In late 2009, the IFRS Board finalized a stand-alone set of authoritative accounting guidance for small and medium-sized entities. This guidance was designed specifically for entities whose securities are not publically traded and which are not a financial institution. The IFRS for SMEs is a completely separate set of authoritative guidance designed to reduce unnecessary or irrelevant disclosures and enhance reporting for SMEs. The IFRS for SMEs is 230 pages of guidance compared to more than 3,000 pages for the full version of the IFRS, and approximately 300 possible disclosures compared to 3,000 possible disclosures for the full IFRS.
The 52 largest stock exchanges in the world together have around 45,000 listed companies globally. More than 99% of the companies are private unlisted entities. The United States alone has over 20 million private sector entities.
Currently companies based in the United States are not permitted to use IFRS and still use U.S. Generally Accepted Accounting Principles (GAAP). The convergence process between U.S. GAAP and IFRS has already begun, but it is still a long way from being finalized. Once the convergence process is completed, the IFRS for SMEs will hopefully simplify financial reporting requirements for privately owned companies and make the process more efficient.
Additional information on the IFRS for SMEs and the convergence between IFRS and U.S. GAAP can be found here. For further information on IFRS and convergence procedures, please contact Trevor Warren, Assurance Advisory Services.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.