IASB Proposes Consolidation Exception for Eligible SMEs

Posted 05 June 2026 Written by Acts Online
Category Financial and Accounting

Brought to you by SA Accounting Academy: The International Accounting Standards Board (IASB) has published an Exposure Draft proposing amendments to the IFRS for SMEs Accounting Standard to introduce a consolidation exception for intermediate parent entities whose ultimate or intermediate parent is an investment entity.

Under the proposed amendments, an exception from presenting consolidated financial statements will be introduced for a small or medium-sized enterprise (SME) that is an intermediate parent, provided its ultimate or intermediate parent is an investment entity that does not present consolidated financial statements. Instead, the investment entity parent presents financial statements in which its subsidiaries are measured at fair value through profit or loss in accordance with IFRS 10 Consolidated Financial Statements.

The proposed amendments would affect any SME that is an intermediate parent and whose ultimate parent (or any intermediate parent) presents financial statements that comply with full IFRS Accounting Standards, in which all its subsidiaries are measured at fair value through profit or loss. Under the proposals, these eligible SMEs would be permitted, but not required, to apply the consolidation exception.

The IASB plans to issue any resulting amendments to the standard by the end of 2026. This development aims to reduce the reporting burden on intermediate SMEs where the parent entity already accounts for subsidiaries at fair value.

Click here to download the 19-page Exposure Draft: Consolidation Exception.

What this means for you, your business, or your clients

  • For yourself: You must familiarise yourself with the proposed amendments to the IFRS for SMEs Accounting Standard to understand how the consolidation exception criteria apply to intermediate parent structures.
  • For your business: Accounting and audit firms must assess their service methodologies to identify which SME clients qualify for this optional exception, potentially reducing the scope of consolidation work required once finalised.
  • For your clients: Eligible SME clients with investment entity parents will have the option to bypass preparing costly consolidated financial statements, provided their parent measures subsidiaries at fair value under IFRS 10.

Originally published at https://accountingacademy.co.za/news/read/iasb-consolidation-exception-for-eligible-smes

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