World Bank SME Financial Reporting José Maria Bové FEE Vice-President, SME/SMP Matters
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Transcript of World Bank SME Financial Reporting José Maria Bové FEE Vice-President, SME/SMP Matters
World Bank
SME Financial Reporting
José Maria Bové
FEE Vice-President, SME/SMP MattersChairman, FEE SME/SMP Working Party
FEE – European Federation of Accountants
Fédération des Experts Comptables Européens – representative organisation for the accountancy profession in Europe
44 Member Bodies of professional accountants
– From 32 countries– With over 500.000 members
Located in Brussels, Belgium
Created in 1987
www.fee.be
FEE Active in the SME/SMP Area
FEE SME/SMP Working Party
Works closely with IFAC SMP Permanent Task Force
EFRAG: Joint EFRAG FEE Working Group IFRS for SMEs
Conferences and Seminars
FEE SME/SMP Working Party Publications
How SMEs Can Reduce the Risk of Fraud ? (October 2005)
Avoiding Business Failure – A Guide for SMEs (October 2004)
How to Prepare to Successful Sale of an Established Family Business
Business Valuation: A Guide for SMEs
Keeping it in the Family – SME Family Business Succession
Directory of FEE Member Body Publications on SME and SMP matters
FEE SME/SMP Working PartyActive Projects
Guide on European Accounting Networks
SME/SMP Aspects of Auditing Standards
IFRS for SMEs
Financial Reporting for SMEs in the EU
What is an SME?
Thresholds Accounting Directives
Small1: Balance sheet total < 4 400 000€
Net turnover < 8 800 000€
Employees < 50
(not exceeding two of the three criteria)
1 New amounts as adopted in December 2005, but not yet published in the Official Journal
Financial Reporting for SMEs in the EU
Medium1: Balance sheet total < 17 500 000€
Net turnover < 35 000 000€
Employees < 250
(not exceeding two of the three criteria)
1 New amounts as adopted in December 2005, but not yet published in the Official Journal
Accounting Directives
Fourth Directive (1978): individual accounts
Seventh Directive (1983): consolidated accounts
Reporting requirements all limited liability companies
Simplification for small and medium sized companies
Simplifications (Member State Option)
Small:
Permission to draw up abridged balance sheets
Permission to publish abridged balance sheet and abridged notes
Permission not to publish profit and loss account, annual report and audit report
Exemption from audit
Simplifications (Member State Option)
Medium:
Permission to adopt different lay-out for profit and loss account
Permission to publish abridged balance sheet and abridged notes
No audit exemption
Background to EU LegislationEU Legislation on Financial Reporting and Auditing
National companieswith statutory audit
Small companies
Listed companies
National “auditable” entities
Specific sector
4th, 7th and 8th Directives
Partnership Directive
Other legal forms Transparency Prospectus
Directives and IAS Regulation
Foreign listedDirectives on financial
institutions
Some EU Data:
Over 20 million companies
Over 4.5 million covered by Accounting Directives
Some 8 000 listed companies (of which some 1400 foreign companies)
National Requirements
In many EU countries financial reporting standards for SMEs are in development or in place
Best known example: FRSSE UK
Need for an IFRS?
Will an IFRS for SMEs in some future replace the Accounting Directives?
IFRS – Changing Accounting
N a tio na l ju risd ic t io ns co u ldre q u ire /a llo w o th e rs (s in g le )co m pa n ies o r co n so lida te d)
to m o ve to IF R S
IF R S re q u ire d fo rco n so lid a te d f in an c ia ls ta tem en ts fo r lis tedse cu rit ie s co m pa n ies
E C Re g u la tionN ° 16 06 /20 02
N a tio na l ju risd ic t io nsm a y w ish to m ove to
IF R S ove r t im e
B a se d o n E U 4 th an d 7 thC o m p a ny L a w D ire c tive s -
su b je c t to ch an g e v iaD ire c tive
N a tion a l G A A P
T w o R o u tesBA
IAS Regulation (2002)
Scope:
Requirement to use endorsed IAS for consolidated accounts of EU listed companies
Optional:
– Consolidated accounts of unlisted companies
– Individual accounts
Endorsement infrastructure:
– EU Accounting Regulatory Committee
– EFRAG (European Financial Reporting Advisory Group)
EFRAG
Set up in 2001
Private sector organisation
Founding fathers:
– UNICE and ERT Business (preparers)
– FEE (accountants)
– Banking organisations (FBE, ESBG, ECBG)
– EFFAS (financial analysts)
– CEA (insurers)
– FESE (securities exchanges)
– UEAPME/EFAA (SMEs)
EFRAG
Main objectives:
Proactive contribution to the work of IASB and IFRIC: Contribute to and influence IASB standard setting process BEFORE a standard is issued
Endorsement advice to the Commission Technical assessment of IFRS and IFRIC interpretation AFTER they are issued
Advising on changes to the EU Accounting Directives
Advisory Forum to discuss
IAS Regulation
Impact on SMEs:
SMEs listed on a stock exchange
Voluntary basis
National standards
IFRS for SMEs ?!
– EU: several millions
– Legal requirements
– National standards for SMEs
– Translation
Reduce the financial reporting burden on SMEs
Need for Global Standards for SMEs
If IFRS are not followed by unlisted company, national GAAP is followed
But, no two national GAAPs are the same
- All look to IFRS to varying degrees. Selective adoption
Danger of 28 “SME GAAPs” in Europe alone
But, need for genuine simplification
Way forward
Criticism of European members of IASB Advisory Group
Alternative EFRAG proposals to arrive at real simplification
Why to Apply IFRS for SMEs ?
World Bank
SME Financial Reporting
José Maria Bové
FEE Vice-President, SME/SMP MattersChairman, FEE SME/SMP Working Party