The IFRS for SMEs
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Topic 1.4
Quiz and Discussion
Section 1 SMEs
Section 2 Concepts & Pervasive Principles
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The accounting requirements applicable to small and medium-sized entities
(SMEs) are set out in the International Financial Reporting Standard (IFRS)
for SMEs, which was issued by the IASB in July 2009.
The IFRS Foundation, the authors, the presenters and the publishers do not
accept responsibility for loss caused to any person who acts or refrains
from acting in reliance on the material in this PowerPoint presentation,
whether such loss is caused by negligence or otherwise.
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Case study* about
Section 1
Small and Medium-sized Entities
* see case study in Module 1 of the IFRS Foundation training material
© 2011 IFRS Foundation
Section 1 – Discussion questions
Case study 1
- multinational group
- consolidated FS using full IFRSs
- stock exchange listed parent
- subsidiaries not listed
- local law permits use the IFRS for SMEs
except
- IFRS for SMEs is not permitted for J
- IFRS for SMEs is required for D (even if
publicly accountable)
Which subs can use the IFRS for SMEs?
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Section 1 – Discussion questions
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Case study 1 continued
Information about subsidiaries
A retails food. It is in the process of
issuing debt in a domestic stock exchange
B operates a private school. It holds
refundable deposits. Deposits are refunded
when child’s application is declined or the
child leaves the school. Deposits are
forfeited if a child declines to take up a
place at the school.
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Section 1 – Discussion questions
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Case study 1 continued
Information about subsidiaries continued
C operates a travel agency. It holds
deposits for prebooked package holidays.
Deposits are refunded only if cancelled
more than 60 days before travel.
D retails food. As a ‘side-line’ it also takes
deposits from its customers in return for a
promise to return capital plus interest.
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Section 1 – Discussion questions
Case study 1 continued
Information about subsidiaries continued
E retails food. It also provides employees
with short-term interest-free loans so that
they can purchase annual rail cards to
travel between their homes and place of
work.
Employees repay the loan in 12 equal
monthly instalments (deducted from their
salaries).
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Section 1 – Discussion questions
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Case study 1 continued
Information about subsidiaries continued
J retails food. Local law does not permit J
to use the IFRS for SMEs.
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Section 1 – Discussion questions
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Case study 1 continued
The group wants to simplify the process of
preparing its consolidated financial
statements.
Can the group follow any of the following
options?
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Section 1 – Discussion questions
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Case study 1 continued
Option 1: Require subs to use the
recognition and measurement (R&M)
requirements of full IFRSs and provide the
disclosures required by the IFRS for SMEs.
Option 2: Require subs use the R&M
requirements of the IFRS for SMEs, except
for financial instruments, which would be
R&M in accordance with full IFRSs
(ie IAS 39), and provide the disclosures
required by the IFRS for SMEs.
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Section 1 – Discussion questions
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Case study 1 continued
Option 3: Require subs to use the R&M
requirements of the IFRS for SMEs, except
for borrowing costs, which would be
recognised and measured in accordance
with full IFRSs (ie IAS 23), and provide the
disclosures required by the IFRS for SMEs.
Option 4: Require subs to use the IFRS for
SMEs.
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Questions about
Section 2
Concepts and Pervasive Principles
© 2011 IFRS Foundation
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Section 2 – Discussion questions
Question 1: The objective of general
purpose financial statements prepared in
accordance with the IFRS for SMEs is:
a. to inform government statistics?
b. to support the entity’s tax return?
c. to meet all the information needs of all
the users of an entity’s financial
statements?
d. to inform economic decision-making
by a broad range of users that are not
in a position to demand reports tailored
to their needs (eg investors and
creditors)?
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Section 2 – Discussion questions
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Question 2: The qualitative characteristic
‘reliability’ means:
a. free from material error and bias and a
faithfully representation of the
economic phenomenon?
b. precision (eg little or no uncertainty in
a measurement)?
c. historic cost?
d. fair value?
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Section 2 – Discussion questions
Question 3: Expenses are recognised in
comprehensive income (profit or OCI):
a. using the matching basis—on the basis
of a direct association between the
costs incurred and the earning of
specific items of income?
b. using the accrual basis—items are
recognised as assets, liabilities, equity,
income or expenses when they satisfy
the definitions and recognition criteria
for those items?
c. at the discretion of management?
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Section 2 – Discussion questions
Question 4: Prudence implies that in
preparing financial statements management
should:
a. have a bias toward understating assets
and income and overstating liabilities
and expenses?
b. have a bias toward understating
liabilities and expenses and
overstating assets and income?
c. be neutral (ie no bias) and cautious in
the exercise of judgements needed in
making estimates?
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Section 2 – Discussion questions
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Question 5: Recognition criteria determine
when to recognise an item.
Measurement is determining the monetary
amounts at which to measure an item.
Uncertainties about the extent of future cash
flows:
a. only affect the decision about whether
to recognise?
b. only affect the estimation of the
amount at which to measure the item?
c. could affect both recognition and
measurement?
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Section 2 – Discussion questions
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Question 6: How many measurement bases
does the IFRS for SMEs specify for the
measurement of assets?
a. one—historical cost
b. one—fair value
c. two—historical cost and fair value
d. many—including historical cost, fair
value, value in use, estimated selling
price less costs to complete and sell,
etc
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