What is the extent to which full IFRS and IFRS for Small and Medium-Size Enterprises (SMEs) are used in Australia?

IFRS are used by SMEs in Australia to some extent, but they are not required to use them as fully as larger reporting entities.

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Before trying to measure the extent to which International Financial Reporting Standards (IFRS) are used by Australia’s small and medium-sized entities (SMEs), it’d might be helpful to review the purpose of IFRS.

IFRS are accounting protocols that are created by the IFRS Foundation and the International Accounting Standards Board (IASB). As many companies transact with companies from across the globe, IFRS creates a common standard for financial reports, so, no matter the nation, all businesses, hypothetically, are abiding by similar guidelines.

Australia did not adopt IFRS until 2005. When they did, they understood that adhering to these standards could be burdensome and costly, especially to an SME with limited resources. An exact definition of an SME can be elusive; generally, if a business in Australia employs less than 200 people, they can be reasonably labeled an SME.

In 2009, when the IASB circulated IFRS for SMEs, the Australian Accounting Standards Board (AASB), the agency responsible for maintaining and enforcing financial standards for its domestic businesses, did not require SMEs to adopt them. Instead, the AASB decided that SMEs should use a variant of IFRS that, while maintaining their standards, was less onerous.

The AASB figured that, due to their relatively tiny scope and operational size, SMEs shouldn’t have to go through the process of reporting everything that a larger enterprise must.

Considering the above, it seems safe to say that most SMEs probably use IFRS to some extent in their financial reports. Yet due to their comparative smallness, they likely don’t use them as fully as bigger companies.

Last Updated by eNotes Editorial on

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