Simplifying IFRS for private entities.

• Author: Pacter, Paul
• Position: Financial reporting - International Financial Reporting Standards

Comment Letters

The main nontechnical issues raised in the comment letters related to making the final standard a stand-alone document; retaining accounting policy options; anticipating future changes to full IFRS; the need for further disclosure simplifications; changing the title of the document; considering which entities should be eligible to use the standard; and use of fair value.

Additionally, most comment letters raised technical issues related to specific sections in the ED.

Topics that received the most comments--generally in favor of further simplifications--included: consolidation; amortization of goodwill and other indefinite life intangibles; component depreciation and annual review of residual values; financial instruments; requirements for statements of cash flows and changes in equity; measurements for impairments and finance leases; sharebased payment; employee benefits; and income taxes.

Field Tests

At the 2008 board meeting, staff presented an overview of the issues identified as a result of the field tests of the ED. Overall, participants encountered few significant problems in applying the ED, and they generally said they found it to be understandable and appropriate. The single most problematic area was determination of fair value where market prices or active markets are not available.

The second most significant area causing problems was the nature, volume and complexity of disclosures.

Working Group

IASB has a working group of more than 40 experts on financial reporting by private entities (including several U.S. financial executives), which met on April 10-11. The group prepared two comprehensive reports for the board: one with recommendations relating to scope, recognition, measurement and presentation; and the other relating to disclosures.

Board Redeliberations

In May, the board began redeliberating the proposals in the ED. Redeliberations continued in June, July and September, and the board addressed the few remaining issues in October and November.

Here are some selected issues and the board's tentative decisions:

Title of the standard. It should be changed to "IFRS for Private Entities," with "private entities" defined the same as "small and medium-sized entities" (SMEs) in the ED.

Stand-alone standard. Requirements currently available by cross-reference to full IFRS will be either addressed in the final standard or eliminated.

Accounting policy options. In general, all options in full IFRS should be...