No rush to review SME standard

The IASB on October 18, 2016, unanimously agreed with a recommendation from its staff to wait until 2019 before it begins its next review of IFRS for Small and Medium-Sized Entities (IFRS for SMEs).

The board’s SME Implementation Group (SMEIG) had also recommended waiting until 2019, which is when the next scheduled review is to take place. The board was considering initiating an interim review to incorporate changes from standards that had been added to IFRS in recent years but not incorporated into IFRS for SMEs.

The board members felt that the financial professionals and organizations that use the guidance, which are mostly smaller businesses or groups with limited resources from emerging markets, do not have the capacity to keep up the standard-setting process more frequently than the five-year to six-year cycle in the existing review schedule or absorb final amendments more frequently than that.

“This set of companies do need some stability,” said IASB member Amaro Gomes.

The board members disagreed somewhat on the extent the research staff should study issues in advance of the periodic reviews as a form of preparation but largely settled on a sort of debriefing process conducted by the SMEIG that would take place following the conclusion of each standard-setting project and consider the suitability of a new standard or set of amendments to IFRS for IFRS for SMEs. The SMEIG was formed in 2012 to advise the IASB on issues related to the SME guidance.

Mary Tokar was among the board members who were more opposed to having the staff carry out a lengthy study of new standards and amendments immediately following their adoption but before they are implemented.

“I’m concerned that it isn’t particularly effective in terms of getting the project going,” Tokar said. “When it’s standards that have not been implemented, we want to learn from the implementation experience. We’d be spending time in a hypothetical analysis that doesn’t have the benefit of the experience of applying it in practice.” In her view, the board and the staff would waste time on an effort that would offer little in the way of a constructive result.

Stephen Cooper was among the board members who supported doing the research as an interim step, and Darrel Scott seemed to agree with him initially.

“It would help to discuss it with the board and not let it accumulate and have a very lengthy discussion on all the different standards at a later time,” Cooper said.

“While the new standard is still fresh in board members minds; while it’s still fresh in staff members’ minds, let’s see if we can leverage on that information to develop some thinking about how we would apply that in the IFRS for SMEs,” Scott said.

Ultimately, Scott and Tokar agreed that some sort of brief review that did not require much attention from board members or the staff and relied on the SMEIG’s advice made sense.

“I would imagine we’re not looking for any consultation beyond what the SMEIG would provide us with,” Scott said.

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