SMEs adopt international financial standard

MASERU — The introduction of the International Financial Reporting Standard (IFRS) for small to medium enterprises (SMEs) will help most businesses in the country to comply with international accounting standards.
The IFRS for SMEs was published in July this year and has already been adopted by the Lesotho Institute of Accountants (LIA).
LIA technical manager Moahloli Mphaka said the majority of businesses in Lesotho — which fall under the SME sector — had been struggling to comply with international reporting standards.
He said the introduction of the IFRS for SMEs would thus be beneficial for the businesses.
“Research has shown that about 98 percent of businesses in almost every country fall under the category of small to medium enterprises,” he said.
“So it was costly for them to comply with the international reporting standards.”
LIA, starting yesterday until tomorrow, is hosting a seminar on the IFRS for SMEs.
Mphaka said it was necessary to give continuous training for professional development as this would enhance skills.
He said most businesses found it costly to comply with ever-changing international accounting standards.
“The international financial reporting standard changes regularly such that many small and medium businesses are left behind,” he said.
“IFRS for SMEs is for small businesses which do not really need complex accounting reporting demands.”
Mphaka added that one of the advantages of the IFRS for SMEs was that the system had less regulatory changes.
“This standard is revised only once in three years and as such it leaves those responsible for recording financial statements in a better position to produce quality work as expected by the business,” he said.
Mphaka said accounting standards also made it easier to categorise businesses for easier financial reporting.
“The international reporting standards run with the changes in developments of developed countries, so they are revised all the time which makes it hard for SMEs to keep up — hence the high compliance costs,” he said.
Mphaka said for a company to be classified as an SME it had to have a maximum of 25 employees, a turnover of up to M3 million and total assets worth M4.5 million.
“The objective of financial statements for a small to medium-sized entity is provision of information about its financial position, performance and cash flow that will be useful for decision-makers to come up with informed economic decisions,” he said.