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A step towards establishing an appropriate international reporting regime for SMEs

15 Feb 2007

The International Accounting Standards Board's (IASB) long-awaited exposure draft of its financial reporting standard for Small and Medium-Sized Enterprises (SMEs) is an important step forward towards establishing an appropriate international reporting regime for this crucial business sector, says ACCA.

The IASB's draft, issued today, answers ACCA's long-standing call for separate accounting standards for SMEs - this was crucial given the sheer complexity of the full International Financial Reporting Standards (IFRS) regime, which ACCA argues was always designed more for listed companies and have therefore been inappropriate for the vast majority of businesses.

But ACCA still has concerns as to whether the standard-setter has sufficient knowledge of the users of SME accounts and their different needs. It also has reservations over the fact that the draft is still not a fully stand-alone document. This means that in some situations SMEs will still have to refer back to the full IFRS regime.

Allen Blewitt, ACCA Chief Executive, said: 'We welcome the IASB's draft and believe it has gone a long way to easing the burden of overly-complex financial reporting for SMEs. We like the fact that national jurisdictions have been allowed flexibility over the scope of the standard's application - this is important to ensuring successful implementation around the world. We know that many developing countries struggled to apply IFRS in their national circumstances and it is crucial that the SME standard does not suffer similarly.'

But he added: 'We encourage everyone to consider the draft very carefully, during its comment period. But we are still concerned that the IASB may be assuming too great a level of sophistication for the average preparer of accounts at SME level. There is still over-complexity from a preparer's perspective and a lack of emphasis on what users want in the exposure draft. We have our doubts that deferred tax is very relevant to the users of SME accounts, for example.'