On the interpretation of IFRS for SMEs

Abstract: The globalization of capital in the context of today, more and more companies increasing demand for international financing, however, cumbersome financial reporting process for many SMEs to go international stumbling block In 2009, the International Accounting Standards Board issued the SME International Financial Reporting Standards (IFRS for SMEs, which greatly promoted the international investment and financing process.

Keywords: IFRS for SMEs, the full version of IFRS, key terms, SMEs, International Financial Reporting Standards

Over the years, the accounting profession generally considered necessary for a simplified financial reporting standards for SMEs, to enable the SMEs to get rid of GAAP cumbersome .2009 July 9, ISAB released a simplified version for small and medium enterprises with International Financial Reporting Standards (IFRS for SMEs, and now can be applied. compared to 2500 full version of IFRS, only a simplified version of the 230. IASB for SMEs (SMEs division is not based on its size, but on the availability of public responsibility for public trade stocks or bonds, and bear the responsibility of the organizations trust assets can not use the full version of IFRS. These include: banks, insurance companies, raised funds, securities companies, etc. As a simplified version of IFRS accounting standards than the current common to complex less, so the non-listed companies will adopt a positive attitude in this paper will be to interpret IFRS for SMEs.

General - SME International Financial Reporting Standards (IFRS for SMEs) have a separate set of accounting principles, by the composition of different projects, and with the full version of IFRS compared with the very different framework to adopt IFRS or choose a full enterprise version IFRS, or select the IFRS for SMEs, do not allow mixed use of both cross only if the IFRS for SMEs in particular the issue of no specific application guidelines, we can consider the full version of IFRS approach. IFRS for SMEs in accounting policy levels are as follows: 1IFRS for SMEs on the application of similar or related issues guidelines, 2 the second part of the "basic concepts and principles," explained the concepts definitions, recognition criteria, measurement methods, the full version of IFRS 3 are similar or related issues for the processing requirements and guide, but, IFRS for SMEs does not refer to other standard-setting bodies (eg FASB announcement, it is worth noting that, if an enterprise must consider the full version of the application of IFRS guidance, to know the complete version of IFRS indeed a reference to other criteria making bodies of the published application guidelines.

Compared with the full version of IFRS, IFRS for SMEs omits the following: earnings per share, interim financial reporting, segment reporting, insurance contracts, and assets held for sale. And the IFRS for SMEs does not allow the following accounting treatment: for property, plant , equipment or intangible assets re-valuation, the proportion of joint ventures to mergers, capitalization of borrowing costs, capitalized R & D costs, defined-benefit plan actuarial gains and losses deferred.

Standards Architecture - The IFRS for SMEs by different project components, and each item in the guidelines stand alone (as shown in Table 1, the guidelines include a total of 35 separate chapters. To further reduce the burden of financial reporting for SMEs , IFRS for SMEs will be limited to the revised every three years. this order in accordance with guidelines summarize some important projects in the key provisions. Accordingly, the examples are not intended to fully and thoroughly, but only help to understand and analysis.

Disclosure requirements: 3 ~ 8 - compared with the full version of IFRS, IFRS for SMEs with a large number of disclosure requirements for cut, mainly because of the full version of the IFRS recognition and measurement of some problems in the IFRS for SMEs has been simplified deal with the full version is similar to IFRS, IFRS for SMEs need to disclose the following financial statements: balance sheet, consolidated income statement, changes in equity; cash flow statement and financial statements - including a summary of significant accounting policies and other information. Similarly, IFRS for SMEs provides a full version < > Similar to the initial application of guidelines, however, the first full version of IFRS requires companies to adopt the annual financial statements must include at least one year of comparative statements, IFRS for SMEs include two more practical exemptions - no need to provide more reporting and re- above the opening balance sheet assets and liabilities.

Financial Instruments: 11 - 12 - IFRS for SMEs in financial instruments, financial instruments involving the application of some or International Accounting Standards (IAS 39 - Financial instruments recognition and measurement, together with part of its financial instruments disclosures. IFRS financial instruments for SMEs on the two parts are Chapter 11 - Basic Financial Instruments and Chapter 12 - Other financial instruments worth mentioning is that the classification of financial instruments and there is no "assets held for sale." Share for free download http://www.hi138.com
Chapter 11 of the financial instruments include: cash, demand deposits, accounts receivable or accounts payable, loan payments, accounts or notes payable, non-convertible preferred stock investment, not back to sell common or preferred stock investment, non-cash settlement loan commitments, etc. If a financial instrument is classified as Chapter 11 of the basic items, the initial recognition, should the transaction price and transaction costs as the initial amount. follow-up measurement should be amortized in accordance with costs and to confirm the effective interest method.

Is classified as Chapter 12 in other financial instruments, including: options, options, warrants, futures, forward contracts, interest rate swaps can be cash-settled, qualified hedging tool to cash settlement of loan commitments etc. and non-financial commodities price risk associated agreements also fall into this category. Chapter 12 of the financial instruments measured at fair value changes included in the gain or loss. Hedge accounting applies only to interest rates, exchange rates, or commodity price risk.

Inventories: Chapter 13 - Inventories include assets held for sale business activities, products, raw materials, etc. Inventories are stated at the lower of cost and net realizable value is measured. Inventory cost method for determining the individual Recognition Act, the FIFO method, weighted average method. LIFO is not allowed. inventories should be limited to its net realizable value recorded.

Intangible assets other than goodwill: Chapter 18 - IFRS for SMEs do not allow endogenous intangible assets recognized accordingly, R & D expenditures should be at its actual cost of Similarly, self trademarks, start-up costs, training costs , advertising costs, relocation costs when they should be the actual capitalization.

Goodwill and other intangible assets: 18 ~ Chapter 19 - Goodwill and other intangible assets at cost less accumulated amortization and impairment losses recorded its revaluation is not allowed, and the amortization period for its use life, not sure if its life, the amortization period shall be ten years. impairment testing only when the impairment can be found. Useful life, residual value, amortization method is also an indication of impairment exists only in order to modify.

Business Combinations: Chapter 19 - The revised IFRS 3 (2008 compared to Chapter 19 in the recognition and measurement business combination more and IFRS 3 (2004 line. Shall pay the cost of business combination of assets, commitments debt, equity securities at fair value at the acquisition date and the business combination occurred in costs associated with the direct measurement with the equity method and full consolidation compared to related parties can use the cost method investment.

Reserve and or matters: Chapter 21 - the reserve only in the past events and to confirm the current obligations, the obligation will cause the outflow of corporate Economic interests, and the amount of the obligation can be reliably measured. Paid contract, quality assurance, legal or practical significance of the restructuring, product returns and so need to provision for reserves.

Borrowing costs: Chapter 25 - Borrowing costs such as interest, etc., must not in its actual capital, but should be incurred.

Employee Benefits: Chapter 28 - If the pension accounting measurement method - the projected unit credit method applied is very difficult or costly, you can use the more simplified method of calculation. Pension accounting period must be before the pension costs for all expenditures are recognized as gains and losses, all actuarial gains and losses must be recognized as profit or loss or other comprehensive income.

Benefits and challenges - with mandatory business compared to the full version of IFRS for IFRS for SMEs, enterprises can gain many benefits. IFRS for SMEs to provide application guidelines and more concise than the full version of the IFRS and the disclosure requirements are very deletion of addition, IFRS for SMEs in the optional simplified to make it more conducive to the implementation issues, however, from another perspective, some aspects of the application guide to simplify the application guide may make a relatively large enterprises to adopt the full version of IFRS . there is the IFRS for SMEs can be revised every three years, some companies may think this is a good thing, but some companies will need more timely updates. the use of IFRS for SMEs and other challenges, including creditors and other stakeholders recognized , conversion time and cost considerations.

It is estimated that worldwide 99% of the private sector should be included in the scope of IFRS for SMEs. There full version of IFRS and IFRS for SMEs to choose from, so that listed companies and private enterprises to adopt global financial reporting standards to lay the foundation of different organizations may be based on cost and the choice of financial reporting IFRS for SMEs, such as family-owned business private equity firms, etc. have a relatively streamlined application guide to IFRS for SMEs and the full version of IFRS compared to the low efficiency is caused negligible.

References:
[1] Accounting Standards Committee of the International Financial Reporting Standards [M]. Beijing: China Financial and Economic Publishing House, 2008. Links to free download http://www.hi138.com
[2] Liu Yuting, Chinese Accounting Standards System: structure, convergence and is equivalent to [J]. Accounting Research, 2007, (3).

[3] Sun Guangguo the SME accounting guidelines for Research [M]. Dalian: Dongbei Press, 2009.

[4] http://www.iasb.org/IFRS for SMEs / IFRS for SMEs.htm.

[5] Deborah L. Seifert, Deborah L. Lindberg "IFRSfor Small and Medium-sized Entities" Journal of Accounting & Auditing.

Links to free download http://www.hi138.com