1. Fiduciary Forum 2008 Henri Fortin, LCSFM
Recent International Developments in Corporate Financial Reporting A Focus on Small and Medium Entities
Fiduciary Forum 2008
Henri Fortin, LCSFM

2. Background Consensus: “One size does not fit all” Problems
Large business entities (“Public interest entities”) should observe high standards of financial transparency, disclosure and controls
Conversely, SMEs should not be subjected to stringent A&A requirements standards
SMEs need help with improving their accounting reporting practices
Problems
Laws and regulations do not differentiate enough between SMEs and PIEs
A system of double standards can have serious pitfalls

3. “Adopt v. Adapt”: the dilemma
Adopting
Higher quality and stronger recognition than local standards
National standard-setters can focus on implementation of the standards and their contributions to IASB and IFAC Boards
Adapting
Country “idiosyncrasies” better reflected
More country ownership
IFRS/ISA too complex for the country (?)

4. Varying levels of public accountability Proposed framework (accounting)
Category of company
Financial reporting standards
Listed companies, large SOEs, banks, insurance companies, etc.
Laws,
regulations
and standards
should reflect these
varying degrees of
accountability
Full IFRS
Local GAAP (or
simplified IFRS)
Limited F/R obligations if any
Simplified IFRS (or local GAAP)
Public
Interest
Entities
Large private non-listed companies, and other SOEs
Degree of corporate accountability
SMEs
Micro-enterprises

5. Overcoming the “Adopt v. Adapt” dilemma
For public interest entities
Set IFRS adoption as MT/LT objective
Establish procedures for reviewing draft IFRSs
Design plan for an orderly transition
Provide for a sufficient transition period
For SMEs
Consider adopting SME IFRS
Alternative: improve/simplify existing GAAP, in line with SME IFRS
Auditing standards: no credible alternative to ISA adoption

6. International response (1): Exposure Draft SME IFRS
Project initiated in 2003 by the IASB
Intensive consultation process between 2004 and 2006: discussion paper, regional roundtables, etc.
Exposure Draft released in February 2007
All background information and details available at (Current Projects / IASB / SMEs)

7. © 2008 IASC Foundation, all rights reserved.
IASB Exposure Draft
IASB’s proposed IFRS for SMEs:
Simplified principles tailored for SMEs
Self-contained (nearly)
Based on full IFRSs, which are developed for public capital markets
Modifications based on:
User needs
Cost-benefit
General purpose financial statements
© 2008 IASC Foundation, all rights reserved.

8. Exposure Draft – IFRS for SMEs
Organised by topic
ED 254 pages
Plus illustrative financial statements, disclosure checklist, basis for conclusions
Board vote: 13 to 1
Published:
15 February 2007
Comment deadline:
30 November 2007
© 2008 IASC Foundation, all rights reserved.

9. © 2008 IASC Foundation, all rights reserved.
Simplifications
Five kinds of simplifications based on user needs and cost-benefit tradeoffs:
Some topics in IFRSs omitted if irrelevant to SME
Where IFRS has options, include only simpler option
Recognition and measurement simplifications
Reduced disclosures
Simplified drafting
© 2008 IASC Foundation, all rights reserved.

10. Activities Since ED Was Issued
Compliance questionnaire
Checklist of all recognition and measurement requirements
111 pages
Prepared by Big-4 firm
Posted on IASB website May 2007
For field testers and others to use in understanding and applying the ED
© 2008 IASC Foundation, all rights reserved.

11. Activities Since ED Was Issued
Staff overview of ED
Explains the ED (what’s proposed, for who, and why) in question and answer format
Posted on IASB website April 2007
17 pages
© 2008 IASC Foundation, all rights reserved.

12. Examples of Private Publications
ACCA ECSAFA Summary of ED
PWC Pocket Guide to ED
World Bank Newsletter to Latin America & Caribbean
© 2008 IASC Foundation, all rights reserved.

13. International response (2): ISA Guide for SMPs
Presentation by Paul Thompson, IFAC