SMALL AND MEDIUM-SIZED ENTITIES

The intended scope of this standard

1. 1 The IFRS for SMEs is intended for use by small and medium-sized entities (SMEs). This section describes the characteristics of SMEs.

Description of small and medium-sized entities

1. 2 Small and medium-sized entities are entities that:
   1. do not have public accountability; and
   2. publish general purpose financial statements for external users.
   3. Examples of external users include owners who are not involved in managing the business, existing and potential creditors, and credit rating agencies.

1. 3 An entity has public accountability if:
   1. Its debt or equity instruments are traded in a public market or it is in the process of issuing such instruments for trading in a public market.
   2. domestic or foreign stock exchange or an over-the-counter market, including local and regional markets); or
   3. It holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses (most banks, credit unions, insurance
   4. Companies, securities brokers/dealers, mutual funds, and investment banks would meet this second criterion).

1. 4 Some entities may also hold assets in a fiduciary capacity for a broad group of outsiders because they hold and manage financial resources entrusted to them by clients, customers, or members not involved in the management of the entity. However, if they do so for reasons incidental to a primary business (as, for example, may be the case for travel or real estate agents, schools, charitable organizations, cooperative enterprises requiring a nominal membership deposit, and sellers that receive payment in advance of delivery of the goods or services, such as utility companies), that does not make them publicly accountable.

1. 5 If a publicly accountable entity uses this standard, its financial statements shall not be described as conforming to the IFRS for SMEs—even if law or regulation in its jurisdiction permits or requires this standard to be used by publicly accountable entities.

1. 6 A subsidiary whose parent uses full IFRS, or that is part of a consolidated group that uses full IFRS, is not prohibited from using this standard in its own financial statements if that subsidiary by itself does not have public accountability. If its financial statements are described as conforming to the IFRS for SMEs, it must comply with all of the provisions of this standard.

1. 7 A parent entity (including the ultimate parent or any intermediate parent) assesses its eligibility to use this Standard in its separate financial statements on the basis of its own status without considering whether other group entities have, or the group as a whole has, public accountability. If a parent entity by itself does not have public accountability, it may present its separate financial statements in accordance with this Standard (see Section 9 Consolidated and Separate Financial Statements), even if it presents its consolidated financial statements in accordance with full IFRS or another set of generally accepted accounting principles (GAAP), such as its national accounting standards. Any financial statements prepared in accordance with this Standard shall be clearly distinguished from financial statements prepared in accordance with other requirements.