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Defining SME

10 June 2010 1,853 views 6 Comments

Anybody to tell me;

there are separate IFRSs for SMEs.

Is there any predefined criterion for an organization to be SME?

what is the differentiating line to be SME and to be otherwise?

is the criterion in terms of;

a. capital invested?

b. revenue generation?

c. human resource employed?

or any thing else?

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6 Comments »

  • ifrslist
    ifrslist said:

    [New Post] Defining SME – http://www.ifrslist.com/2010/06/defining...
    via Twitoaster

    # 10 June 2010 at 6:16 pm
  • abhinavaca said:

    SME’s can be genrally defined as ones other than the following;

    1) listed companies
    2) Public Interest Entities like banks/ insurance companies/ brokers/ etc
    3) Any other entity defined under your companies act/ local legislation or financial reporting authority.

    # 10 June 2010 at 9:06 pm
  • patriciawalters said:

    Yes, there are criteria for determining whether a company is an SME or not.

    Section 1 of IFRS for SMEs describes an SME. Perhaps the most important criterion is that an SME cannot be “publicly accountable”. In short that means its debt or equity instruments cannot be traded in a public market and it cannot be in the process of issuing securities for that purpose. Also, its primary business cannot be to hold assets in a fiduciary capacity for a broad group of outsiders.

    Additional guidance can be found in the IFRS.

    Patricia

    # 10 June 2010 at 9:11 pm
  • ifrsexpert said:

    If you think about it a bit – and this applies to all IFRS standards – they cannot by definition contain any criteria linked to a currency (such as revenue, market capitalisation, total assets, etc.) because these standards are for the whole world.

    A company cannot be a SME if its debt or equity is traded on any stockmarket, or if it is a subsidiary or partly-owned subsidiary of such a company.

    # 11 June 2010 at 8:30 am
  • Mladek said:

    To answer the implicit question, no, there is not a direct correlation between IFRS and the accounting directives.

    As a matter of fact, they are fundamentally different.

    The directives are based on the so called “Franco-Germanic” view of accounting, where accounting strives to server a broadly defined group of stakeholders (from employees and the community at large to the state and its revenue services). That is why companies are classified (at the EU level) based on revenue, assets, employees (Thresholds defining SME), all measures indicative of their impact on the nation state as a whole.

    IFRS (and US GAAP) are based on the so called “Anglo-Saxon” view of accounting, where the primary function of published accounts is to facilitate the allocation of capital (from investors to companies).

    Thus the term “public accountability” in the 4th and 7th Directive sense (serving the state and all its citizens) is fundamentally different from the IFRS/US GAAP sense (servicing providers of capital at risk).

    And, BTW, IFRS-SME, is not currently “allowed” in any EU jurisdiction. While the UK and Ireland are (surprise, surprise) the closest), other jurisdictions (such France and Germany) have stated that they have no intention (hard to believe as it may be) of ever recognizing IFRS-SME in place of their own “national GAAP”.

    # 22 August 2010 at 10:11 am
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