IFAC Public Discussion

IFAC's Small and Medium Practices (SMP) Committee has released a report on research into whether the proposed International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs), developed by the International Accounting Standards Board (IASB), is suitable for micro-entity financial reporting. The paper, Micro-Entity Financial Reporting: Some Empirical Evidence on the Perspectives of Preparers and Users, presents the findings of focus group interviews of users and preparers of micro-entity financial reports in Italy, Kenya, Poland, Uruguay, and the United Kingdom. Focus group participants indicated that the proposed IFRS for SMEs appears to be too complex for micro-entities - defined as entities with fewer than 10 employees - and suggested that relatively minor changes to the current draft might not be sufficient to address this concern. Some participants supported the development of a separate set of accounting guidance for micro-entities.

The IFAC SMP Committee is seeking your views on the following:

1. Do you believe there is a case of a third tier of standards or guidance aimed at micro-entities, or do you believe that the IFRS for SMEs will suffice?
2. If a third tier of standards or guidance is required, should this be guidance?
3. Should the guidance have a financial reporting focus or should it span record keeping, accounting, and financial management/control?

IFAC's Small and Medium Practices (SMP) Committee has released a free implementation guide to assist SMPs and other practitioners in applying International Standards on Auditing (ISAs) to the audits of small and medium entities (SMEs). The Guide provides a detailed analysis of all ISAs issued as of December 31, 2006 and their requirements in the context of an SME audit. This is the first version of the Guide. While we consider this Guide to be of high quality and useful in its present form, like any first edition it can be improved. Hence, we are committed to updating this Guide on a regular basis so as to ensure that it reflects current standards and is as useful as possible.

The next update is scheduled for late-2009 and will be based on the newly clarified ISAs that take effect for audits of periods beginning on or after December 15, 2009. In order to ensure the second version is even more useful than this one, we welcome comments from IFAC member bodies, national standard setters, practitioners, and others over the coming 18 months. These comments will be used to assess the Guide's usefulness and to improve it prior to publishing the second edition.

Hence, the SMP Committee is seeking your views, in particular, on the following:

1. How do you use the Guide? For example, do you use it as a basis for training and/or a practical reference guide, or in some other way?
2. Is the cross-referencing to the ISAs sufficient for you to easily refer to the ISAs while reading the Guide?
3. Do you believe that the Guide has appropriately integrated all of the relevant ISAs into the audit process?
4. Do you consider the guidance to be conducive to the performance of an efficient, effective and economic ISA-compliant audit of smaller entities?
5. Do you find the illustrative case study helpful? In particular, do you consider the case study example documentation to be comprehensive and of practical assistance, particularly in connection with the audit of smaller owner-managed businesses?
6. Do you find the Guide easy to navigate? If not, do you have suggestions for how navigation can be improved?
7. In what other ways do you think the Guide can be made more useful?
8. Are you aware of any derivative products - such as training materials, audit software, forms, checklists, and programs - that have been developed based on the Guide? If so, can you please provide details.