Abstract
According to generally accepted accounting practice, the objective of financial
statements is to provide useful information to the primary user groups of such
statements, regardless of the size of the entity. The primary users of the financial
statements of SMEs are the owners, South African Revenue Services (SARS) and
bankers.
The recognition, measurement and disclosure requirements of full IFRSs do not
result in cost-effective and useful information being provided to the users of the
financial statements of SMEs (non-listed companies, close corporations and other
small entities, irrespective of their legal form), because these users do not need the
extensive and complex information provided in general purpose financial statements.
Consequently, an accounting standard is required to differentiate between general and
limited purpose financial statements.
The International Accounting Standards Board (IASB) issued an exposure draft
(ED 222) on IFRS for SMEs in February 2007. These stipulated modifications relating
mainly to relaxed disclosure requirements and are more applicable to medium-sized
entities. According to a survey among preparers of financial statements in June 2007,
these developments may not be adequate for the purposes of smaller entities,
irrespective of their legal form. Accordingly, the study recommends that a formal,
separate set of simplified differential reporting standards be developed for smaller
entities.
AbstractAccording to generally accepted accounting practice, the objective of financialstatements is to provide useful information to the primary user groups of suchstatements, regardless of the size of the entity. The primary users of the financialstatements of SMEs are the owners, South African Revenue Services (SARS) andbankers.The recognition, measurement and disclosure requirements of full IFRSs do notresult in cost-effective and useful information being provided to the users of thefinancial statements of SMEs (non-listed companies, close corporations and othersmall entities, irrespective of their legal form), because these users do not need theextensive and complex information provided in general purpose financial statements.Consequently, an accounting standard is required to differentiate between general andlimited purpose financial statements.The International Accounting Standards Board (IASB) issued an exposure draft(ED 222) on IFRS for SMEs in February 2007. These stipulated modifications relatingmainly to relaxed disclosure requirements and are more applicable to medium-sizedentities. According to a survey among preparers of financial statements in June 2007,these developments may not be adequate for the purposes of smaller entities,irrespective of their legal form. Accordingly, the study recommends that a formal,separate set of simplified differential reporting standards be developed for smallerentities.
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