The third edition of the IFRS for SMEs® Accounting Standard, issued in February 2025 and effective from January 2027, brings several key amendments compared to the second edition issued in 2015. This report provides an overview of these amendments, highlighting changes in alignment with full IFRS ® Accounting standards, simplification and usability, conceptual updates, new requirements, and global relevance.
- Alignment with IFRS Accounting Standards
Since the last update in 2015, full IFRS standards have undergone significant changes. The third edition of the IFRS for SMEs Standard brings it closer to these updates, particularly those outlined in the table below:
| IFRS | IFRS for SMEs | Key Update |
|
IFRS 15 – Revenue from Contracts with Customers |
Section 23 – Revenue from Contracts withCustomers | Introduced a new revenue recognition model based on a five- step approach, replacing theprevious simpler model |
|
IFRS 13 – Fair Value Measurement |
Section 12 – Fair Value Measurement | New section added to consolidatefair value measurement guidance, improving consistency and clarity |
|
IFRS 9 – Financial Instruments |
Section 11 – Financial Instruments |
Updated classification and measurement principles; removed the option to apply IAS 39; retained incurred loss model for impairment Further, all financial instruments are now dealt with under section 11, both basic (previous section 11) and other financial instruments (previous section 12) |
|
IFRS 10 – Consolidated Financial Statements |
Section 9 – Consolidated and Separate FinancialStatements | Revised definition of control and introduced a single basis for assessing control |
|
IFRS 3 – Business Combinations |
Section 19 –Business Combinations and Goodwill | Introduced the acquisition method of accounting for business combinations |
|
IAS 7 – Statement of cash flows |
Section 7 – Statement of Cash Flows |
Added requirement to reconcile changes in financing liabilities, including non-cash changes Addition of requirements to disclose information about supplier finance arrangements |
| 2018 Conceptual Framework | Section 2 – Concepts and Pervasive Principles | Updated to align with the revised framework, enhancing the basis for developing accounting policies |
2. Simplification and Usability
While aligning with IFRS Accounting Standards, the IASB retained the simplicity principle—ensuring the Standard remains accessible and cost-effective for SMEs with limited resources. For example:
• The incurred loss model for impairment was retained instead of the more complex expected credit loss model.
• Simplified disclosures and streamlined sections (e.g., merging financial instruments sections) were introduced.
3. New and Enhanced Requirements
Several new requirements were introduced to improve transparency and decision-usefulness:
• Fair value measurement now has a dedicated section.
• Cash flow statements must now include reconciliation of financing liabilities.
• Supplier financing arrangements must be disclosed.
4. Global Relevance and Adoption
As SMEs form the backbone of many economies, especially in developing countries, updating the Standard ensures it remains globally relevant, credible, and widely adoptable.
