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The Upside to IFRS for Small, Medium Entities

Colleen Cunningham | August 25, 2009

The International Accounting Standards Board finally issued its long-awaited, International Financial Reporting Standard for small and medium-sized entities (SMEs) in July. This is more important than you think.

Essentially, IFRS for SMEs is a simplified microcosm of full IFRS aimed at meeting the needs of financial reporting for private companies through a cost-benefit approach. The name is somewhat of a misnomer; in this case, size doesn’t matter as much as public accountability does. IASB struggled with the name over the project’s five-year history, going from “Non-publicly Accountable Entities” to “Private Entities,” and coming back full circle to its original name, SMEs.

IASB’s definition of an SME states that the entity can have no publicly traded debt or stock, or the entity cannot be deemed as having “public accountability” such as holding assets in a fiduciary capacity for a broad group of outsiders (banks, credit unions, broker-dealers, mutual funds...

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