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IASB streamlines accounting rule book for SMEs

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15th Feb 2007
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The International Accounting Standards Board (IASB) has produced a thinner version of its rule book in an attempt to woo small businesses. Dan Martin reports.

After extensive debate over whether the same financial reporting rules should be applied to both listed and unlisted entities, the Board published on Thursday a draft 320-page draft version of its new International Financial Reporting Standard (IFRS) for SMEs. The document is eight times smaller than the full set of IFRSs which apply to larger businesses.

If adopted by national governments, IASB said the standard would transform the accounting of small, fast growing companies and allow investors for the first time to compare SMEs' financial performance across international boundaries on a like for like basis.

IASB added it had streamlined the rules by eliminating topics not relevant to small firms and simplified methods for recognition and measurement using "plain English".

Sir David Tweedie, IASB chairman, said: "Our goal has been to produce a standard for use by smaller and unlisted companies that offers the comparability of full IFRSs while reducing the burden on the preparing company.

"When completed, the SME standard will make the accounting requirements more accessible to smaller preparers in both developed and emerging markets.

"With this publication, we are now actively seeking the views of companies, banks, the audit profession, and other interested parties as part of a broad consultation to see if we've taken out too much or not enough or if we’ve got it about right."

Brian Shearer, financial reporting expert at accountants Grant Thornton, welcomed the IASB's action. "The users of financial information in the non-publicly accountable sector don't have the same requirements as users of listed company financial statements," he said.

"An internationally accepted approach to reporting by non-publicly accountable entities will also bring credibility to their financial statements because banks and other financial institutions will take comfort from the fact that they are following a recognised set of standards."

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Richard Murphy
By Richard Murphy
21st Feb 2007 10:17

Not fit for purpose
I applaud AccountingWEB for raising this issue.

The above comment already makes a link to some of my concerns on the FRSSE - which I think an exceptionally poorly conceived document. The IASB approach to SME accounting is worse. It was headed by a partner in Deloittes who thinks small entities have 50 employees, it's based on the FRSSE, it incorporates the same 'let's cut down big business accounting and assume it meets the needs of SMEs' approach - which is fundamentally flawed, and from the outset it acknowledges that this is a standard which will not be a suitable basis for assessing taxation - which ignores one of the primary uses of SME accounts and can only add to the admin burden of SMEs all over the world. This prposed standard is not fit for purpose.

There is an alternative which the UN promotes. It's simple, very short, and looks like a set of accounts. It can be explained, avoids all the accounting nonsense we've (I stress we've) loaded on SMEs and could be used by almost anyone. It's time to back SMEGA 3 - as the alternative is called. Read about it here http://www.taxresearch.org.uk/Blog/2006/10/13/an-accountant-at-the-un/

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By User deleted
19th Feb 2007 13:47

"reducing the burden on the preparing company"
I doubt if a 320-page guide to preparing accounts falls into the category of "reducing the burden on the preparing company".

I fail to see how I need to read 320 pages of international irrelevance when preparing a subcontractors accounts - unless a UK Government, perhaps encouraged by the CCAB or "big four" Accounting practices decides to surrender sovereignty again in this respect and makes the irrelevant international rules mandatory. Introduction of a 320 page rule book on small business accounts would go against the concept of reducing administrative burdens on business.

If we MUST have international interfering rules on small business accounts, then I suggest that SME's with a turnover of (say) £5million pa or less "carry on as normal" and ignore this proposed irrelevant international garbage by sensible legislative exemption.

If sensible exemption is not forthcoming a campaign of mass civil disobedience may be warranted - all sensible accountants and their clients could carry on as normal ignoring outside influence and preparing accounts as we have done for the past 20, 30 years or so.

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