[Global Financial Insights] IASB Proposes IFRS for SMEs Amendments on Consolidation Exemption

Editorial Team – [2026] 186 taxmann.com 519 (Article)

Global Financial Insights is a weekly feature for the Accounts and Audit Module subscribers of Taxmann.com. It provides you with the latest updates on financial reporting and auditing practices from across the globe. Here is this week’s financial update:

1. IASB Issues an Exposure Draft Proposing Amendments to IFRS for SMEs on the Consolidation Exemption

The International Accounting Standards Board (IASB) has issued an Exposure Draft proposing narrow-scope amendments to the IFRS for SMEs Accounting Standard, aimed at aligning certain consolidation requirements more closely with full IFRS Accounting Standards.

The proposed amendment would introduce a consolidation exemption for intermediate parent entities whose parent or ultimate parent is an investment entity that does not prepare consolidated financial statements. Instead, such investment entities measure subsidiaries at fair value through profit or loss under IFRS 10. The proposal seeks to address an inconsistency under the current IFRS for SMEs framework, where eligible SMEs may still be required to prepare consolidated financial statements despite similar entities under full IFRS being exempt.

The amendment follows recommendations from the SME Implementation Group (SMEIG), which considered the issue significant enough to warrant an urgent revision to the standard. According to the IASB, the change is intended to reduce unnecessary reporting burdens and provide eligible SMEs with similar cost-saving benefits available under full IFRS.

The Exposure Draft is open for public comment until 9th September 2026, with the proposed amendments expected to become effective from 1st January 2027 if finalised.

Source – IFRS Foundation

2. IAASB Proposes a Revision to the Review Engagement Standard to Strengthen the Interim Review Engagement

The International Auditing and Assurance Standards Board (IAASB) has issued an Exposure Draft proposing extensive revisions to ISRE 2410, Review of Interim Financial Information by the Independent Auditor of the Entity’s Annual Financial Statements, the international standard that governs the review of interim financial information by an entity’s external auditor. The proposal represents the first comprehensive update to the standard in nearly two decades and is intended to modernise the framework in line with evolving reporting and assurance practices.

Interim financial reporting, including quarterly and half-yearly results, continues to play an important role in capital markets by providing timely financial information to investors and other stakeholders. Against this backdrop, the IAASB’s proposed revisions seek to improve the quality, consistency, and transparency of interim review engagements while clarifying the responsibilities of auditors performing such reviews.

Among the key changes proposed are clearer distinctions between an interim review and a full financial statement audit, helping users better understand the level of assurance provided in these engagements. The draft also strengthens auditor responsibilities in sensitive and high-risk areas such as going concern assessments, fraud considerations, and instances of non-compliance with laws and regulations.

In addition, the proposals introduce updated guidance on engagement quality management, materiality considerations, and reviews involving group entities. The IAASB has also proposed improvements to the auditor’s interim review report to enhance transparency and provide more meaningful information to users of financial statements.

The Board developed the proposals in coordination with the International Ethics Standards Board for Accountants (IESBA) to ensure alignment between auditing and ethical requirements applicable to interim review engagements. Stakeholders have been invited to provide comments on the Exposure Draft by 3rd September 2026.

Source – International Auditing and Assurance Standards Board

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