The IFRS for small and medium-sized entities (IFRS for SMEs) simplified framework is intended for use by entities which do not have public accountability. One of the main drivers for the standard is to facilitate the convergence of local standards with IFRS around the world. The decision as to which entities are required or permitted to use the new standard rests with the legislative and regulatory authorities and standard-setters in individual jurisdictions. How it will fit into a proposed UK converged framework is considered on page 9, but at present the standard cannot be applied in the UK.
Structure of the IFRS for SMEs
To facilitate ease-of-use the sections of the IFRS for SMEs are laid out by topic and there are also example accounts and a disclosure checklist. Accounting requirements of full IFRS have been simplified by:
- excluding topics which are less relevant to SMEs for example IAS 33 'Earnings per share', IAS 34 'Interim financial reporting' and IAS 14 'Segment reporting'
- omitting the more complex option from standards that provide a choice in accounting treatment
- simplifying recognition and measurement criteria, and
- reducing disclosure requirements.
Many of the principles are as contained in full IFRS and they are therefore different from UK GAAP, including the requirement to prepare a cash flow statement for each entity.
Main differences from full IFRS
Some of the most important differences from full IFRS are considered in the table opposite.
Transition
In the first year of adoption, an entity will be required to explain how the transition to IFRS for SMEs has affected its previously reported financial position, performance and cash flows. This will be achieved by presentation of reconciliations from previous GAAP in a similar way to the requirements of IFRS 1.

Smith & Williamson commentary
The IFRS for SMEs is probably one of the most important developments in financial reporting for a number of years insofar as it provides a catalyst for convergence. The IFRS for SMEs is not how
ever a simplified version of IFRS in the way the FRSSE is a simplified version of UK GAAP. There are a number of differences from full IFRS and, as a consequence, while underlying principles may be the same, detailed application and end result will be different.
For many UK preparers the removal of the revaluation option for fixed assets could be unpopular. For example where borrowings are linked to the valuation of a property, the entity will record all of the debt on its balance sheet without being able to reflect the value of the asset upon which it is secured.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.