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IFRS for SMEs in South Africa: a giant leap for accounting, but too big for smaller entities in general

IFRS for SMEs in South Africa: a giant leap for accounting, but too big for smaller entities in... According to generally accepted accounting practice, the objective of financial statements is to provide useful information to the primary user groups of such statements, regardless of the size of the entity. The primary users of the financial statements of SMEs are the owners, South African Revenue Services (SARS) and bankers. The recognition, measurement and disclosure requirements of full IFRSs do not result in cost‐effective and useful information being provided to the users of the financial statements of SMEs (non‐listed companies, close corporations and other small entities, irrespective of their legal form), because these users do not need the extensive and complex information provided in general purpose financial statements. Consequently, an accounting standard is required to differentiate between general and limited purpose financial statements. The International Accounting Standards Board (IASB) issued an exposure draft (ED 222) on IFRS for SMEs in February 2007. These stipulated modifications relating mainly to relaxed disclosure requirements and are more applicable to medium‐sized entities. According to a survey among preparers of financial statements in June 2007, these developments may not be adequate for the purposes of smaller entities, irrespective of their legal form. Accordingly, the study recommends that a formal, separate set of simplified differential reporting standards be developed for smaller entities. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Meditari Accountancy Research Emerald Publishing

IFRS for SMEs in South Africa: a giant leap for accounting, but too big for smaller entities in general

H.A. van Wyk; J. Rossouw
Meditari Accountancy Research , Volume 17 (1): 18 – Apr 1, 2009
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References (4)

Publisher
Emerald Publishing
Copyright
Copyright © 2009 Emerald Group Publishing Limited. All rights reserved.
ISSN
1022-2529
DOI
10.1108/10222529200900007
Publisher site
See Article on Publisher Site

Abstract

According to generally accepted accounting practice, the objective of financial statements is to provide useful information to the primary user groups of such statements, regardless of the size of the entity. The primary users of the financial statements of SMEs are the owners, South African Revenue Services (SARS) and bankers. The recognition, measurement and disclosure requirements of full IFRSs do not result in cost‐effective and useful information being provided to the users of the financial statements of SMEs (non‐listed companies, close corporations and other small entities, irrespective of their legal form), because these users do not need the extensive and complex information provided in general purpose financial statements. Consequently, an accounting standard is required to differentiate between general and limited purpose financial statements. The International Accounting Standards Board (IASB) issued an exposure draft (ED 222) on IFRS for SMEs in February 2007. These stipulated modifications relating mainly to relaxed disclosure requirements and are more applicable to medium‐sized entities. According to a survey among preparers of financial statements in June 2007, these developments may not be adequate for the purposes of smaller entities, irrespective of their legal form. Accordingly, the study recommends that a formal, separate set of simplified differential reporting standards be developed for smaller entities.

Journal

Meditari Accountancy Research – Emerald Publishing

Published: Apr 1, 2009

Keywords: Differential reporting; Limited purpose financial statements; IFRS for SMEs; Micro‐entities; Generally accepted accounting practice; Small and medium‐sized entities

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