shifts focus to smaller entities

The importance of effective and reasonable regulation for
smaller organisations was one of the cornerstones of discussion at
the third annual European SME/SMP Congress in the Netherlands this
month. Carolyn Canham reports

The European Federation of Accountants (Fédération des Experts
Comptables Européens – FEE) is to focus more attention on SMEs. FEE
president Jacques Potevin revealed a shift in strategy at the Third
FEE Annual European SME/SMP (small- to medium-sized practices)
Congress held in The Hague, the Netherlands, recently. In his
opening speech he said most of FEE’s focus has traditionally been
on large internationals.

“Therefore it was necessary to review the scope [of the
federation’s activities],” he explained.
Potevin said the necessity of the review was due to the importance
of SMEs to economies worldwide. He emphasised the role of SMEs on
the European internal market and how the development of this market
is vital to smaller entities.

Potevin said there is transparency at a national level and now it
is needed at an EU and global level. “As a profession we can help
SMEs by improving transparency,” he said.

Loek Hermans, chair of the business umbrella group MKB-Nederland,
suggested that regulation for SMEs should be the standard, rather
than the exception. The former government minister said
transparency is needed, especially when the public’s money is
invested, however, transparency for smaller entities “should be
“Introduction of IFRS for SMEs is over the top,” he said at the
conference. “The 5 percent of larger companies should be the

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Hermans said, at present, the largest 5 percent of companies cause
90 percent of regulation. “Government needs to make SMEs the
standard for rules. The exceptions should be multinationals,”
Hermans explained, adding that governments need to beware of
bringing the problems of the big internationals “flowing into

The EC Director of Free Movement of Capital, Company Law and
Corporate Governance, Pierre Delsaux, said the commission does not
intend to enforce IFRS for SMEs. “It is limited to listed companies
and we do not intend to change,” he said. “If, by chance the
[International Accounting Standards Board (IASB)] develops a
standard that is so well liked by all of you, we won’t stop you
adopting it.” Delsaux explained that IFRS for SMEs is not part of
the European legal system and it is up to individual countries to
decide whether to adopt the standards.

SEC recognition of European IFRS

Delsaux also expressed concern about the US Securities and Exchange
Commission’s (SEC) recommendation to allow preparers of financial
statements in the US to use IFRS as adopted by the IASB. Delsaux
suggests this could exclude financial statements prepared under
IFRS as adopted by Europe, which has some variances to the IASB
version. He said the commission is currently speaking with the SEC
about accepting the European version of the standards.

“It is important for our firms to operate in the US and on a global
level,” he explained.

Contrary to the reservations some industry figures held regarding
IFRS for SMEs, there was widespread support during the congress for
the simplified standards. Angela van Os, financial manager for
Dutch flower company Anthura, spoke about how the increasingly
international nature of SME transactions made it highly desirable
to have a set of suitable international standards.

Support for IFRS for SMEs

Deloitte Netherlands chief executive Roger Dassen also supported
the standards. “I do believe that having, even for SMEs, a common
sets of standards makes an awful lot of sense, because even SMEs
are getting more and more international than they were in the
past,” Dassen told TA. “But it should be a set of
standards that really can be handled by SMEs and I think IFRS as it
currently stands might be a handful.”

Dassen expressed sympathy for the IASB’s task of modifying IFRS to
suit smaller entities, likening it to asking an artist to cut away
50 percent of a painting.

“I can see that for the standard setter that came up with the
original standards, it’s pretty difficult to do that,” he

The main theme of Dassen’s presentation at the FEE conference was
the future of the profession. He told the congress that there has
not been enough talk on the topic in recent years.

“In the past seven years, with all the financial scandals that
arose, there has been an incredible pressure on the quality, the
compliance, etc, etc, for very good reasons,” Dassen said. “But I
think we need to look at what business reporting will look like in
the next couple of years and I am quite certain that it will not be
confined to the traditional financial statements once every year
that we currently have because I don’t think they serve the
information needs for investors and of the public at large.

“I believe that in addition to those financial statements… we will
see that non-financial measures get reported on, that companies
report on the quality of their systems, that they report on their
behaviour, their corporate social responsibility.”

Dassen suggested that continued focus solely on the quality of
financial statements could lead to unnecessary complexity. He
concluded: “If we do not think about the reporting framework in the
future, the only discussion in our territory will be on reducing
the administrative burden, and that’s not a great place to be in,
is it?”