Paper on “A study of key requirements analysis of IFRS for

SMEs vs. Indian Scenario in relation to Financial Reporting”

Paper Presented by:

CA Nalayiram Subramanian, Professor, Alliance School of Business, Alliance University,
Central Campus, Chandapura – Anekal Main Road, Anekal, Bengaluru -562106
Email: nalayiram.subramanian@alliance.edu.in; nalayiram@hotmail.com
Mobile Number: 9790853099 / 9330116963
 Abstract
Financial Reporting by business entities across the globe has been undergoing a transformation.
The transformation is due to the implementation or efforts towards the implementation of the
International Financial reporting Standards Full Set (IFRS Full Set) and IFRS for Small and
Medium Sized Enterprises (IFRS for SMEs) either by way of convergence or adoption. India
too for her part, has obligated the need for implementation of IFRS Full Set by way of
convergence under the name and style “Indian Accounting Standards” or Ind AS and has thus
become a part of the 144 Nations1 that have implemented the IFRS Full Set in respect of larger
companies. However, India has yet to announce her decision with respect to implementation
of the International Financial Reporting Standard for SME or IFRS for SME2, despite being
one of the top six global economies3, while 86 Nations have either required or permitted the
business entities to present the Financial Statements as per the Standard. The erstwhile
accounting standards which were applicable even in respect of present day Ind AS category
companies continue to be applicable in respect of the rest of the business entities, which may
be technically referred to as Small and Medium Enterprises in the context of classification of
business entities by the Government of India with some exceptions in respect of One Person
Company, Small Company and Dormant Company4. Thus, there is a greater asymmetry of
financial information flow in relation to the Small and Medium Enterprises between Indian
SMEs and those of nations implementing IFRS for SME as against Ind AS / IFRS category
companies. Hence, it becomes essential to evaluate the quality of financial reporting versus
requirements on a comparative basis in relation to presentation between these two sets of
standards, namely Existing Accounting Standards and IFRS for SMEs, which would help
investors and analysts in analysing the general purpose financial statements and making
effective economic decisions and the policy making bodies including the regulators to consider
the outcome of the study in their future policy formulation with respect to prescription of the
financial reporting requirements or in formulation of the Standards. This study has been carried
out on the basis of key requirements as per the IFRS for SMEs and Existing Accounting
Standards and requirements under Companies Act 2013, which forms an essential reckoning
force in relation to defining the presentation requirements in India.

1
https://www.ifrs.org/-/media/feature/around-the-world/adoption/use-of-ifrs-around-the-world-overview-
sept-2018.pdf (p2)
2
https://www.ifrs.org/use-around-the-world/use-of-ifrs-standards-by-jurisdiction/india/
3
https://economictimes.indiatimes.com/news/economy/indicators/india-likely-to-surpass-uk-in-the-worlds-
largest-economy-rankings-pwc/articleshow/67609647.cms?from=mdr
4
Sec. 2(40) of Companies Act 2013, exempts them from furnishing a Cash Flow Statement
Key Words: Financial Reporting, Existing Accounting Standards, Indian Accounting
Standards (Ind AS), International Financial Reporting Standards, Companies Act 2013, Small
and Medium Enterprises, One Person Company, Small Company and Dormant Company,
Financial Information, Asymmetry of Financial Information Flow, General Purpose Financial
Statements.