Grant Thornton welcomes new global IFRS standard for privately held businesses
9 July 2009
The new International Financial Reporting Standard for Small and
Medium-sized Entities (IFRS for SMEs) could transform the way
privately held businesses (PHBs) around the world prepare their
accounts said Grant Thornton, as it welcomed the publication of
the global standard by the International Accounting Standards
Board (IASB). The global accounting organisation believes the
new standard offers a unique opportunity to create a
standardised accounting framework for privately held businesses
throughout the world.
IFRS for SMEs provides a substantially simplified set of internationally recognised accounting principles for PHBs. Based on the full IFRSs, which were developed primarily for listed companies, the new standard will particularly benefit businesses that operate internationally. Individual countries will now consider the new standard, consult with local stakeholders and decide whether and when it should be used in their jurisdiction. Individual countries will also have discretion over which entities the new standard will apply to - unlisted subsidiaries of listed multinationals, for example, could be included in the scope.
Alex MacBeath, global leader of privately held business services
for Grant Thornton International explains, "Unlisted businesses
around the world who currently have to comply with full IFRS
will be pleased to find that the new standard is about one tenth
of the length of full IFRS and that the number of potential
disclosure items will be nearer to 300 than the current 3,000.
"We believe the IFRS for SMEs will be particularly welcome in
those countries (around 30 worldwide) that currently use full
IFRS for all entities, listed and unlisted. In these countries,
the pressure to reduce the administrative burden on SMEs will
surely persuade governments to adopt the new standard, in some
form, sooner rather than later. South Africa, for example, took
the unusual step of adopting the simplified standard in its
draft form so is effectively already using it."
Grant Thornton believes the case for adopting IFRS for SMEs will
require more detailed assessment in those countries where PHBs
still use local accounting standards (SME GAAPs). In the EU, for
example, there are currently around 55 different SME GAAPs.
Converting to new accounting principles always involves some
degree of financial and resource cost. Businesses and their
advisers will have to learn new terminology and accounting
techniques and make changes to their accounting software.
Moreover, in some countries, a move away from existing SME GAAP
will have implications for tax legislation and company law.
Despite these challenges, Grant Thornton believes the short term
disruption will be outweighed by the longer term benefits for
many PHBs around the world.
Alex MacBeath explains, "The potential of this new standard is that we move to a situation where lenders and investors are able to assess company performance from financial statements that use directly comparable, authoritative, internationally recognised principles, regardless of the country of origin of the company itself. This could improve access to capital and help decision-making on cross-border deals, quite apart from reducing the administrative burden on PHBs."
Grant Thornton is encouraging PHBs to make their views known in their own jurisdiction, as many countries are now likely to launch consultation exercises.
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For further information please contact:
Christine Hobart
International communications manager
T +44 (0) 20 7391 9548
M +44 (0) 79 0005 2240
