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  • IFRS Becoming a Cost Burden to SMEs

IFRS Becoming a Cost Burden to SMEs

19 March 2015

Johannesburg, South Africa- 18 March, 2015 –Finance Minister Nhlanhla Nene showed some support for the country's small- and medium-sized enterprises (SMEs) this year, by giving further tax relief to the smallest enterprises. Yet, there is still much to be done to assist SME growth in SA, especially as The International Accounting Standards Board (IASB) works on further, multifaceted, changes to IFRS for SMEs specifically.

‘Full IFRS is becoming increasingly complex and is heading toward being a huge cost and time burden to a small company as it can be rather complex,' says Nigel Griffiths, Technical Head of Audit at BDO South Africa.

Below are the main changes you can expect in the first facelift to IFRS for SMEs since it was introduced in South Africa in August 2009.

  • Investments in unlisted shares may be carried at cost
  • Revaluation model for property, plant and equipment (“PPE”)
  • Investment property measured using the cost model
  • Disclosure changes
  • No change to borrowing costs

Griffiths gives his comments on the upcoming changes and what they mean for SMEs:

  • The changes to PPE using the revaluation model is welcomed especially for fund raising for property owning companies.
  • Carrying unlisted shares at cost may be a practical expedient but if such shareholdings are material will detract from the fair presentation of the companies' financial position. Where shares are held for capital appreciation this will not be reflected in financial statements.
  • Also, not allowing the capitalisation of borrowing costs will continue the lack of comparability between financial statements presented using SMEs and full IFRS. These can be significant on large projects.

‘To ensure the growth within our SME sector, it is important to keep SMEs as simple as possible without losing meaning,' continues Griffiths. ‘We advise any and all companies to speak to an expert to guide you through the changes.” Visit www.bdo.co.za to view our updates and bulletins on IFRS as and when they happen.