How IFRS for SMEs simplifies full IFRS
The five kinds of simplification the IFRS Foundation lists for IFRS for SMEs, and what each means when drafting a small client's policies and notes.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
A junior who trained on full IFRS often drafts an SME client's statements as if the full standards applied, then trims. The result is recognisable: a note on a topic the client's framework does not cover, a policy describing an option the framework does not permit, and pages of disclosure no reader of a small company's statements needs. Each item is harmless on its own. Together they make the statements longer, harder to review and occasionally wrong.
The better approach starts from what the IFRS for SMEs Accounting Standard is designed to be. This article sets out the kinds of simplification the IFRS Foundation describes, and what each one means for the person drafting a client's policies and notes.
The kinds of simplification the IFRS Foundation lists
The IFRS Foundation describes five types of simplification from full IFRS Accounting Standards in the IFRS for SMEs Accounting Standard:
- Some topics in full IFRS are omitted because they are not relevant to typical SMEs.
- Some accounting policy options in full IFRS are not allowed, because a more simplified method is available to SMEs.
- Many of the recognition and measurement principles in full IFRS are simplified.
- Substantially fewer disclosures are required.
- The text is written in plain English, so it is easier to understand and translate.
Each has a practical consequence for drafting. The first three affect what the client recognises and how it measures it. The fourth affects the length of the notes. The fifth is a reminder that the standard is meant to be read directly by the people applying it, which is good news for any preparer tempted to rely on a full IFRS manual instead.
Topics omitted and options removed
When a topic is omitted because it is not relevant to typical SMEs, the SME client does not need a policy or a note on it. The drafting error to watch for is importing one anyway because the preparer's template or memory came from full IFRS. Before finalising, read the policy list and ask of each heading: does the IFRS for SMEs standard deal with this, and does the client have it?
Removed options work in a similar way. Where full IFRS gives a choice and the SME standard allows only the simpler method, the client's policy should describe that method and nothing else. A policy that says "the company has elected" something the SME standard does not offer is a sign that wording was copied from a full IFRS set. Rewrite it.
If a client has a transaction that seems not to be covered at all, do not reach for full IFRS by reflex. Read the SME standard's own guidance on selecting policies first, and record the reasoning.
Simpler recognition and measurement
The IFRS Foundation states that many of the recognition and measurement principles in full IFRS have been simplified in the SME standard. For the preparer this means two things.
First, the measurement working papers should follow the SME standard's requirements, not the full IFRS ones. A calculation built on a full IFRS model may produce a different figure from the one the SME standard requires, and the reviewer will reasonably ask which standard the working paper applies.
Second, simplified does not mean optional. A simpler principle is still a requirement, and a small client's statements still need it applied consistently from year to year.
Fewer disclosures and shorter notes
The IFRS Foundation states that the SME standard requires substantially fewer disclosures than full IFRS. This is the simplification most often wasted. Notes drafted from a full IFRS checklist, then partly deleted, usually leave behind paragraphs the SME standard never asked for.
Draft from the SME standard's disclosure requirements outward, not from full IFRS inward. A short checklist for each note:
- Which paragraph of the SME standard requires this disclosure?
- Does the client actually have the item being described?
- Would a reader of this client's statements miss the paragraph if it were removed?
Achekam's Studio supports this approach. Its standard accounting policy wording is based on IFRS for SMEs and is labelled for review before issue, and staff can write the client's own policies where the standard wording does not fit. Notes take their figures from the mapped trial balance; facts the trial balance does not hold are left as "[to be completed]", and a line carries a note reference only when that note is in the set. Review the standard wording against the client's circumstances and against the edition of the standard the client applies, which matters during the move to the newer edition described in the 2025 edition of IFRS for SMEs.
Leases under Section 20 in the lease register
Leases are one area where the framework choice must be carried into the working papers. Achekam lets staff keep a client's lease register under either IFRS 16 or IFRS for SMEs Section 20. Choose the basis that matches the client's framework and the edition it applies, and do not run an SME client's leases through an IFRS 16 model by default.
The register can also read a lease from the contract and produce an AI draft of its terms. That draft is not used until a person confirms it, and every number the AI reads must appear in the contract text. Check the extracted dates, payments and options against the signed lease before confirming, because the accounting under either basis depends on them.
Where to read further
The IFRS Foundation's page on the IFRS for SMEs Accounting Standard explains what the standard is and how it simplifies full IFRS for smaller entities. Whether a given client should use it at all is a separate question, covered in IFRS for SMEs or full IFRS.
The next time a draft for an SME client runs long, go through the notes with the five simplifications beside you. The paragraphs that do not belong usually identify themselves.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
