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IFRS FOR SMEs

Introduction

ICPAK formally adopted the IFRS for SMEs following Council approval at its October

2009 meeting.

This implies that all entities that meet the definition of an SME may immediately adopt

the standard. Such entities are at liberty to apply the full IFRS as well.

Entities that are publicly accountable as per the approved definition must apply the full

IFRS. This definition is essential so that entities that are not small or medium-sized

entities, and therefore are not eligible to use the IFRS for SMEs, do not assert that they

are in compliance with it.

If a publicly accountable entity (Non SME) uses this IFRS, its financial statements shall

not be described as conforming to the IFRS for SMEs—even if law or other regulation in

its jurisdiction permits or requires this IFRS to be used by publicly accountable entities.

Definition of An SME in Kenya

An SME is defined as an entity that,

a) Does not have public accountability

b) Publishes general purpose financial statements for external users eg owners not

involved in day to day management; Kenya Revenue Authority; existing and

potential creditors; credit rating agencies.

c) Who’s debt and equity instruments are �OT traded in the public market (A

domestic or foreign stock exchange or over the counter market)

A�D

d) Does �OT hold funds in a fiduciary capacity for a broad group of outsiders as

one of its primary businesses such as banks, credit unions, insurance companies,

securities brokers/dealers, mutual funds and investment banks

SMEs will have the option to use IFRSs for SMEs or the full IFRSs

�on SMEs are Publicly Accountable entities that,

a) Have their debt and equity instruments traded in the public market (A domestic or

foreign stock exchange or over the counter market)

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A�D/OR

b) Hold funds in a fiduciary capacity for a broad group of outsiders as one of its

primary businesses such as banks, credit unions/Saccos, insurance companies,

securities brokers/dealers, mutual funds and investment banks

Publicly accountable entities must present their financial statements in

compliance with full IFRS. These (Publicly accountable entities) will comprise

entities included in the list below,

a) Companies whose debt or equity instruments are traded in a public market or are

in the process of issuing such instruments for trading in a public market

b) Banks and Building Societies

c) Savings and Credit unions including Saccos

d) Insurance companies

e) Retirement Benefit Schemes

f) State owned entities including state funded parastatals

g) Mutual funds

h) Investment banks

i) Stock brokers

All other entities (�ot in this list) preparing general purpose financial statements for

external users may opt whether to comply with full IFRS or the IFRS for SMEs

The IFRS for SMEs and the accompanying basis for conclusions and implementation

guidance are available on the ICPAK website at www.icpak.com (Click on resources and

download the relevant document).

The Institute secretariat has prepared a summary of the standard. Training sessions have

been planned for members on IFRS for SMEs in the CPE calendar 2010.