General overview
On 27 February 2025, the International Accounting Standards Board (IASB) released the third edition of the IFRS for SMEs Accounting Standard, marking a significant milestone in financial reporting for small and medium-sized entities (SMEs). This major update is the result of a comprehensive review and aims to align the standard more closely with recent changes in full IFRS Accounting Standards while maintaining its simplicity and cost-effectiveness for SMEs.
Major section updates
- Revenue Recognition: A revised Section 23 now aligns with IFRS 15, introducing a simplified version of the five-step model for recognizing revenue from contracts with customers.
- Fair Value Measurement: A new Section 12 has been added to provide a centralized and consistent framework for fair value measurement, based on the principles of IFRS 13.
- Financial Instruments: Sections 11 and 12 have been combined into a single Section 11, with updates to reflect the requirements of IFRS 9 (with some simplifications).
- Business Combinations: Changes to Section 19 align with IFRS 3, including updates to the definition of a business and requirements for measuring contingent consideration.
Key implications for SMEs
- Entities must reassess eligibility based on public accountability.
- More rigorous disclosure and measurement requirements.
- Enhanced comparability and transparency in financial reporting.
- Flexibility in transitioning to the new standard.
What’s not included (Yet)
Topics such as IFRS 16 (Leases), IFRS 9 (Financial Instruments – Expected Credit Loss Model), and matters related to crypto currency accounting were excluded in the review and will be considered in future reviews.