Most SMEs in Ireland currently prepare accounts using Irish GAAP (Generally Accepted Accounting Standards). IFRS for SMEs (International Financial Reporting Standards for Small and Medium-sized Entities) is a reporting standard for non-publicly accountable companies which is likely to replace Irish GAAP by 2012.
The standard is based on International Financial Reporting Standards (IFRS) and was published by the standard setters in July 2009.
One of the main reasons why this standard has been published is the drive towards improved comparability when looking at two sets of accounts. If companies prepare accounts using IFRS for SME’s it will significantly improve the comparability of the accounts of entities within an industry and across different industries; regardless of where the reporting entity is located.
How do I know what accounting standards are currently applied by my company?
If your company is audited have a look at your most recent set of accounts and open the Auditors report. Then look at the paragraph in the audit report headed ‘Opinion’. This should state which accounting standards are used by the company:
“Opinion: In our opinion the financial statements give a true and fair view, in accordance with Generally Accepted Accounting Practice (GAAP) in Ireland”
What is the proposal?
The proposal is for the implementation of a three tier system of financial reporting such that, depending on certain specified criteria, companies would apply one of the following;
- IFRS (as endorsed by the European Union) – Publicly Accountable entities;
- IFRS for SMEs – non-Publicly Accountable entities; or
- Financial Reporting Standards for Small Entities (FRSSE) small entities
Will your company be affected by this new standard, IFRS for SME’s?
Does your company currently prepare its accounts under:
- FRSSE and does your company want to continue to do so?
If either of the above are true your company will not be affected.
Any company currently applying Irish GAAP will be affected. Also any company currently applying FRSSE although not required to can opt to apply IFRS for SMEs.
If my company is affected by proposals how will it be affected once proposals are implemented?
Any entity currently applying Irish GAAP but deemed to be publicly accountable will be required to prepare accounts under full IFRS.
Any entity currently applying Irish GAAP but that is deemed not to be publicly accountable will be required to prepare accounts under IFRS for SMEs.
Any entity currently applying FRSSE who wishes to prepare accounts under IFRS for SMEs may opt to do so.
When will this standard affect me?
While it is not yet known when these proposals will become requirements the consultation process is at an advance stage and it is widely thought that it will not be any earlier than 2012.
What do I need to do to prepare?
Your accountant will be able to advise you as to what these changes mean for your business and what you need to do to prepare.