New global accounting standard will benefit many

News release

Quick adoption of new global accounting standard for SMEs will benefit many NZ companies – Grant Thornton

July 10, 2009

Compliance relief could be at hand for small and medium-sized entities in New Zealand if they were allowed to take immediate advantage of a new standard that has just been published by the International Accounting Standards Board (IASB) says accounting and consulting firm Grant Thornton.

The new standard, aptly named International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs), provides a substantially simplified set of accounting principles that would be suitable for many businesses that operate locally and internationally, as well as many public sector entities and not-for profit organisations.

Chris Dixon, Grant Thornton’s National Audit Director in New Zealand says that the release of this standard is very timely because the Ministry of Economic Development has indicated it will shortly release a discussion paper outlining future financial reporting obligations for SMEs in this country.

“Some might say that what the IASB has just released does not go far enough to reduce the costs of compliance, but it does provide a useful platform to discuss what New Zealand should do next when it comes to financial reporting.

“Sentiments in New Zealand mirror those in Australia where a June 2009 survey* completed by Grant Thornton indicated that 83% of respondents were in favour of a move away from all the complexity present within a full set of International Financial Reporting Standards (IFRS) financial statements,” he said.

The SME standard is about one tenth of the length of full IFRS and the number of potential disclosure items will be nearer to 300 than the current 3000 It took the IASB more than five years to complete this standard because it wanted to respond appropriately to user needs and still be faithful to the financial principles it was using to develop IFRS.

“Another appealing feature of the IFRS for SMEs regime is the IASB’s stated intention, after an initial assessment period, to limit changes to this standard to once every three years – a decision that clearly reflects the IASB’s desire to further reduce the compliance costs associated with financial reporting.

“Any move away from current practice to what the IASB has just released for SMEs will, of course, require careful consideration. Despite these challenges, Grant Thornton believes any short term disruption will be outweighed by the longer term benefits.

“Hopefully New Zealand standard setters will quickly move to allow non-listed companies to replace the cumbersome full IFRS suite of accounting standards with the much more simplified IFRS for SMEs accounting standard if they so wish,” Chris Dixon said.

To help company directors to evaluate the benefits of adopting this new standard Grant Thornton will shortly be providing support material on the new standard via its website: www.grantthornton.co.nz

ENDS

*Access the Grant Thornton 2009 IFRS Survey at http://www.grantthornton.com.au/files/gt_ifrs_survey_0509-final.pdf

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