Definition
IFRS for SMEs is a standalone, simplified version of IFRS for small and medium-sized entities that have no public accountability, meaning their debt or equity is not publicly traded and they do not hold assets for a broad group of outsiders, such as banks do. It cuts options, simplifies measurement and requires far fewer disclosures.
How it works
The standard fits in one volume organised in sections, so a small company does not have to navigate the full IFRS. Key simplifications include amortising goodwill over its useful life (no more than ten years when it cannot be estimated reliably), expensing all borrowing costs and development costs, and fewer fair value measurements.
The IASB issued the third edition in February 2025, effective for periods beginning on or after 1 January 2027, with earlier application allowed. It aligns the revenue section with the five-step model of IFRS 15 and updates fair value and consolidation guidance.
Whether you can use it depends on local law. Many countries allow it for private companies, some require it. A small business chart of accounts or the IFRS template both work as a base.
Example: goodwill under IFRS for SMEs
A company buys a small competitor and recognises goodwill of 300,000. Management cannot reliably estimate its useful life, so it amortises the goodwill over 10 years: 30,000 a year. Under full IFRS, goodwill is not amortised but tested for impairment every year.