The European Union has rebuffed the International Accounting Standards Board's proposed standards for small to midsized businesses, labeling the package "too complicated" for the nature of SMBs."The feedback we have received from member states, the European Parliament and stakeholders is that the current IASB draft is not simple enough to be applicable for the bulk of SMBs in the EU," said EU Commissioner for Internal Markets Charlie McCreevy. "Therefore, at this stage, I do not intend to propose that the IASB draft be endorsed for application in the EU."
McCreevy added, "We have repeatedly emphasized that accounting for SMBs must be simple and reflect the nature of the business of small companies." The head of the EU internal market even questioned whether European national governments could voluntarily opt to apply the IASB draft standard.
There are currently between 1 million and 2 million SMBs in the EU.
The IASB drew up its 200-page draft - IFRS for SMEs - in February. The original comment deadline was scheduled for October, but that date was pushed back until November 30. Field tests are currently under way, in part "to help identify aspects of the exposure draft that may need reconsideration. "
SOME READY TO GO
In the past, McCreevy has consistently championed any measure to boost the EU's capital markets. His recalcitrance to embrace the SMB standards may have strained relations with the British Accounting Standards Board, whose chairman, Ian Mackintosh, expressed his disappointment in the commissioner's position.
Nevertheless, two EU members, Britain and Denmark, have already indicated that they intended to begin the process of adopting the IFRS for SMBs. Australia has already proposed adoption for its approximately 25,000 large and midsized unlisted companies, while South Africa indicated that it would take the same route.
Paul Pacter, the IASB's director of standards for private companies, told Accounting Today that in any event, jurisdictions would have an independent option to adopt or not. In response to objections that, for example, a corner bakery would not be able to cope with the proposed standards, Pacter questioned why governments would think of forcing compliance on them at all.
LET'S ASK BUSINESS
BusinessEurope, the massive employers' federation, like others, criticized the standard in its present form as "too complex and not suitable for a vast majority of SMBs, which are small and owner-managed."
At the recent annual congress of the European Federation of Accountants held in the Netherlands, the group offered qualified support for the proposal, but also some criticism.
Olivier Boutellis-Taft, the federation's chief executive officer, said that an international standard for smaller businesses would help. But the FEE, like the EU, felt that some parts of the exposure draft could do with further simplification - particularly considering that up to 150 countries could conceivably fall under IASB standards in the future, depending on the progress of the global convergence initiative.
Boutellis-Taft also noted that the challenge of providing a set of standards to suit the vast range of types of SMB is a very broad concept. "It's broad enough in Europe itself, but even more so when one thinks globally. It's not a matter of size of the firm. The term covers realities that are completely different ... with factors such as maturity of the business. A private company in the U.S. employing fewer than 20 people could well be a highly complex business working in a field of advanced technology."
