Plante & Moran Discusses Impact of the International Financial Reporting Standards on Small and Medium Sized Entities
SOUTHFIELD, Michigan —On July 9, the International Accounting Standards Board (IASB) issued a new standard called International Financial Reporting Standards (IFRS) for Small and Medium-Sized Entities (SMEs). IFRS for SMEs represents a significantly scaled-down version of IFRS designed specifically for companies that do not have “public accountability.” Most private companies in the U.S. meet the definition of an SME.
“This standard has been in the works since 2003 and has generated a significant amount of interest because it provides relief for private companies from the most complex areas in IFRS,” said David Grubb, partner on Plante & Moran’s professional standards team. “For example, goodwill will be amortized rather than tested for impairment and the standard includes a simplified set of financial statement disclosures.”
Other implications of this new standard may be an acceleration of the pace of IFRS convergence in the U.S. In a recently released white paper on financial regulatory reform, the U.S. Treasury Department called for the development of a single set of high quality global accounting standards (i.e., IFRS convergence) by the end of 2009.
“This could result in a change in the Security and Exchange Commission’s (SEC) position on the IFRS roadmap and the overall timetable,” added Grubb. “The change in the SEC’s position for public companies combined with the issuance of IFRS for SMEs for private companies could provide a groundswell of support that moves the IFRS convergence issue forward much more quickly than anticipated.”