IFRS for SMEs — What Is It and Does Your Business Need It?
IFRS for SMEs explained: what it is, how it differs from full IFRS, which businesses can use it, key simplifications, and relevance for Indian SMEs and finance professionals.
What is IFRS for SMEs?
IFRS for SMEs (Small and Medium-sized Entities) is a standalone simplified standard issued by the IASB (International Accounting Standards Board) in 2009, updated in 2015 and 2019. It is designed specifically for entities that do not have public accountability — i.e. companies whose shares or debt are not publicly traded and that do not hold assets in a fiduciary capacity for a broad group of outsiders (like banks and insurance companies).
IFRS for SMEs is about 230 pages long, compared to over 3,000 pages for full IFRS — reflecting significant simplifications.
Key Simplifications Compared to Full IFRS
| Topic | Full IFRS | IFRS for SMEs |
|---|---|---|
| Goodwill | Annual impairment test (IAS 36) | Amortised over 10 years if useful life not estimable |
| Development costs | Capitalised if IAS 38 criteria met | All R&D expensed immediately |
| Financial instruments | Complex IFRS 9 classification | Simplified — basic and other financial instruments only |
| Leases | All leases on balance sheet (IFRS 16) | Finance/operating distinction retained (simpler lessee accounting) |
| Fair value | Comprehensive IFRS 13 framework | Simplified fair value guidance |
| Investment property | Fair value model permitted (IAS 40) | Cost model default; fair value only if determinable without undue cost |
| Associates | Equity method (IAS 28) | Cost, equity, or fair value method — accounting policy choice |
Who Can Use IFRS for SMEs?
IFRS for SMEs is available to entities that:
- Do not have public accountability (not listed on a stock exchange; do not hold assets in fiduciary capacity)
- Publish general purpose financial statements for external users
Each jurisdiction decides whether to permit or require IFRS for SMEs for qualifying entities. Adoption is not automatic — it depends on national law and regulations.
IFRS for SMEs in India
India has not adopted IFRS for SMEs. Indian SMEs use:
- AS (Accounting Standards) — Indian GAAP: for companies below the Ind AS threshold
- Ind AS: for companies above the net worth threshold
- ICAI-issued SME guidance: provides certain simplifications within AS framework
Understanding IFRS for SMEs is relevant for Indian finance professionals working at companies with global operations or multinational subsidiaries in countries where IFRS for SMEs is adopted.
IFRS for SMEs in the ACCA Qualification
IFRS for SMEs is tested in ACCA Diploma in IFRS (DipIFRS) — Learnsignal offers this qualification for professionals wanting to specialise in IFRS. It also appears in ACCA FR and SBR where questions compare full IFRS to SME standards.
Explore ACCA qualifications with Learnsignal — including full ACCA and DipIFRS pathways.
Further Reading
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Learnsignal Education Team
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