IFRS for SMEs | Supporting the Entrepreneur
International Financial Reporting Standards (IFRS) is a set of global accounting standards that is implemented to ensure transparency, accountability and efficiency in different financial markets around the world, including South Africa. IFRS for SMEs concerns the accounting standards that has been specifically developed with small companies in mind, and it focuses on the information that may be required by creditors, lenders, and other authorities that may use SME’s financial statements. IFRS for SMEs is less complex and burdensome.
Converting to an IFRS-friendly system is about more than just your company’s accounts. It also affects many your daily operations. If you look at it as an opportunity to evaluate and improve certain systems in your business, you might benefit greatly from the changes. Unfortunately, the conversion process and initial reporting phase can be challenging.
Generally, there is confusion about when IFRS or IFRS for SMEs is applicable to a company. Many people believe that a business’ Public Interest Score (PIS) determines this – but this is not correct. The PIS score is calculated by taking certain factors into consideration. Some of these factors include the number of parties with interests in the company (such as shareholders), total turnover within a financial year, the number of employees, and third-party liabilities at the end of a financial year. According to the Company’s Act, companies only need to apply for IFRS if they are state-owned as defined within the Act, or when they are listed on stock exchanges, such as the JSE. Other companies can apply for IFRS for SMEs.
Before making a change to your company’s accounting framework, however, there are some other factors that also need to be considered. You should determine whether your Memorandum of Incorporation (MOI) requires you to follow specific accounting guidelines, and also find out whether there is a specific framework required by your shareholders. Another factor that may play a role is if your company forms part of a group of companies – all of which apply the IFRS framework - then you would most likely need to apply the same framework to ensure uniformity.
With our team of qualified and experienced individuals, who make sure to stay ahead of the latest financial sector advancements, including IFRS and IFRS for SMEs, clients can have confidence in MMS’ abilities to assist your business in an efficient manner, to ensure that all standards are met. We can assist in the fields of accounting, transition methodology, tax, valuations, treasury, and overall project management.
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