Accounting for Small and Medium Enterprises
Learn About Accounting Online for SMEs and Contractor Accounting
The International Accounting Standards Board (IASB) issued the International Financial Reporting Standards (IFRS) for Small and Medium Enterprises (SMEs) in July 2009. This aids entrepreneurs who are more concerned with short-term cash flows, liquidity and solvency, as compared to sophisticated investors and users of financial statements. Indeed, contractor accounting software such as QuickBooks and Simply Accounting are available for entrepreneurs which already aid them in their accounting work. Nevertheless, this accounting standard further streamlines many of the small business accounting requirements previously required for all legal entities.
According to the IFRS for SMEs which is a good resource for small business accounting online, SMEs are defined as entities that do not have public accountability, and publish general purpose financial statements for external users. An entity typically has public accountability if its debt or equity instruments are traded in a public market, or it holds assets in a fiduciary capacity for a broad group of outsiders.
The objective of the financial statements of SMEs is to provide information about the financial position, performance and cash flows of the entity that is useful for economic decision making by a broad range of users. In addition, the financial statements should record the stewardship function of management.
IFRS for SMEs is based on the fundamental principles of the regular IFRS. Some of the alternatives available under the regular IFRS have been removed and some requirements have been lifted to make IFRS for SMEs simpler to apply for entrepreneurs and owners of small and medium sized enterprises. These changes are largely for cost/benefit reasons and not necessarily conceptual reasons.
Considerations for Entrepreneurs when Adopting IFRS for SMEs
- Legislative/regulatory requirements in their jurisdiction
- Impact on consolidation and financial statement processes
- Significant judgment may be required to determine “undue cost or effort” and “impracticable”
- Personnel changes in the finance function
- Information Technology systems changes
The IFRS for SMEs includes general definitions of assets, liabilities, income and expenses and the general requirements for recognition that:
- It is probable that future economic benefits will flow to/from the entity; and
- The item can be measured reliably.
Other key accounting online references can be found below.
Small Business Accounting Online for Fixed Assets for Entrepreneurs
- Property, plant and equipment
- Measured at cost less accumulated depreciation and impairment losses
- Revaluation option removed
- Investment properties
- Measured at fair value (unless fair value cannot be measured reliably)
Small Business Accounting Online for Intangible Assets for Entrepreneurs
- Intangible assets
- Measured at cost less accumulated amortisation and impairment losses
- All internally generated intangibles are expensed
- Have finite useful life which is assumed to be 10 years unless it can be reliably estimated
- Goodwill
- Amortised over useful economic life (which is very different from the regular IFRS)
- Has finite useful life which is assumed to be 10 years unless it can be reliably estimated
Payroll Accounting Online for Employee Benefits such as Stock Options for Entrepreneurs
- Share-based payments
- Directors’ judgment is used to measure fair value of shares in equity-settled schemes in certain circumstances
- Schemes that give choice of equity or cash settlement are typically accounted for as cash-settled.
Useful list of Small Business Accounting Software and Contractor Accounting Software for Entrepreneurs
- Simply Accounting by Sage
- Epicor Financial Management
- MYOB Premier Accounting
- NetSuite Financials
- Intuit Quickbooks
Accounting Online for Entrepreneurs
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