A new edition of the IFRS for SMEs® Accounting Standard
4 March 2025
The International Accounting Standards Board (‘IASB’) has released the third edition of the IFRS for SMEs Standard, effective for reporting periods beginning on or after 1 January 2027. Anyone using this framework and preparing general-purpose financial statements without public accountability needs to be aware of these new updates.
The aim of this 3rd edition was to align the IFRS for SMEs Standard more closely with the IFRS® Accounting Standards where appropriate by comparing the two frameworks and addressing stakeholder concerns.
Recognising that full IFRS Accounting Standards are not always suitable for SMEs, the IASB focused on relevance, simplification, and faithful representation when considering alignment. They also weighed the costs and benefits of each change.
Some of the key changes include:
- Definitions: Definition of public accountability is amended to specifically include banks, credit unions, insurance companies, security brokers/dealers, mutual fund and investment banks as entities having public accountability.
- Concepts and Pervasive Principles (Section 2): This section has been completely revised to provide better guidance for developing accounting policies.
- Statement of Cash Flows (Section 7): Section now requires disclosure of supplier finance agreements as well as a reconciliation between the opening and closing balances for liabilities arising from financing activities.
- Consolidated and Separate Financial Statements (Section 9): Amendments include the requirement to use a single basis for assessing control to improve comparability.
- Financial Instruments (Section 11): There is now only one section for financial instruments, and the option to apply IAS 39 has been removed. Entities will be required to to disclose its analysis of financial assets by due date (ageing analysis) as well as a maturity analysis for financial liabilities (based on paragraph 39 of IFRS 7). The IASB also introduces instrument classification and new requirements for certain financial guarantee contracts. Regarding impairment of financial assets the IASB decided not to introduce the ECL model accounting.
- Fair Value Measurement (Section 12): A new section dedicated to fair value has been added, aligning with IFRS 13 Fair Value Measurement. This consolidates all fair value requirements of the sections, improving clarity and comparability across the framework.
- Revenue (Section 23): This section has been completely revised to align with IFRS 15, with some simplifications to maintain the standard's ease of use.
Other, less significant changes have also been made to clarify various sections.
Entities adopting these amendments must include a ‘new standards issued disclosure’ note, as per Section 10, paragraph 13 in the set of financials on adoption. There is no need to disclose the expected impacts before that date.
Further details on these additional changes will be provided in a series of upcoming articles and podcasts. Watch this space!
Author:
Refilwe Mahoko, Manager
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