In This Issue:
Features
1. IFAC Launches Review of Support for SMEs and SMPs
2. IFAC President Robert Bunting Furthers Public Debate on SME Issues
3. European Commission Progresses on "Think Small First" Principle
4. Debate Grows on EC Proposal to Abolish Micro-Entity Reporting Requirements
5. Share Your Thoughts on Important Issues on the SMP/SME Discussion Board
News from IFAC
6. Translation Work Started on Quality Control Implementation Guide for SMPs
7. IFAC Releases Annual Report
8. IFAC Launches New Comment Letter Submission System
9. French Translation of ISA Guide Complete
10. SMP Committee Expands Resources Available at Small and Medium Practices Website
11. Information Now Available for SMP Committee's NY Meeting; Next Meeting Set for Beijing
More News from Around the Globe
12. AICPA Makes IFRS Roadmap Suggestions; Proposes Changes to Compilation/Review Services
13. AUASB Issues Explanatory Guide to Proposed New Standards on Auditors' Reports
14. CPA Australia Develops Public Practice Communiqué on QA Breaches
15. French Institute Launches SMP Website
16. Hong Kong Develops SMP/SME Resource Center
17. Malta Amends Companies Act to Adopt GAPSE
18. New African Standards for SMEs Near Finalization
19. Share SMP eNews with Your Colleagues
Features:
1. IFAC Launches Review of Support for SMEs and SMPs
During its February 2009 meeting in New York, the IFAC Board concentrated a significant part of its discussion on issues facing small- and medium-sized enterprises (SMEs) and SMPs, as well as on how IFAC can best support this constituency. The Board duly approved that a process be established to explore how IFAC can best support its SMP constituency. Accordingly, an SMP Review Task Force (RTF), chaired by Bernadette McGrory-Farrell, has been established by the Planning and Finance Committee (PFC).
The objective of the SMP RTF is to determine the range of activities that IFAC should undertake in support of the SME sector of the economy and its SMP constituency. The first step in this review process has been to conduct an online SMP survey of IFAC member bodies and regional organizations which asked about the awareness and usefulness of existing IFAC SMP-related initiatives and the importance of IFAC undertaking additional activities. Some 97 responses from 83 member bodies spanning 67 countries have been received.
The survey responses are currently being analyzed and will serve as the basis for some proposals on which the task force will consult. The task force is expected to report back to the IFAC Board with its recommendations in either November 2009 or February 2010.
2. IFAC President Robert Bunting Furthers Public Debate on SME Issues
In speeches and interviews, IFAC President Robert Bunting continues to further public discussion on issues important to small and medium practices and small- and medium-sized enterprises (SMEs).
For example, in an April 16, 2009 speech before the World Bank, Mr. Bunting discussed the global significance of SMEs and Micro-Entities, including their roles as growth incubators and job creators in both developing and developed countries. In this speech, Mr. Bunting also addressed the unique challenges faced by SMEs in the financial crisis, including problematic access to capital and credit, rising costs of fuel and supplies and the need to cost effectively meet regulatory and compliance requirements. Mr. Bunting stressed the need for regulatory initiatives to consider these needs to ensure that unnecessary or unintended, financial or other, burdens are not placed upon such businesses. The speech was discussed in an April 21, 2009 article within the Journal of Accountancy.
Other IFAC speeches can be accessed at www.ifac.org/MediaCenter/?q=speech.
3. European Commission Progresses on "Think Small First" Principle
In order to help policy makers and regulators better attend to the needs and concerns of small- and medium-sized enterprises (SMEs), the Small Business Act of the European Union endorses a principle called "Think Small First." The principle implies that policy makers give full consideration to SMEs at the earliest policy development stages and that SMEs should be considered the prime customers for business regulation. All rules impacting business should be created from the SME point of view first.
To promote the wide-spread application of "Think Small First," the European Commission (EC) created a group of experts representing the viewpoints of various national administrations. The group issued a report in March 2009 on the subject, outlining a number of good practices related to the principle at the national and European Union level.
The report can be accessed at www.ec.europa.eu/enterprise/entrepreneurship/docs/sba/report_think_small_first.pdf.
The report's executive summary can be accessed at
www.ec.europa.eu/enterprise/entrepreneurship/docs/sba/report_think_small_first_summary.pdf.
This EC effort, in addition to others addressing the needs of SMEs, is generating a growing amount of public support from relevant stakeholders, including the European Federation of Accountants and Auditors for SMEs.
4. Debate Grows on EC Proposal to Abolish Micro-Entity Reporting Requirements
Discussion continues on a new proposal put forward by the European Commission (EC), which would allow Member States to completely abolish financial reporting obligations for Europe's smallest companies (commonly referred to as micro-entities). In particular, the proposal would amend European Council Directive 78/660/EEC such that a new category of micro-entity businesses (to be defined as having a net turnover of less than €1 million) would be exempt from the European Union's Fourth Company Law Directive. The proposal was flagged in the European Economic Recovery Plan in November 2008, and has now passed to the European Parliament and the Council of Ministers for consideration.
More information on the proposal is provided by the European Commission on the following website:
www.ec.europa.eu/internal_market/accounting/sme_accounting/index_en.htm.
The leadership of the Institute of Chartered Accountants of Scotland argues that the benefits of this proposal are doubtful. A full copy of the Institute's response can be found on this website:
www.icas.org.uk/site/cms/contentviewarticle.asp?article=6119.
5. Share Your Thoughts on Important Issues on the SMP/SME Discussion Board
The SMP Committee would like to hear from practitioners worldwide on the subject of micro-entity reporting and other important issues impacting small and medium practices. Please share your views on the SMP/SME Discussion Board.
To post your views, or read the views of others, please join the public discussion on the committee's SMP/SME Discussion Board.
News from IFAC:
6. Translation Work Started on Quality Control Implementation Guide for SMPs
A number of translations are now in progress for the Guide to Quality Control for Use by Small- and Medium-sized Practices, including one in French by CGA-Canada and one in Portuguese by Instituto dos Auditores Independentes do Brasil (IBRACON).
The guide is designed to help SMPs understand and efficiently apply International Standard on Quality Control (ISQC) 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services, as redrafted under the International Auditing and Assurance Standards Board's Clarity Project.
The guide was developed by CGA-Canada for IFAC's SMP Committee and uses an integrated case study to illustrate how to implement the requirements of ISQC 1. It also includes two sample firm policy manuals, as well as key checklists and forms.
It can be downloaded free of charge from IFAC's online bookstore at www.ifac.org/Store/. A Microsoft Word version is available to allow for translation and adaptation by institutes and small firms.
To learn more about the translations planned for the Guide, please refer to the translations database at www.ifac.org/Translations/database.php.
In addition to translating the Guide into Portuguese, IBRACON will also offer training to members when the translation is completed.
7. IFAC Releases Annual Report
IFAC has released its 2008 annual report, which highlights initiatives to help restore financial stability and the need for convergence to global standards. The report features messages from Immediate Past President Fermín del Valle, Chief Executive Officer Ian Ball, and Public Interest Oversight Board Chairman Stavros Thomadakis.
The report gives information on IFAC's Service Delivery for 2008 in five areas, including Standards and Guidance, Promoting Quality, International Collaboration Activities, Representation of the Accountancy Profession in the Public Interest, and Information Services.
The 2008 annual report can be downloaded from the IFAC website at www.ifac.org/About/Publications.php. Print copies will be sent to all member bodies, associates, regional organizations, boards and committees, and other stakeholders.
8. IFAC Launches New Comment Letter Submission System
IFAC has launched a new comment letter submission system that allows visitors to the IFAC website to submit comment letters electronically on any IFAC exposure draft or consultation paper.
Website users can register on the IFAC website and then log in to submit comment letters and track comments they have submitted. This new system streamlines the submission process and helps to ensure that comment letters are processed promptly by IFAC staff.
The new comment letter submission system is accessible through "My IFAC Homepage," where registered users can also access the public areas of the IFAC website. Registered users may participate in the Global Financial Crisis and Small and Medium Practices discussion boards and in the Professional Accountants in Business Dynamic Links page. Through these social media tools, professional accountants may share their ideas, exchange resources, and make connections with other accountants.
Visit www.ifac.org and click on the Login/Register link located in the left-hand navigation to register now.
9. French Translation of ISA Guide Complete
A French translation of the Guide to Using International Standards on Auditing in the Audits of Small- and Medium-sized Entities is now available on the IFAC Translations Database.
The French ISA Guide can be accessed at web.ifac.org/download/TRADUCTION_ISA_GUIDE.pdf.
10. SMP Committee Expands Resources Available at Small and Medium Practices Website
The SMP Committee has updated many of the resources available at the International Center for Small and Medium Practices, located within the IFAC website. The Center provides access to previous SMP eNews documents, links to various resources, relevant sites and IFAC speeches, as well as information on recent SMP Committee meetings.
For example, links have been added to the following resource sections:
Viewers can access the SMP resources by going to the following web address: www.ifac.org/SMP/relevant_links.php.
11. Information Now Available for SMP Committee's NY Meeting; Next Meeting Set for Beijing
A Meeting Summary has been posted for the SMP Committee's May 21-22 Meeting in New York. It can be accessed at www.ifac.org/SMP/Committee.php.
In addition, the next meeting for the Committee, scheduled for October 29-30, will be held in Beijing. The SMP Forum will also be held in Beijing on October 28.
More News from Around the Globe:
12. AICPA Makes IFRS Roadmap Suggestions; Proposes Changes to Compilation/Review Services
The American Institute for Certified Public Accountants (AICPA) has recommended some amendments to the proposed roadmap for adopting International Financial Reporting Standards (IFRSs) within the United States, promulgated by the US Securities and Exchange Commission. These amendments include a push to minimize dual recordkeeping requirements and a call for optional early adoption to be expanded to include smaller companies.
The AICPA's Accounting and Review Services Committee (ARSC) also released an exposure draft that would revise the standards for compilation and review engagements. The changes are designed to address concerns of small businesses, users of small-business financial statements, and CPAs who serve smaller entities. They would allow an accountant to issue a review report on financial statements when the accountant's independence is impaired by performing non-attest services that were designed to improve the reliability of the client's financial information. You can read the full article in the Journal of Accountancy and view a short video, in which AICPA President and CEO Barry Melancon discusses the proposals and the importance of this project.
Moreover, the AICPA's Private Companies Practice Section commissioned research that provided support to the ARSC as it developed the proposed Statements on Standards and Review Services (SSARs). The research is summarized in a report entitled An Empirical Test of the Reliability Framework: Evidence From Banking Professionals that is available for download from http://pcps.aicpa.org/NR/rdonlyres/AE3385D9-707A-4DA9-A2CF-AEFABCE6EEEB/0/AICPA_PCPS_Reliability_Report.pdf.
13. AUASB Issues Explanatory Guide to Proposed New Standards on Auditors' Reports
The Australian Auditing and Assurance Standards Board (AUASB) has issued an Explanatory Guide to a series of proposed new standards on auditors' reports. The proposed standards, involving the Australian Auditing Standard (ASA) 700 and ASA 800 series, are the result of an initiative by the AUASB to revise and redraft these standards using the equivalent "clarity" versions of the International Standards on Auditing as issued by the International Auditing and Assurance Standards Board. The standards will be operative for financial reporting periods commencing on or after January 1, 2010.
14. CPA Australia Develops Public Practice Communiqué on QA Breaches
CPA Australia issued in March a public practice communiqué that addresses the most common breaches in quality assurance and offers new resources for managing the global credit crisis, as well as new links to global accounting resources.
The organization maintains a web page devoted to small and medium businesses, offering information and tools for supporting unlisted companies with less than 200 staff or annual turnover under A$50 million.
CPA Australia also operates a web page that discusses many issues related to auditing of small incorporated associations in Australia. Since the introduction of new auditing standards in 2006, there has been considerable debate about the impact of these standards on the quality and cost of audits, particularly for smaller entities, such as clubs and kindergartens.
15. French Institute Launches SMP Website
The Conseil Supérieur de l'Ordre des Experts-Comptables has launched a website addressing the needs of SMPs resulting from the credit crisis. The site provides resources on at least 20 issues, such as declining sales, lack of capital, and hiring. The resources include advice, reports, guidance, and links to relevant sites.
16. Hong Kong Develops SMP/SME Resource Center
The Hong Kong Institute of Certified Public Accountants has launched an online resource center for small- and medium-sized enterprises (SMEs) and SMPs. The center provides news, guidance, information on standards, technical updates and a members' handbook. Other resources include staff summaries on important issues, auditing bulletins, example reports, and a financial crisis database.
17. Malta Amends Companies Act to Adopt GAPSE
Malta has amended its Companies Act to adopt General Accounting Principles for Smaller Entities (GAPSE).
The GAPSE is a special set of standards that can be used by entities that meet the following criteria:
- Have fewer than 250 employees;
- Have assets below €17.5 million;
- Have revenue below €35 million;
- Are not publicly traded; and
- Are not financial institutions.
Since 1995, all limited liability companies in Malta, irrespective of size, have been required to prepare annual financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Many over the years have considered this requirement to becoming increasingly onerous for local smaller entities. As a result the Malta Institute of Accountants started the initiative to draw up GAPSE. GAPSE provides a historical cost option for all assets and liabilities but allows alternative measurement bases in particular circumstances. It contains significantly reduced disclosure requirements compared to IFRSs.
More information about this initiative can be found at www.maltamediaonline.com/?p=5432.
18. New African Standards for SMEs Near Finalization
A new set of accounting standards under development for small businesses in Africa is nearing finalization.
They are being developed by a working group that consists of a number of representatives from various institutions and associations, such as the South African Institute of Chartered Accountants, the University of Johannesburg, the Association of Chartered Certified Accountants, the Independent Regulatory Board for Auditors, and the South African Revenue Service.
The standards are expected to contain less stringent reporting requirements for small businesses that would be easier to grasp and apply.
To learn more about the project, see www.allafrica.com/stories/200903030623.html.
19. Share SMP eNews with Your Colleagues
The SMP Committee issues regular eNews updates to keep you current on its activities and recent publications. Please forward this eNews to any interested colleagues and advise them that they can subscribe to receive this eNews by following these simple steps:
- Go to the eNews sign-up page at www.ifac.org/E-news/index.tmpl.
- Enter your email address, name, and country.
- Select "SMP eNews" from the check list as well as any other eNews alerts that you would like to receive.
You will receive the next issue of the SMP eNews directly in your inbox.
For more information about any of the items mentioned above or other information about the SMP Committee, please contact communications@ifac.org.
About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 157 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry, and commerce. Through its independent standard-setting boards, IFAC sets international ethics, auditing and assurance, education, and public sector accounting standards. It also issues guidance to encourage high-quality performance by professional accountants in business.