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The IFRS for SMEs is all about access to capital
In 2003, the International Accounting Standards Board (IASB) decided to develop a separate International Financial Reporting Standard (IFRS) for smaller companies in response to overwhelming demand from regulators, standard-setters, small businesses, and auditors in both developed and emerging economies across the globe. Six years later, in July 2009, the IFRS for Small and Medium-sized Entities (IFRS for SMEs) was issued. Finally the IFRS for SMEs provides businesses with a passport to raise capital on a national or an international basis.
1. Why an IFRS for SMEs?
Lenders, vendors, customers, rating agencies, venture capitalists, and outside investors all use financial statements to make credit, lending, and investment decisions. Often, those are cross-border decisions. High quality, comparable information, tailored to their needs, is important to them. Therefore, there is a public interest in sound and transparent financial reporting by small companies.
In most countries in the world all or most SMEs are required by law or government regulation to prepare and publish GAAP financial statements – and, in many jurisdictions, to have them audited. For example, in the European Union the...