial instruments

Only one option to apply full IFRS for recognition and measurement

13


The IFRS for SMEs Standard contains a general fallback for ‘undue cost or effort’.

True or false?

14

True False


15

Deliberately not defined

Lower hurdle than ‘impracticable’

Not a free choice – requires management judgement

Relative to the entity

01

02

03

04

Required:● Disclose the reason the

exemption was applied● Revisit assessment

annually

Undue cost or effort exemption

15


16

Calculation of the Public Interest Score

Will it cost less to apply?

Is there a downside to applying IFRS for SMEs?

Will IFRS for SMEs be aligned with full IFRS in the future?

What if the holding company applies full IFRS?

1 2

3 4

Some frequently-asked questions

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Most stakeholders will consider only the consolidated AFS; unless there are minority shareholders/creditors.

11

Does the entity meet all the requirements to apply IFRS for SMEs?

1Are you prepared to follow the standard in its entirety?

2A sub whose parent applies full IFRS can apply SMEs in its separate/statutory AFS.

3

17

Applying IFRS for SMEs in a group using IFRS

17


Reduced disclosure requirements in many areas:Impairments, associates, defined benefits, use of fair value (IFRS 13)

18

Primary Statements

RestatementStandards

not yet effective

Recons

Segments, EPS, IFRS 7

Limited disclosure

requirements

Heading

01

02

03

04

05

06

A single statement of Income and Retained Earnings is permissible

Reconciliations are normally only required for the current year (e.g. provisions, PPE, investment property).

.

No third Statement of Financial Position required when a restatement occurs

No disclosure requirements for: Operating Segments, Earnings per share, IFRS 7 Financial Instruments Disclosures (even if IAS 39 elected), Held for Sale (IFRS 5)

Simplified presentation and disclosure

18

There are no standards not yet effective under IFRS for SME.


Defined employee obligations

Expense recognition

Leases

Investment property

Investment in

subsidiaries

Goodwill

Intangible assets

Government grants

Financial instruments

Investment in

associates and joint ventures

Business combinations

Key differences

19


● Assess relevance of each one● Understand impact on opening balance sheet● Determine measurement and disclosure

impact

● Identify unnecessary disclosures● Identify potential disclosure

improvements● Ensure compliance with minimum

requirements

Application of the exemptions

IFRS vs IFRS for SMEs

Do you meet the requirements?

Update the AFS

● Identify differences● Assess applicability of undue cost or effort● Determine measurement and disclosure impact

● Scope assessment● Co Act● Group structure/requirements

1

2

3

4

Transition to IFRS for SMEs It is more than just a name change ...

20


2

An illustration of the relevant periods affected for a December 2020 year end

Is there relief from retrospective application?Several optional exemptions apply for PPE, business combinations, share-based payments and foreign currency reserves.

Mandatory exceptions exist as described in Section 35

Transition process

Decemberyear end

1 January 2019 31 December 2019

31 December 2020

Opening IFRS for SMEs statement of financial position

Comparatives for annual financial statements

IFRS for SMEs annual financial statements

21

Transition Date


Fair value as deemed cost

22

Revision of existing accounting policies and classifications

Transition exemptions that may benefit the company


PwC Illustrative IFRS for SMEs

IASB training modules

IFRS for SMEs Q&A

24

Resources available

Thank you for attending

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