"Businesses that qualify as SMEs can now implement these accounting standards immediately, even if they have just entered a new financial year," said Theunis Schoeman, the technical director for PKF chartered accountants and business advisers. "This will be enormously beneficial for those businesses, as well as the accountants auditing their financial statements, because there are now far fewer disclosures for them to make compared with mainstream IFRS requirements."
With fewer disclosures to make, the time and money spent on financial statement preparation will be considerably reduced. "In some instances, new IFRS requirements have led to disclosures in the annual financial statements doubling - and for the average owner-managed business, those additional disclosures serve no purpose at all," explained Schoeman. Some of these areas of relief include:
• Straight lining of operating leases is not required if increases in lease payments are reflective of expected general inflation
• No requirement to assess annually the residual values, useful lives and depreciation methods for property, plant and equipment
• Reduced disclosure of financial instrument risks and exposures
In general, entities that do not trade debt or equity instruments in a public market such as the JSE Securities Exchange, or that do not hold assets in a fiduciary capacity for a broad group of outsiders (as, for example, banks and stockbrokers do), will qualify as SMEs and can benefit from these new standards.
"There are some transitional arrangements that businesses will have to comply with when they first adopt IFRS for SMEs, but this is simply to ensure that their results are comparable with previous years," concluded Schoeman. "However, this is unlikely to be onerous and should easily be outweighed by the advantages of the new standards."
