A Guide For Micro-sized Entities Applying The IFRS For SMEs

International Accounting Standards Board® (IASB®)

Illustrative Guidance

June 2013

IFRS® for SMEs

A Guide for Micro-sized Entities Applying the IFRS for SMEs (2009)

A Guide for Micro-sized Entities

Applying the IFRS for SMEs (2009)

This Guide accompanies, but is not part of, the IFRS for SMEs

A Guide for Micro-sized Entities Applying the IFRS for SMEs (2009) is issued by the IFRS Foundation

and has not been approved by the International Accounting Standards Board (IASB).

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CONTENTS

from page

INTRODUCTION 4

A GUIDE FOR MICRO-SIZED ENTITIES APPLYING THE IFRS FOR SMEs (2009)

Guide section:

1 INTENDED SCOPE OF THIS GUIDE 6

2 CONCEPTS AND PERVASIVE PRINCIPLES 7

3–8 FINANCIAL STATEMENT PRESENTATION 10

9 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 27

10 ACCOUNTING POLICIES, ESTIMATES AND ERRORS 28

11–12 FINANCIAL INSTRUMENTS 31

13 INVENTORIES 42

14–15 INVESTMENTS IN ASSOCIATES AND JOINT VENTURES 46

16 INVESTMENT PROPERTY 46

17 PROPERTY, PLANT AND EQUIPMENT (PPE) 46

18 INTANGIBLE ASSETS OTHER THAN GOODWILL 51

19 BUSINESS COMBINATIONS AND GOODWILL 52

20 LEASES 52

21 PROVISIONS AND CONTINGENCIES 56

22 EQUITY 60

23 REVENUE 62

24 GOVERNMENT GRANTS 68

25 BORROWING COSTS 69

26 SHARE-BASED PAYMENT 69

27 IMPAIRMENT OF ASSETS 70

28 EMPLOYEE BENEFITS 76

29 INCOME TAX 80

30 FOREIGN CURRENCY TRANSLATION 89

31 HYPERINFLATION 90

32 EVENTS AFTER THE END OF THE REPORTING PERIOD 90

33 RELATED PARTY DISCLOSURES 92

34 SPECIALISED ACTIVITIES 95

35 TRANSITION TO THE IFRS FOR SMEs 96

A GUIDE FOR MICRO-SIZED ENTITIES APPLYING THE IFRS FOR SMES (2009)

3  IFRS Foundation

Introduction

This Guide accompanies, but is not part of, the IFRS for SMEs.

IN1 Many requirements of the International Financial Reporting Standard for Small and

Medium-sized Entities (IFRS for SMEs) will not be relevant to micro-sized entities

(‘micro entities’) as they generally only encounter a narrow range of simple

transactions.

IN2 This Guide is intended to help micro entities that are within the scope of the

IFRS for SMEs, ie who do not have public accountability (see paragraph G2), and

are either required to prepare general purpose financial statements in

accordance with the IFRS for SMEs as issued in July 2009 (for example, under the

law in their jurisdictions) or choose to do so, to identify more easily the

requirements of the IFRS for SMEs that are relevant to them. It is not a separate

Standard for micro entities.

IN3 This Guide is not intended for micro entities preparing financial statements

solely for tax reasons or to comply with local laws (unless local laws require

micro entities to use the IFRS for SMEs). However, those micro entities may still

find this Guide helpful in preparing such financial statements.

IN4 This Guide does not define a micro entity in quantitative terms. A jurisdiction

may choose to define a micro entity in quantitative terms or provide further

indicators of typical characteristics in order to indicate when this Guide should

be used in that jurisdiction. A micro entity is normally a very small entity with

simple transactions that has the following typical characteristics:

(a) few employees and often owner-managed;

(b) low or moderate levels of revenue and gross assets; and

(c) does not:

(i) have investments in subsidiaries, associates or joint ventures;

(ii) hold or issue complex financial instruments; and

(iii) issue shares or share options to employees or other parties in

exchange for goods or services.

IN5 This Guide extracts requirements from the IFRS for SMEs without modifying any

of the principles for recognising and measuring assets, liabilities, income, and

expenses, and without changing any of the presentation or disclosure

requirements. This Guide includes only those requirements of the IFRS for SMEs

that are likely to be necessary for a typical micro entity. If an entity encounters

a transaction in the current period or any comparative period presented in the

financial statements (or that occurred in an earlier period but still affects those

periods) that is not dealt with in this Guide, the entity is required, by the Guide,

to refer to the applicable requirements in the IFRS for SMEs.

IN6 Compliance with this Guide will result in compliance with the IFRS for SMEs. If

an entity applies this Guide, the basis of preparation note and audit report can

still refer to conformity with the IFRS for SMEs because this Guide does not

modify the IFRS for SMEs.

A GUIDE FOR MICRO-SIZED ENTITIES APPLYING THE IFRS FOR SMES (2009)

 IFRS Foundation 4

IN7 If a transaction, other event or condition covered in the IFRS for SMEs is not

included in this Guide, it is identified in a ‘box’ at the beginning of the relevant

section in this Guide, with a requirement that an entity having such a

transaction, other event or condition must refer to the IFRS for SMEs. If an entity

encounters one or two of the transactions, other events or conditions listed in

those boxes (ie not dealt with in this Guide), the Guide may still be useful as a

starting point to prepare the entity’s financial statements. However, an entity

that is required to refer to the IFRS for SMEs in more than one or two

circumstances will normally find it easier to use the IFRS for SMEs on its own,

rather than starting with this Guide.

IN8 A jurisdiction may wish to use the Guide as a starting point when developing its

own similar guide. For example, in a jurisdiction where all or most entities,

including micro entities, commonly have defined benefit plans, a jurisdiction

may wish to issue its own guide to applying the IFRS for SMEs that includes

requirements for defined benefit plans, rather than having a reference to the

IFRS for SMEs in the box at the start of Guide Section 28 Employee Benefits.

IN9 This Guide follows the sequence of the 35 sections in the IFRS for SMEs but, in

some cases, combines several of the sections in the IFRS for SMEs together into

one section in the Guide. To avoid confusion, each section of the Guide is

referred to as a ‘Guide Section’ and when reference is made to a section in the

IFRS for SMEs the term ‘IFRS for SMEs Section’ is used.

IN10 While many of the paragraphs in this Guide have been taken from the IFRS for

SMEs, it has been necessary to make some wording changes to improve the flow

of the drafting or for other editorial reasons. Such changes do not modify the

underlying requirements of the IFRS for SMEs in any way. In a few places the

Guide contains guidance and illustrative examples that are not included in the

IFRS for SMEs. The additional guidance and examples are included to help a

micro entity apply the principles taken from the IFRS for SMEs and they do not

modify the requirements of the IFRS for SMEs.

IN11 Because this Guide does not modify any of the

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