The draft IFRS for Private Entities (PEs) standard received a
cool reception at the FEE SME/SMP Congress in Denmark this

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.

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“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.