Abstract
The purpose of this chapter is to describe the process followed by Latin America to adopt International Financial Reporting Standards for Small and Medium Enterprises (IFRS for SMEs), based on examples about the approaches used by seven South American countries – Argentina, Brazil, Chile, Colombia, Peru, Uruguay, and Venezuela. These countries have followed different models of harmonization to IFRS for SMEs. Harmonization models may be grouped into five categories: maintenance of local financial reporting standards, adaptation of International Financial Reporting Standards (IFRS) to local standards, full or partial adoption of IFRS, adoption of another country's standards, and convergence to diminish differences between local standards and IFRS. Regardless of the chosen mode of harmonization, SMEs face particular challenges as major players in the Latin America and Caribbean region with needs to greater access to finance sources and simplification of laws and reporting standards to be able to achieve global competitiveness.
TopBackground
Countries may be grouped into five categories based on their adopted models for their harmonization process to International Financial Reporting Standards. The first model is the maintenance of local standards developed by national organizations. Examples of Latin American countries following this approach are Brazil and Colombia. Another one is the adaptation of IFRS to local standards; for example, the cases of Argentina and Venezuela. A third model entails the full or partial adoption of IFRS. Full adoption was the choice for Peru while Uruguay opted for partial adoption. A special case is Puerto Rico, which adopted as its own the accounting standards of the United States of America. The fifth and final model is the actual or future plans for convergence with the objective of diminishing differences between local and international standards. Such has been the case of the United States of America and Chile (Vílchez, 2009). This chapter will focus on the harmonization whether through similar or adapted standards, adoption or convergence as it relates to IFRS for SMEs in seven South American countries – Argentina, Brazil, Chile, Colombia, Peru, Uruguay, and Venezuela. The remainder of this discussion will begin with some background information showing the importance of SMEs in the Latin America and Caribbean. This discussion will be followed by an overview of similarities and differences between IFRS for SMEs and IFRS for public companies, a brief analysis of the Comment Letter by the Group of Latin American Standard Setters about Proposed Amendments to IFRS for SMEs and summarized descriptions of the application of IFRS for SMEs in individual countries.
Small and medium enterprises (SMEs) play a major role in Latin America’s global competitiveness. Their contribution extends to job creation, production (OECD Development Centre, ECLAC, and Latin American Development Bank, 2013), and increased local bank loan portfolios.