Question

Full IFRSs are generally designed for use by entities that are quoted on world’s major capital markets. However, the world’s majority entities are Small and Medium sized Enterprises (SMEs) and unlisted. The IASB has developed IFRSs specific to SMEs. The main purpose of this was to provide a framework that generates relevant, reliable and useful information which should provide a high quality and understandable set of accounting standards suitable for SMEs.

Required:

1. Create FOUR scenarios simulating a particular SME where you describe transactions with numerical data as well as specified accounting periods. For each created scenario:

1. Discuss the required accounting treatment in accordance with IFRS for SMEs
2. Contrast the accounting treatment in (b) (i) with the treatment under Full IFRS.

Answer 1

SME

An SME is a small or medium sized enterprise .according to EU , definition of an SME is a business with fewer than 250 employees , and a turnover of less than 50 million . within this umberalla there are three different categorys : medium sized, small and micro business .

IFRS and SMEs is a self contained global accounting and financial reporting standard applicable to the general purpose financial statement of, and other financial reporting by , entities that in many countries are known as small and medium sized entities. In july 2009 the IASB issued the IFRS for SMEs .This standard provides an alternative framework that can be applied by eligile entities in the place of the full set of IFRS

a ) scenarios that stimulating a particular SME

       1. Non - current assets held for sale amounting to 10 lakhs in the year 2018.

       2. Expected return on plan assets amounting to 25 lakhs in the year 2017.

       3. Issue of equity shares   50 lakhs of 100 each

        4. Impairment losses at 15 lakhs in the year 2018

accounting treatment for the above transaction under IFRS for SME

    1.   Non current asset held for sale

             The decision to sell an asset or plans to discontinue the operation to which an asset belongs are considerd    an       impairment indicator.

2.    expected return on plan assets

No distinction between expected and actual return on plan assets. all changes in th efair value of plan assets are recorded in profit or loss

3. issue of equity shares

    Equity instruments are measured at the fair value of the consideration received or receivable,net or direct issue cost

4. impairment losses

it is measured immediately in the profit and loss.

   TREATMENT UNDER FULL IFRS

1. Non current asset held for sale

     A Non current asset is classified as "held for sale " if its carrying amount is recovered principally through a sale transaction rather than through continuing use.This is in the case when the asset is available for immediate sale in the present condition,its sale is highly probable and the sale is expected to be completed within one year from the date of classification.

2. expected return on plan assets

The expected return on plan asset is based on market expectations at the beginning of the period for return over the entire life of the related obligations.It reflect changes in the fair value of plan asset as a result actual contributions and and benefits paid.The difference between actual and expected return on plan asset is an actual gain or loss.

3. issue of equity shares

   Full ifrs is not explicit but the application in practice is same

4. impairment losses

     same as IFRS for SME ,unless the asset is carried at revalued amount in accordance with another standard. In this case the impairment loss is treated as a revaluation decreases in accordance with that other standard.