IFRS rules to be simplified for SMEs

Provisions are being made to assist Jamaican small and medium enterprises (SMEs) to adopt International Financial Reporting Standards (IFRS) as part of efforts to standardise global accounting systems.

The International Accounting Standards Board (IASB), which is responsible for developing global financial reporting standards, has been developing a simplified accounting system for use by small companies without public accountability or stock exchange listings.

At an IFRS seminar staged by PricewaterhouseCoopers (PwC) Monday in Kingston, Tom de Bell, of PwC Global Accounting Services Group, said the decision to provide SMEs with a separate international financial reporting system arose from complaints about the complexity of the full version of international reporting standards for large companies

"It's recognised that small and unlisted companies have different needs, and so IFRS for SMEs addresses those different needs, " de Bell told the Financial Gleaner.

"The IASB can't simplify full IFRS, because that applies to the world's largest companies that are complex."

Besides being smaller entities, many SMEs are unable to accommodate the huge fees auditing firms charge, another factor that influenced the IASB's decision to develop a special IFRS for SMEs.

The PwC partner added that although no specific time frame had been imposed on local SMEs, companies which presently have full reporting standards will be able to apply IFRS for SMEs when it is phased in in Jamaica.

Concerning the use of global accounting standards, Leighton McKnight, of PwC Assurance Services, says the Institute of Chartered Accountants of Jamaica (ICAJ) had decided on the use of IFRS for financial periods commencing on or after July 1, 2002

He said the Companies Act, which gives the ICAJ power to set accounting standards, contains a provision which enables very small companies to use other standards which ICAJ is working on.

"It is hoped that this IFRS for SME's may be able to bridge that gap whereby very small companies can use its standard," said McKnight, who sees it as a step in the right direction.

Asked about Jamaica's success in its application of IFRS, McKnight said the country had performed well, noting it had received recognition from the United Nations Conference on Trade and Development for work done in this area.

Jamaica has hundreds of thousands of micro and small businesses in operation.

The Association of Chartered Certified Accountants, which says more than 70,000 of its 140,000 membership work with or for SMEs, collaborating with the Jamaica Business Development Centre and ICAJ, will stage a one-day workshop for the sector in Kingston on October 8.

The workshop will cover entrepreneurship broadly, but will also look at the IFRS as well as access to financing.

philip.hamilton@gleanerjm.com