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PwC
Have you considered moving to IFRS for SMEs?
21 April 2021
PwC | EC Virtual Touchpoint Series 4
Tammy MarshmanModerator
Email: [email protected]
Natasha StanhamKey presenter
Email:[email protected]
Meet today’s team
PwC | EC Virtual Touchpoint Series8
DD
Are the scoping requirements of IFRS for SMEs met?
Does the Companies Act permit the use of IFRS for SMEs?
Who can apply it?
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Type of company Prescribed Financial Reporting Standards
IFRS IFRS for SMEs
Public companies listed on an exchange ✔Public companies not listed on an exchange ✔ ✔Other companies - PI score ≥ 350 ✔ ✔Other companies - PI score < 350 ≥ 100 ✔ ✔Public Interest Score (“PI Score”)
● Introduced by the 2008 Companies Act● A function of employment, liabilities, turnover and individuals that have a beneficial interest in securities
9
Companies Act (2008)Regulation 27
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● Meets with common information needs of a wide range of users
● For external users including:○ Owners not involved in
management○ Creditors○ Credit rating agencies
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42 General purpose financial statements
1 No public accountability
● Debt/equity instruments traded in a public market
● Holds assets in fiduciary capacity
IFRS for SMEsScope
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Stable reporting framework
Reduced disclosure requirements
Simplified recognitions and measurement principles
Undue cost or effort exemption
The Second Comprehensive review of the IFRS for SMEs standard could bring change. The Board is deciding on a way forward.
Disclosure initiative proposed for subsidiaries that are SMEs - the draft proposes to reduce disclosure.
Why convert to IFRS for SMEs?
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The IFRS for SMEs standard contains a general ‘full IFRS’ fallback.
True False
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True or false?
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IFRS for SMEs only allows an entity to apply the requirements of full IFRS Standards (instead of SMEs) in one area - the recognition and measurement of financial instruments.
IFRS for SME
IAS 39
Apply IFRS for SME Section 11 and Section 12 in full
● Apply IAS 39 for recognition and measurement
● Apply Section 11 and Section 12 for disclosure
IFRS 16
There is no option to elect to apply IFRS 16: Leases within IFRS for SMEs
Accounting Policy Choice - Financial instruments
Only one option to apply full IFRS for recognition and measurement
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The IFRS for SMEs Standard contains a general fallback for ‘undue cost or effort’.
True or false?
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True False
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Deliberately not defined
Lower hurdle than ‘impracticable’
Not a free choice – requires management judgement
Relative to the entity
01
02
03
04
Required:● Disclose the reason the
exemption was applied● Revisit assessment
annually
Undue cost or effort exemption
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Calculation of the Public Interest Score
Will it cost less to apply?
Is there a downside to applying IFRS for SMEs?
Will IFRS for SMEs be aligned with full IFRS in the future?
What if the holding company applies full IFRS?
1 2
3 4
Some frequently-asked questions
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Most stakeholders will consider only the consolidated AFS; unless there are minority shareholders/creditors.
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Does the entity meet all the requirements to apply IFRS for SMEs?
1Are you prepared to follow the standard in its entirety?
2A sub whose parent applies full IFRS can apply SMEs in its separate/statutory AFS.
3
17
Applying IFRS for SMEs in a group using IFRS
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Reduced disclosure requirements in many areas:Impairments, associates, defined benefits, use of fair value (IFRS 13)
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Primary Statements
RestatementStandards
not yet effective
Recons
Segments, EPS, IFRS 7
Limited disclosure
requirements
Heading
01
02
03
04
05
06
A single statement of Income and Retained Earnings is permissible
Reconciliations are normally only required for the current year (e.g. provisions, PPE, investment property).
.
No third Statement of Financial Position required when a restatement occurs
No disclosure requirements for: Operating Segments, Earnings per share, IFRS 7 Financial Instruments Disclosures (even if IAS 39 elected), Held for Sale (IFRS 5)
Simplified presentation and disclosure
18
There are no standards not yet effective under IFRS for SME.
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Defined employee obligations
Expense recognition
Leases
Investment property
Investment in
subsidiaries
Goodwill
Intangible assets
Government grants
Financial instruments
Investment in
associates and joint ventures
Business combinations
Key differences
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● Assess relevance of each one● Understand impact on opening balance sheet● Determine measurement and disclosure
impact
● Identify unnecessary disclosures● Identify potential disclosure
improvements● Ensure compliance with minimum
requirements
Application of the exemptions
IFRS vs IFRS for SMEs
Do you meet the requirements?
Update the AFS
● Identify differences● Assess applicability of undue cost or effort● Determine measurement and disclosure impact
● Scope assessment● Co Act● Group structure/requirements
1
2
3
4
Transition to IFRS for SMEs It is more than just a name change ...
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2
An illustration of the relevant periods affected for a December 2020 year end
Is there relief from retrospective application?Several optional exemptions apply for PPE, business combinations, share-based payments and foreign currency reserves.
Mandatory exceptions exist as described in Section 35
Transition process
Decemberyear end
1 January 2019 31 December 2019
31 December 2020
Opening IFRS for SMEs statement of financial position
Comparatives for annual financial statements
IFRS for SMEs annual financial statements
21
Transition Date
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Fair value as deemed cost
22
Revision of existing accounting policies and classifications
Transition exemptions that may benefit the company
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PwC Illustrative IFRS for SMEs
IASB training modules
IFRS for SMEs Q&A
24
Resources available
Thank you for attending
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