World Council of Credit Unions (World Council) urged the IASB to provide greater clarity in its proposed revisions to the IFRS’ Exposure Draft for IFRS for SMEs Accounting Standard (Exposure Draft), that would clearly delineate that credit unions can used the relaxed standard for its allowance for loan and lease loss accounting (IFRS 9 or CECL). This standard is currently utilized in several countries for credit unions, however, many countries due to the current definition of “publicy accountable” contained in the current definition. Some jurisdiction tend to view credit unions as “publicly accountable” even though the term as used in the standard tend to apply to publicly traded vs. non-publicly traded entities, thus acting as a barrier to utilization of the IFRS for SME’s standard. Other countries have allowed accounting standards based on the IFRS for SME standard for credit unions.
While the language proposes changes that would bring some greater clarity to the definition, WOCCU urged IASB to provide certainty in the revisions noting that credit unions due to their cooperative model, their relatively small size as compared to banks, and the use of financial statements by their members would warrant such a treatment.
Explicitly allowing use of the IFRS for SME standard would prove a valuable contribution to the objective of financial inclusion, particularly in developing countries where pro forma accounting systems are imposed without regard for the size and complexity of the institution subject to the accounting standard. Allowing credit unions to state their financials in conformity with the IFRS for SME standard will not only reduce compliance burdens and provide proportionality but will likely improve the quality of financials provided to their members and regulators.
A copy of the letter can be viewed here.