EFRAG Publishes Draft Letter on IFRS Review for Small and Medium Enterprises
The EFRAG has published a draft letter that includes comments from the public on the International Accounting Standards Board’s ‘Request for Information: Comprehensive Review of the IFRS for SMEs', which was issued in the month June in 2012. The European Financial Reporting Advisory Group had suggested a two-fold approach for carrying out a review, which would be useful for a high-profile review of the International Financial Reporting Standards for small and medium enterprise’s goals, keeping organizations in perspective at the time of mulling over the needs of the reporting standard and determining the manner in which it should be related to IFRS. The review can also be useful for a more in-depth exploration of the manner in which alterations to complete International Financial Reporting Standards must be incorporated for small and medium enterprises. However, since the two-fold approach was not adopted, therefore European Financial Reporting Advisory Group faced several questions and now stands divided on 2 fundamental problems.
One of the issues is related to the importance that numerous factors including alteration in user’s alignment and requirements with complete IFRS and stability must have at the time of amendment of IFRS for small and medium enterprises. European Financial Reporting Advisory Group has come up with different views on the issue. As per the first view on the issue, the International Financial Reporting Standards for small and medium enterprises should be amended only when some kind of a problem is identified via the review of post-implementation of IFRS or there are some other proofs regarding inappropriate working of the reporting standard. The second view on the issue is that all the relevant as well as available information must be taken into consideration at the time of IFRS amendment for small and medium enterprises. This information revolves around identified changes and problems to complete IFRS. The third view on the issue is that most of the changes to IFRS pertaining to measurement as well as recognition must be incorporated in the IFRS for small and medium enterprises in view of the reviews that are conducted periodically.
The second issue is that European Financial Reporting Advisory Group has different views with regard to incorporating options in the International Financial Reporting Standards for small and medium enterprises, which would enable entities in applying accounting related policies and result in parallel outcomes to complete IFRS.