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December 2009
SMEs must wake up to realities of IFRS
Nexia International survey reveals little appetite for early
adoption
The introduction of a specific set of international financial
reporting standards for SMEs – so-called IFRS-lite –
has made IFRS potentially accessible to a wide range of companies
around the world. But few SMEs have plans in place to adopt
even this lighter version of IFRS before it becomes a mandatory
requirement, according to a survey of European member firms
by Nexia International, the global network of international
accounting firms.
Speaking at Nexia International’s recent annual conference
in Prague (its largest to date, with 220 delegates from 67
countries) Stephen Cooper of the International Accounting
Standards Board said “IFRS for SMEs was created in response
to strong international demand from both developed and emerging
economies for a rigorous and common set of accounting standards
for smaller and medium-sized businesses that is much simpler
than full IFRS. In a recent survey, almost 60% of accounting
standard-setters said they planned to require or permit the
use of IFRS for SMEs within their jurisdiction in the next
three years.”
Nexia International welcomed the IASB’s continued drive
towards global standards and acknowledged the IASB’s
efforts to drive these developments forward against a back-drop
of action required on urgent issues arising as a consequence
of the financial crisis.
IFRS specialist Eric Hutton of Nexia International member
firm KroeseWevers in the Netherlands, who conducted the survey,
said that the introduction of IFRS for SMEs was an important
step in facilitating worldwide convergence by making the standards
more “user-friendly” for the majority of companies.
“It eases the way for national standard setters being
comfortable with the introduction of an IFRS-based platform
in place of their own”, he said.
According to its survey, a large majority (73%) of Nexia
International members support the adoption of a common set
of accounting standards for non-listed companies throughout
Europe. But 38% think that entities in their country will
not adopt IFRS until it is mandated by their respective national
accounting standard setting body. The survey also raised doubts
over the necessity of mandatory IFRS for the smallest SMEs
– so called micro companies. Nearly a third of Nexia
members believe that IFRS will not be of use to micro SMEs
in their country.
The Nexia International members surveyed echoed the sentiments
of the IASB on the benefits of the new IFRS for SMEs in providing
a simplified, self-contained set of accounting standards and
reducing the financial reporting burden. The standards will
enable investors, lenders and other users to compare financial
performance among SMEs.
Implementation of IFRS for SMEs in specific jurisdictions,
especially those outside the EU, may prove to be just as challenging
as the development of the standard itself.
“With less emphasis on fire-fighting the financial
crisis, companies may now have more time to focus attention
on the IFRS issue. Understanding the differences between IFRS
and generally accepted accounting principles in any given
country will be a significant challenge for many companies,
with significant resource implications. There will be a number
of new challenges for preparers and users of financial statements
in the future that will change company accounts as we know
them. It is important that finance teams address these issues
at the earliest opportunity”, said Mike Bishop, Nexia
International’s European chairman. “Nexia firms
expect to be at the forefront of providing that support, using
their expertise in IFRS and experience in those countries
that have already adopted the standards”, he added. |
