History Of Financial Reporting Framework For Smes Accounting Essay

The International Accounting Standards Board had published International Financial Reporting Standard specially designed to be used by the little and moderate-sized entities ( SMEs ) in 2009 ( IASB, 2009 ) . This IFRS for SMEs was issued with the intent of cut downing the load of private entities that is non accountable to the populace. The IFRS for SMEs is a self-contained criterion of 230 pages, and is less complex in a figure of ways compared to the full IFRSs ( IASB, 2009 )

The undertaking started in 2003, where IASB had published the treatment paper ( DP ) Preliminary Views on Accounting Standards for Small and Medium-sized Entities. After five twelvemonth of development procedure, on July 2009, IASB had published the full set of IFRS for SMEs. There are many statements on the publication of the IFRS for SMEs, whether it will give benefit or burthen the SMEs. In fact, before the IFRS for SMEs is published by IASB, remarks from the public through round-table and recommendation from working group had been taken into consideration.

One of the advantages of this IFRS for SMEs is that it is simpler than the full IFRS ( Yusoff, 2009 ) . The IFRS for SMEs is a subset of the full IFRS where it is simplified to run into the demands of users of SMEs fiscal statement. As a consequence, utilizing IFRS for SMEs can cut down the coverage load of SMEs ( IFRS Conference, 2010 ) and supply a platform for turning concern to fix in come ining public capital market ( Yusoff, 2009 ) . Price Waterhouse Coopers ( 2009 ) explains the debut of the model to SMEs can cut down clip and cost of fixing statutory filings yearly since it is less specific in many countries. With the increasing of figure of SMEs in many states, the model can assist planetary companies or shared service Centres to centralize the accounting expertness, create efficiency and cut down cost. Besides, with the acceptance of IFRS for SMEs, SMEs are able to better the entree to capital ( IFRS Conference, 2010 ) . As IFRS for SMEs is now accepted by the worldwide, it can supply improved comparison for users of the histories particularly for capital suppliers to do intelligent determinations ( Bertoni and De Rosa, 2013 ) . SMEs are able to heighten the assurance in the histories particularly to the Bankss and fiscal establishment.

There are some statements against the acceptance of IFRS for SMEs. The acceptance of the IFRS for SMEs involve immense sum of cost particularly in developing cost ( Masca, 2012 ) . Since the IFRS for SMEs is still new, developing demand to be given to the preparer every bit good as to the users. However, insufficiency of preparation provided to the accounting forces and deficiency of preparation plans arrange by the professional organic structures is another obstruction for implementing IFRS for SMEs ( Uyar and GungormuAY , 2013 ) . This will ensue in preparer and users do non aware or understand the different between full IFRS and IFRS for SMEs. Besides, the acceptance of new accounting model will hold an impact on the revenue enhancement jurisprudence. Regulators need to modify the revenue enhancement jurisprudence to provide the alterations in the fiscal coverage model. This could be overly dearly-won for SMEs to carry through the new revenue enhancement demand ( Bertoni and De Rosa, 2013 ) .

History of fiscal coverage model for SMEs in Malaysia

The fiscal coverage patterns in Malaysia are governed by the Companies Act 1965, the Securities Commission Act 1993, Companies Commission of Malaysia and Kuala Lumpur Stock Exchange ( KLSE ) List Requirements. The standard scene duty lies entirely with the Malayan Accounting Standard Board ( MASB ) .

SMEs in Malaysia can be classified into three classs which are micro, little and medium and can be decided based on two standards either the Numberss of people a concern employs or the entire gross revenues or gross generated by a concern in a twelvemonth ( SME Masterplan 2012 – 2020, 2012 ) . The classs and standards of SMEs are as below:


Servicess Sector


Less than 5 employees

Less than 5 employees


Between 5 & A ; 50 employees

Between 5 & A ; 19 employees


Between 51 & A ; 150 employees

Between 20 & A ; 50 employees

Table 1: Standards based on figure of employees


Servicess Sector


Less than RM250,000

Less than RM200,000


Between RM250,000 & A ; less than RM10 million

Between RM200,000 & A ; less than RM1 million


Between RM10 million & A ; RM25 million

Between RM1 million & A ; RM5 million

Table 2: Standards based on one-year gross revenues turnover

Businesss that fulfil either one of the standards will be classified as SME in Malaysia. Harmonizing to the Annual Report 2011/12 of SME Corporation, SMEs constitute of 97.3 % of entire concern constitution which provide 57.3 % of employment in 2011. Besides, SMEs besides contribute 32.5 % of GDP. This shows clearly that SME sector is the anchor of Malaysia ‘s economic system. Currently SMEs in Malaysia are describing utilizing the Private Entities Reporting Standard ( PERS ) which is similar to the old International Accounting Standard ( IAS ) ( Yusoff, 2009 ) .

The Malayan Accounting Standard Board ( MASB ) had decided to alter its fiscal coverage model from individual grade to a two-tier fiscal coverage model in 2006. Under this two-tier fiscal describing criterion, private entities have an option to take whether they want to use Malayan Financial Reporting Standards ( MFRS ) or PERS Framework whichever is appropriate for them. The issue of the PERS Framework via exposure bill of exchange ( ED ) 52 served as impermanent criterions to be used by the private entities while waiting for the IASB to develop a set of new criterions for SMEs. PERS Framework is a comprehensive set of accounting criterions for private entities and it has remove certain revelation demands which are burdensome for private entities ( MASB, 2006 ) .

When IASB had issued IFRS for SMEs in July 2009, MASB jointly with Malaysian Institute of Accountants ( MIA ) issued ED 72 Financial Reporting Standards for Small and Medium-sized Entities in March 2010. The exposure bill of exchange received positive feedback from the consequence of the study while ED 52 received the least feedback. Subsequent to the issue of ED 72, MASB had issued ED 74 Amendments to Financial Reporting Standards originating from Reduced Disclosure Requirements in December 2010. This exposure bill of exchange serves as a response to turn to the concern of those private entities that does non hold public answerability such as non-publicly accountable subordinates, associates or jointly-controlled entities whose parent, investor or venture that is non a private entity ( MASB, 2010 ) .

In March 2012, MASB had issued Roadmap for Private Entities Financial Reporting Framework which explains MASB ‘s program to guarantee that private entities which meet certain standards to follow FRS for SMEs which was issued as MASB ED 72. Harmonizing to the Roadmap, private entities with one-year gross of RM500,000 and above which is referred to as “ moderate-sized PE ” will follow the FRS for SMEs as their fiscal coverage model. Those private entities with gross below RM500,000 can take to go on using PERS Framework.

Malaya is still in the passage procedure where MASB has targeted to publish the FRS for SMEs during the first half of twelvemonth 2013. The FRS for SMEs shall be compulsory for moderate-sized PE with one-year periods get downing on or after 1 January 2016. However, any private entity who decided for an early acceptance is encouraged.

Relevance and rightness of the IFRS for SMEs in Malaysia



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