06 September 2009
A separate stand-alone financial reporting framework for small and medium enterprises (SMEs) will soon replace the cumbersome 3,000-page full international financial reporting standards (IFRS), according to sources in accounting profession.
"I believe the work on the more than 200-page simplified set of standards is almost complete and once certain inherent ambiguities are removed and the fine tunings are done, the standards will be ready for use," Saad Maniar, managing partner, Horwath Mak, one of the leading auditors and business advisors in the UAE, told Emirates Business.
According to professionals in the industry, the new set of standards will be a boon to the SME sector, which is fast becoming the backbone of UAE's economy with thousands of units functioning across the country, creating tens of thousands of job opportunities.
"IFRS for SMEs is based on the fundamental principles of full IFRS but, in many cases, it has been simplified to make the accounting requirements less complex and to reduce the cost and effort required to produce financial statements. This has been achieved by the IASB removing a number of the accounting options available under full IFRS and simplifying the accounting rules in some areas," said Naushad Anwar, Partner and Head of Ernst & Young's IFRS Group.
Raju Menon, Managing Partner of Morison Menon, another leading audit and consulting firm, said: "The new standard will be a big relief to the SMEs, which view reporting as per full IFRS as an ordeal. Since banks insist on audited financials as a condition to financing them, SMEs will welcome this move wholeheartedly."
The relevance of the SME sector is growing as is the number of banks which have dedicated SME divisions. The new reporting framework is understood to have left out complicated standards such as IAS 14, 33, 34, IFRS 5, etc, which the board believes do not apply to SMEs per se. "Some accounting policies such as having financial instruments options, revaluation of property, plant and equipment (PPE) are not allowed under the new framework," said Maniar.
The new framework has simplified several "recognition and measurement" principles, like borrowing cost, R&D expenses and PPE review. Moreover, it will have fewer disclosures. For example, the new framework is likely to do away with "related-party" disclosures.
SMEs, to be eligible to adopt the new accounting framework, should not have public accountability. These entities should not have debt or equity instruments being traded in the public or should not be in the process of issuing such instruments.
These companies should not hold assets in fiduciary capacity for a broad group of outsiders as one of their primary businesses.
"Full IFRS is designed for complex public interest firms, and complying with them is burdensome for small and medium units," said Maniar.
A separate stand-alone financial reporting framework for small and medium enterprises (SMEs) will soon replace the cumbersome 3,000-page full international financial reporting standards (IFRS), according to sources in accounting profession.
"I believe the work on the more than 200-page simplified set of standards is almost complete and once certain inherent ambiguities are removed and the fine tunings are done, the standards will be ready for use," Saad Maniar, managing partner, Horwath Mak, one of the leading auditors and business advisors in the UAE, told Emirates Business.
According to professionals in the industry, the new set of standards will be a boon to the SME sector, which is fast becoming the backbone of UAE's economy with thousands of units functioning across the country, creating tens of thousands of job opportunities.
"IFRS for SMEs is based on the fundamental principles of full IFRS but, in many cases, it has been simplified to make the accounting requirements less complex and to reduce the cost and effort required to produce financial statements. This has been achieved by the IASB removing a number of the accounting options available under full IFRS and simplifying the accounting rules in some areas," said Naushad Anwar, Partner and Head of Ernst & Young's IFRS Group.
Raju Menon, Managing Partner of Morison Menon, another leading audit and consulting firm, said: "The new standard will be a big relief to the SMEs, which view reporting as per full IFRS as an ordeal. Since banks insist on audited financials as a condition to financing them, SMEs will welcome this move wholeheartedly."
The relevance of the SME sector is growing as is the number of banks which have dedicated SME divisions. The new reporting framework is understood to have left out complicated standards such as IAS 14, 33, 34, IFRS 5, etc, which the board believes do not apply to SMEs per se. "Some accounting policies such as having financial instruments options, revaluation of property, plant and equipment (PPE) are not allowed under the new framework," said Maniar.
The new framework has simplified several "recognition and measurement" principles, like borrowing cost, R&D expenses and PPE review. Moreover, it will have fewer disclosures. For example, the new framework is likely to do away with "related-party" disclosures.
SMEs, to be eligible to adopt the new accounting framework, should not have public accountability. These entities should not have debt or equity instruments being traded in the public or should not be in the process of issuing such instruments.
These companies should not hold assets in fiduciary capacity for a broad group of outsiders as one of their primary businesses.
"Full IFRS is designed for complex public interest firms, and complying with them is burdensome for small and medium units," said Maniar.
By CL Jose
© Emirates Business 24/7 2009
