[Global Financial Insights] Updates on IFRS for SMEs Accounting Standard

Editorial Team – [2026] 184 taxmann.com 234 (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. Updates on IFRS for SMEs Accounting Standard

The IFRS for SMEs Accounting Standard Update (staff summary) provides recent developments relating to the third edition of the IFRS for SMEs Accounting Standard, including changes in consolidation guidance, recent discussions of the SME Implementation Group (SMEIG), and new implementation resources issued by the IASB. This update is a staff summary and has not been formally reviewed by the IASB.

a) Changes in Consolidation Guidance

Under the said update, a key highlight is the revision of Section 9 in the third edition of the IFRS for SMEs Standard, which is now aligned with IFRS 10 Consolidated Financial Statements. The update introduces a single control model for determining whether an entity should consolidate another entity. Under the revised definition, an investor controls an investee when the following three elements are present:

a) power over the investee’s relevant activities,

b) exposure or rights to variable returns, and

c) the ability to use power to affect those returns.

The earlier guidance relating to special purpose entities has been removed, simplifying the consolidation assessment.

The revised Section 9 also clarifies the accounting treatment when a parent loses control of a subsidiary. In such cases, the parent must derecognise the subsidiary’s assets, liabilities and non-controlling interest, recognise the fair value of consideration received and any retained interest, and record the resulting gain or loss in profit or loss.

Certain aspects remain unchanged to simplify the application. In particular, the standard retains the rebuttable presumption of control when an investor holds a majority of the voting rights, unless it can be clearly demonstrated that the elements of control are absent.

The amendments are generally applied retrospectively, with practical reliefs where retrospective application is impracticable or where the determination of control does not change.

b) Discussion on SMEIG Meeting

The update also reports on the SMEIG meeting held on 5th February 2026, where members discussed an application issue relating to the consolidation exemption. The issue concerns whether the exemption should apply to an intermediate parent whose ultimate parent is an investment entity that measures subsidiaries at fair value through profit or loss instead of consolidating them. As the IFRS for SMEs standard currently lacks an equivalent exemption found in IFRS 10, most SMEIG members recommended that the IASB amend the standard, preferably on an urgent basis rather than waiting for the next periodic review.

c) Implementation Resources Issued by the IASB

To support the consistent application of the IFRS for SMEs Accounting Standard, the IASB continues to provide several implementation resources for stakeholders. These include the online version of the IFRS for SMEs Accounting Standard available in multiple languages, hard-copy publications of the Standard, educational modules explaining key sections, and guidance on the procedure for submitting implementation issues.

Source – International Financial Reporting Standard

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