-
BQA approved training consultant
At Grant Thornton, we offer a comprehensive suite of training programs designed to empower individuals and organisations to thrive in today's dynamic business landscape. Our expert-led training courses focus on enhancing key skills for career development, employee engagement, and organisational performance.
-
IT audit and advisory services
We help clients to navigate the complexities and provide you with robust independent assurance that your IT risks, key management priorities and core systems are being appropriately managed.
-
Automotive
Advances in technology are increasing the risk of disruption in the market and existing players, both upstream and downstream, are taking note. They’re innovating. They are making more use of lightweight materials and alternative fuels and taking the first steps towards intelligent and connected vehicles.
-
Asset management
Increasing regulation and investor demands for returns and transparency have brought new challenges to the asset management sector. Within this new world, organisations with the operational agility and strong infrastructure to embrace change and innovation can maximise opportunities.
-
Insurance
In a market where businesses operate with a 30-year outlook change is rarely spectacular or sudden. Yet there’s no doubt that important shifts are underway in insurance.
-
Banking & securities
Grant Thornton’s global banking and securities team consists of country, regional and service line leaders with experience of supporting clients in more than 80 countries.
-
Technology
The ability to anticipate and adapt is more important in the technology industry than ever before.
-
Media
The media industry is in the grip of a technological revolution and it’s affecting every part of the business. Distribution models, commissioning procedures and revenue streams are all evolving as the industry responds to the shift to digital and personalisation. This has resulted in a flood of new channels, platforms and experiences, all of which have to be constantly fed with compelling, quality content. If they are not, audiences move on.
-
Telecommunications
The telecommunications industry is changing rapidly and facing pressure from all sides.
Executive summary
The International Accounting Standards Board (IASB) has recently released the third edition of its IFRS for SMEs Accounting Standard (IFRS for SMEs or the Standard). This edition represents a major update to the Standard and follows a comprehensive review conducted by the IASB over the past few years. The updates to the Standard cover all sections of the current IFRS for SMEs. Some of the most significant updates are on the topics of revenue recognition, fair value measurement and business combinations.
Background
IFRS for SMEs is designed for small and medium sized entities (SMEs) without public accountability that are still required to prepare general purpose financial statements. Entities with public accountability are defined in the Standard as entities who have debt or equity instruments traded in a public market, or entities which hold assets in a fiduciary capacity for a broad group of outsiders (eg banks, insurance companies, securities brokers etc.). The Standard is explicitly not available to entities with public accountability, and if such an entity does apply the Standard, it cannot describe its financial statements as conforming to the IFRS for SMEs Accounting Standard, even if this is allowed by legislation in their local jurisdiction.
The key changes in the new standard
The changes to the Standard cover a broad range of topics, and for the full list you can refer to the IFRS Foundation’s press release and the published Standard (IFRS - IASB issues a major update to the IFRS for SMEs Accounting Standard). Here we have summarised some of the key changes which may have the most significant impact.
Revenue recognition
Section 23 ‘Revenue from Contracts with Customers’ has been revised to align with the requirements of IFRS 15 ‘Revenue from Contracts with Customers’. This is a significant change from previous practice and will require the application of the five-step model (set out in IFRS 15 ‘Revenue from Contracts with Customers’) to identify revenue contracts, identify performance obligations or promises, determine the transaction price, allocate this price to each promise, and finally recognise revenue as promises are fulfilled.
These new requirements may require more work and new processes to be put in place by the reporting entity. As we saw with the adoption of this model in the full version of IFRS 15, this can be very challenging, so we would encourage preparers to start planning for this transition sooner rather than later.
Fair value measurement
Section 12 ‘Fair Value measurement’ has been added to IFRS for SMEs for the first time in this edition. Previously, information about fair value measurement and disclosure was spread throughout the other sections where it was relevant, but in the third edition this is now grouped into a new separate section.
The reformatting that has taken place should make finding and referring to the guidance much easier, and will also ensure consistent application of fair value principles throughout the financial statements.
Business combinations
Section 19 ‘Business Combinations and Goodwill’ has been updated in the third edition to align it more closely with the detailed requirements set out in IFRS 3 ‘Business Combinations’. This edition now replaces the purchase method of accounting, as it was referred to in the previous edition of IFRS for SMEs, with the acquisition method of accounting. Although the methods are similar in many respects, there are more areas of complexity that need to be addressed in the acquisition method.
Although IFRS 3 has been in effect for some time, it is often not properly understood, and as a result is not appropriately applied. For SMEs that regularly engage in business combinations or acquisitions this may cause significant difficulty when applying the updated Standard. We would recommend that preparers engage with this early. Although it applies to full IFRS requirements, our series ‘Insights into IFRS 3’ may help to provide more information and supporting material on the requirements and application of the acquisition method.
Effective date
The third edition of IFRS for SMEs is effective for reporting periods beginning on or after 1 January 2027. Early application is permitted, however this may be dependent on jurisdictional approvals.
The changes introduced in the third edition must be applied retrospectively as set out in Section 10 of the Standard.
Our thoughts
We support the release of this new edition of the Standard, which should improve the quality of financial information being reported by SMEs.
While the effective date is still some time away, we encourage entities that currently apply IFRS for SMEs to start considering the impact of the changes sooner rather than later. In particular, the changes to the revenue recognition model may be challenging to apply, as we saw with the adoption of IFRS 15. If you will be impacted by these amendments, or would like to discuss them further, please reach out to the IFRS contact at your local Grant Thornton firm.
