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Accounting for Small and
Medium-Sized Entities |
Japanese... |
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On July 09, 2009, the International Accounting Standards Board (IASB) completed and issued an International Financial Reporting Standard (IFRS) for small and medium-sized entities (SMEs). This is a self-contained standard of about 230 pages tailored for the needs and capabilities of smaller businesses. Many of the principles in full IFRSs for recognizing and measuring assets, liabilities, income and expenses have been simplified, topics not relevant to SMEs have been omitted, and the number of required disclosures has been significantly reduced. Revisions to this IFRS will be limited to once every three years. The IFRS for SMEs which is much simpler than full IFRS, responds to a strong demand from both developed and emerging economies for a rigorous and common set of accounting standards for smaller and medium-sized businesses, which are estimated to represent more than 95% of all companies. This standard is effective immediately. |
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In Japan, guidance for small and medium-sized entities accounting (the Japanese SME guidelines) was issued in August 2005 and has been updated annually. Some of the major differences between the IFRS for SMEs and the Japanese SME guidelines are as follows: |
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Inventory valuations -The IFRS for SMEs guidelines requires the use of lower of cost or net realizable value for valuing inventory while Japanese SME guidelines |
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Impairments and write-downs - IFRS for SMEs permits reversal of impairments and write-downs while Japanese |
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Asset Retirement Obligations - IFRS for SMEs requires companies to provide for the future disposal cost of assets generally at the time of acquisition while Japanese SME guidelines do not. |
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The treatment for pension obligations is essentially the same in that both allow for simplified methods to compute the pension liability. |
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Although the Private Company Financial Reporting Committee (“PCFRC”) was established in June 2006 for non-public businesses in the U.S., it is unclear when modifications to the FASB standards or a new set of standards will be finalized and issued. |
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