IFRS For Dummies

Appendix B

IFRS for SMEs

This book focuses on the full International Financial Reporting Standards (IFRS). However, small and medium entities (SMEs) may use a condensed version of IFRS called IFRS for SMEs, which I outline in this appendix.

Understanding the Need for IFRS for SMEs

Organisations that use full IFRS as a basis for preparing their financial statements have to disclose a significant amount of information. Why? Well, the vast majority of organisations that prepare their financial statements to IFRS are listed companies (in other words, they trade their shares on a stock market). As a result, the chances are that they’ve a substantial number of shareholders.

Think about an organisation like Vodafone; it has hundreds of shareholders who are all keen on seeing results to know how much dividend (a form of return on investment) they’re probably going to get based on the value of their shares. For this reason, Vodafone’s financial statements run to hundreds of pages showing all different forms of disclosures needed in order to ensure that the user (the shareholder) has all the information he or she needs concerning Vodafone’s profitability, financial position and cash flows.

Organisations that trade their shares on a stock market are publicly accountable. IFRS has no formal definition as to what publicly accountable is, but certainly companies that sell shares on a stock market to the general public are publicly accountable.

So you can see that full IFRS is really suited ...