The draft IFRS for Private Entities (PEs) standard received a cool reception at the FEE SME/SMP Congress in Denmark this month.
EC Internal Markets director Pierre Delsaux and European Financial Reporting Advisory Group (EFRAG) vice-chair Françoise Flores both spoke critically against the standard.
European SME standard
Delsaux said the commission does not like what is being prepared by the International Accounting Standards Board (IASB) and suggested one possible alternative could be using the EU Fourth and Seventh Company Law Directives as a base to develop an EU-wide standard for SMEs.
“It is up to you to decide – do you prefer IFRS for Private Entities or do you want something new?” he said.
Flores suggested IFRS for PEs is a missed opportunity.
“It still does not seem to be a standard in its own right, rather a cut, copy and paste exercise,” she said. “We think that’s a shame.”
Flores said a standard in its own right would be easy to understand and implement and that IFRS should be a starting point, not a reference. Particularly as most SMEs will never go public and apply IFRS and there is little need for the financial statements of PEs and listed companies to be comparative.
“The IASB is in a position to choose between an acceptable standard and a high-quality standard,” she said, adding that the fact that IFRS for PEs is likely to be widely adopted is not an indicator that it couldn’t be better. “In the end the only real simplification is less disclosures,” she said.
FEE vice-president José Maria Bové of Spain was one voice in favour of the private entities standard.
He argued that as quoted companies have an international standard, “smaller companies can’t be kept out of this modernity – to be able to work across borders”. “It is discrimination compared with larger companies,” he said.
Congress chair Henry Heiberg was also not totally dismissive. He said he is “caught in the middle” when it comes to IFRS for PEs and believes there is no doubt the simplified standard is a necessary tool for the future.