IASB to develop IFRS guidance for ‘micro-sized entities’

Very small companies are expected to receive IFRS financial reporting guidance tailored to their needs.

The staff of the International Accounting Standards Board (IASB) will develop guidance to help so-called “micro-sized entities” apply IFRS for Small and Medium-sized Entities (IFRS for SMEs) in their financial reporting.

The IASB staff will extract from the IFRS for SMEs only those requirements that clearly are necessary for most micro-sized entities. The principles for recognizing and measuring assets, liabilities, income, and expenses will not be altered, but the guidance will include only the main principles relating to those requirements.

Although there is no current official IASB definition of “micro-sized entity,” the term is usually used when referring to entities with fewer than 10 employees.

Paul Pacter, a member of the IASB who chairs the SME Implementation Group that advises the IASB, said in a statement that about 80 jurisdictions have adopted or plan to adopt the 230-page IFRS for SMEs.

“In some of those jurisdictions the IFRS for SMEs is also used by very small companies with just a few employees,” Pacter said. “The staff was asked and has agreed to develop guidance suitable for micros as a ‘sub-set’ of the IFRS for SMEs, not as a separate standard.”

The micro guidance will contain cross-references to the IFRS for SMEs for issues that aren’t contained in the guidance booklet. A company that applies the guidance will be able to include notes to financial statements and auditor’s reports that refer to conformity with the IFRS for SMEs because there is no modification of principles.

The SME Implementation Group will work with the IASB staff in developing the guidance, and will approve a final draft to be sent to the IASB for review.

—Ken Tysiac (ktysiac@aicpa.org) is a JofA senior editor.