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One-day IFRS for SMEs seminar

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The Essential Guide to IFRS for SMEs


The Essentials of Company Administration
The Essential Duties of a Company Director

The Role of a Company Secretary in the 21st Century
The Essentials of Employment Law

Using the Courts Service to Make Sure Your Customers Pay

The Essentials of VAT
The Essential Guide to UK VAT and International Trade
The Essential Guide to UK VAT and International Services

The Essential Guide to the European System of VAT

The Essential Guide to VAT and Property

The Essential Guide to Financial Accounting Procedures and Controls

Understanding, Analysing and Interpreting Financial Information


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Redefining the Balance Sheet

Stephen SmithIn the September Business Briefing I explained that should the Accounting Standards Board (ASB) develop a standard that is closely aligned to IFRS for SMEs we can expect a new look Balance Sheet.  IFRS for SMEs is a new standard that was published by the International Accounting Standards Board (IASB) last year.  The IASB’s preferred title for The Balance Sheet is The Statement of Financial Position.

In the IASB's illustrative example the statement consists of two sections.

  1. Assets consisting of Current Assets and Non-Current Assets.
  2. Liabilities and Equity consisting of Current Liabilities, Non-Current Liabilities and Equity.

Based upon this format we will no longer see the value of Net Current Assets or Net Current Liabilities being readily reported.  Another interesting feature is that in the illustrative example the order of liquidity is reversed in The Statement of Financial Position.

IFRS for SMEs has also attempted to arrive at unambiguous definitions of Assets, Liabilities and Equity. When a definition tries to cater for all possible circumstances its meaning often gets lost. I am the author of Understanding, Analysing and Interpreting Financial Information in which I offer very simple (and effective) definitions of assets and liabilities.

My simple definition of an asset is something that the organisation owns and has a realisable value.  I do recognise that Finance Leases and Deferred Costs are exceptions to this general rule.

My simple definition of a liability is where the organisation realises that at a future date a payment will be made to a third party. I am not aware of any exceptions to this general rule, although there are several ways to discharge a liability.  I also consider equity, traditionally capital and reserves in a Balance Sheet, to be just another example of a liability because I recognise that the owners of the organisation are separate entities to the organisation itself – a principle recognised in company law.

One of my watchwords in life is ‘keep it simple’.  I hope the ASB keeps it simple when it publishes its exposure draft proposing a new standard for small and medium sized enterprises, which it aims to do at the end of this month.

I understand from Ian Mackintosh, the Chairman of the ASB, that the intention is to modernise UK GAAP - not abandon it.  The product of the six month consultation period, that will follow the publication of the ASB’s exposure draft, should be a much more user-friendly standard consisting of 300 pages rather than the 3,000 pages of UK standards.

For the IASB’s definitions please visit our website.

Stephen Smith
Managing Director, UK Training (Worldwide) Limited


Now there are 67 countries...

IFRS for SMEsPaul Pacter, a Board member at the IASB who is responsible for the implementation of IFRS for SMEs throughout the world, advised me that there are now 67 countries actively planning to implement the standard including two EU countries: the UK and Ireland.  The European Commission is currently consulting with the 27 member states of the European Union and is asking them whether they think that IFRS for SMEs should be provided for within the EU accounting legal framework.  Paul tells me that the majority of respondents to the Commission’s consultation disagreed, but no action has been taken in those countries one way or the other.

The IASB's standard, IFRS for SMEs, can be downloaded via this link.  

 

 


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