PwC Comments on Draft IFRS for SMEs Interpretation of "Undue Cost or Effort" and "Impracticable" (General, Issue 2)

PwC global network of firms strongly believes that the Implementation Group should not issue a Q&A that addresses the interpretation of "undue cost or effort" and/or "impracticable." The Firm believes that the SMEIG should not address through Q&As issues that might be relevant to full IFRS. The Firm notes that the SMEIG might use the "basis for conclusions" in the Q&As to limit the scope of the non-mandatory guidance, but there remains a danger that the Q&As might be considered in the interpretation of full IFRS, particularly in areas in which there is no guidance in full IFRS.

Comment letter

SME Implementation Group
Paul Pacter
Chairman
30 Cannon Street
London
EC4M 6XH

23 November 2011

Dear Sir

Interpretation of ‘undue cost or effort’ and ‘impracticable’ (general, issue 2)

We are responding to your invitation to comment on the above question and answer (Q&A) on behalf of PricewaterhouseCoopers. Following discussion with members of the PwC network of firms, this response summarises the views of those member firms who commented on the consultation. ‘PwC’ refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

Overall comments

We strongly believe that the SME Implementation Group (SMEIG) should not issue a Q&A that addresses the interpretation of ‘undue cost or effort’ and/or ‘impracticable’.

The SMEIG should not address through Q&As issues that might be relevant to full IFRS. We note the SMEIG might use the Basis for Conclusions in the Q&As to limit the scope of the non-mandatory guidance, but there remains a danger that the Q&As might be considered in the interpretation of full IFRS, particularly in areas in which there is no guidance in full IFRS. This is not appropriate and Q&As issued by the SMEIG should be restricted to issues that affect IFRS for SMEs only.

We also note that the SMEIG does not meet in person and the Q&As are not subject to discussion and approval by the entire IASB or the IFRS Interpretations Committee. The Q&As are not therefore subject to the level of due process usually associated with guidance issued by the IASB. This is appropriate when they address issues that affect only the SME guidance but if the SMEIG continues to issue Q&As that address questions that are also relevant to full IFRS, we believe those Q&As should be debated fully at an IASB meeting.

Issue 2 – Interpretation of ‘undue cost or effort’ and ‘impracticable’

The terms 'undue cost or effort' and 'impracticable' are both used in full IFRS in (amongst others) IAS1 and IAS8 (or in the Basis for Conclusions on these standards) and should not therefore be subject to a Q&A issued by the SMEIG.

If however the IASB decides to issue this Q&A we suggest it be restricted to paragraphs 2 and 3 of the draft Q&A. The remaining paragraphs are confusing and do not add anything to the guidance explained previously. We also suggest that the word “generally” is deleted from the second sentence of paragraph 2 because it creates ambiguity.

If you have any questions in relation to this letter, please do not hesitate to contact John Hitchins, PwC Global Chief Accountant (+44 207 804 2497) or Tony de Bell (+44 207 213 5336).

Yours faithfully

PricewaterhouseCoopers