IFRS for SMEs

What it means

IFRS for SMEs is a simplified version of international financial reporting standards for small and medium-sized companies without public accountability, meaning they are not listed and do not manage others' money as banks do. It is issued by the same board as full IFRS.

Compared with full IFRS it has fewer pages, fewer accounting choices and simpler rules, for example on goodwill, borrowing costs and financial instruments. It also requires fewer disclosures in the notes, which reduces the cost of preparing financial statements.

The Slovak Accounting Act does not allow IFRS for SMEs to be used instead of Slovak accounting procedures for statutory financial statements. The standard is, however, used in group reporting, in some non-EU countries and for voluntary reports to investors.

How it works in practice

Slovak small and micro entities prepare their statements under Slovak rules. If they belong to a foreign group using IFRS for SMEs, they also prepare a reconciliation for group consolidation.

The International Accounting Standards Board updates the standard periodically to reflect changes in full IFRS, for example on revenue and leases. The new edition introduces simplified versions of these principles with a longer transition period for companies.

Slovak companies seeking a foreign investor or bank may find it useful to prepare supplementary statements under IFRS for SMEs. This makes comparison with companies in other countries easier but means extra work alongside the statutory accounts.

What to watch out for

IFRS for SMEs is not just a shortened version of full IFRS and differs in some areas. When moving between them, think through the effects on asset measurement, revenue and equity rather than simply copying accounting policies.

Differences between Slovak procedures and IFRS for SMEs can be significant, for example in deferred tax, impairment allowances or leases. The reconciliation should be documented so the group auditor can verify it.