Análisis de grupos

Referring to sections 1.2 to section 1.5 in the IFRS for SMEs, the financial statements of entities that use this IFRS would be described as conforming to IFRS for SMEs, if they satisfy several criteria that are pertinent to SMEs’ definition by IASB which states “Small and medium-sized entities are entities that (IASB, 2009c):

(a) Do not have public accountability, and

(b) Publish general purpose financial statements for external users. Examples of external users include owners who are not involved in managing the business, existing and potential creditors, and credit rating agencies.

An entity has public accountability if:

(a) Its debt or equity instruments are traded in a public market or it is in the process of issuing such instruments for trading in a public market at domestic or foreign stock exchange or an over-the-counter market, including local and regional markets), or

(b) It holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses. This is typically the case for banks, credit unions, insurance companies, securities brokers/dealers, mutual funds and investment banks.

Some entities may also hold assets in a fiduciary capacity for a broad group of outsiders because they hold and manage financial resources entrusted to them by clients, customers or members not involved in the management of the entity. However, if they do so for reasons incidental to a primary business (as, for example, may be the case for travel or real estate agents, schools, charitable organisations, co-operative enterprises requiring a nominal membership deposit, and sellers that receive payment in advance of delivery of the goods or services such as utility companies), that does not make them publicly accountable” (IASB, 2009:10). In the same context, section 1.6 indicates that any subsidiary of a parent company or that belongs to a consolidated group which applies full IFRS, can use IFRS for SMEs and then its financial statements are considered to be described as conforming with IFRS for SMEs providing that it is non- publicly accountable entity. Therefore, subsidiaries that are non-publically accountable entities have the options of either adopting full IFRS in their separate individual account or adopting IFRS for SMEs in their separate individual account and then transfer the financial statements

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to full IFRS when preparing the consolidated financial statements(IASB, 2009c). IFRS for SMEs are organised into 35 topics which cover (European Commission, 2009a):

1- Concepts and pervasive principles, these concepts and principles are based on the "Framework" 11 of full IFRS.

2- Financial statements which must be presented.

3- The guidance regarding accounting treatments of particular transactions.

According to Basic for Conclusion 162, the standards have been organised by topic in order to be more user-friendly as IFRS for SMEs will be manually referenced and increase users’ abilities to link the topics back to full IFRS (IASB, 2009e).

The disclosure requirements of full IFRS have been relaxed in IFRS for SMEs and several irrelevant topics such as earning per shares and issuance insurance have been omitted. In addition, some recognitions, measurements and options have been simplified (Fitzpatrick and Frank, 2009).

The objectives of financial statements of small and medium size enterprises as determined by IFRS for SMEs in section 2.2 and 2.3 are (IASB, 2009c):

1- Providing information about an entity’s financial position, performance and the cash flow which are useful for a wide range of users without focusing on a particular group of users who are in the position of demanding information tailored to their specific needs of accounting information.

2- Financial statements reflect the outcomes of management’s stewardship and its accountability for the resources entrusted to them.

IASB (2009c), in IFRS for SMEs (section 2.4- 2.14) stipulated numerous qualitative characteristics as to financial information in the financial statements, which are illustrated as follows:

1- Understandability: that is comprehensive and understandable by stakeholders who have a reasonable level of knowledge in accounting and other business transactions. On the other hand, this does not imply and allow the elimination of relevant topics on the basis that these topics are relatively complex or difficult for users to understand.

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2- Relevance: financial information must influence the decisions undertaken, by assisting the users in evaluating events, conforming or correcting the evaluation.

3- Materiality: relies on the size of items of which the omission could lead to misstatements that could affect the decisions taken by the users of financial statements. Therefore, material items are relevant.

4- Reliability: financial information in the financial statements must be free from error and bias and faithfully representative. Faithful representation is linked and created by the qualitative characteristics of substance over form, prudence and completeness.

5- Substance over form: financial information prepared according to the substance and economic reality rather than the legal form which enhance the reliability of accounting information.

6- Prudence: implies conservatism and using caution under the circumstances of uncertainty to help users to take wise decisions. Under these conditions, assets and income are not overestimated while liabilities and expenses are not underestimated. However, prudence does not indicate deliberate misstatements for either underestimating assets and income or overestimating liabilities and expenses as the exercise of prudence does not allow bias.

7- Completeness: financial information in the financial statements must be complete. However, the exercise of completeness must be applied under the consideration of materiality and the associated cost. Further, if the omission of information leads to users’ misleading, the information in financial statements will be unreliable and be deficient regarding relevance.

8- Comparability: financial statements must be consistent over time and within companies so that users can determine the trends of financial position, performance and cash flow. Moreover, disclosures are required for any

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accounting policies implemented by entities as well as any change of those polices reflecting the change effects.

9- Timeliness: financial information must be provided within the period of relevance in which decisions being made. However, entities must make a balance between timely reporting and the reliability of accounting information. In other worlds, balance between reliability and relevance is a necessary task in order to maximise the benefits of making effective decisions.

10- Balance between benefit and cost: the benefit of using financial information must overweight the associated cost of providing accounting information.

The expected positive contributions from applying IFRS for SMEs that reflect some of these qualitative characteristics such as, comparability, relevance, understandibility, and cost and benefit consideration, will be evaluated from the preparers’ perceptions.