When a UAE company can use IFRS for SMEs: requirements and upcoming changes

A UAE company can apply IFRS for SMEs if it qualifies as a small or medium-sized entity under the Standard, subject to any local regulatory requirements. The most recent (2025) edition of IFRS for SMEs is effective for accounting periods beginning on or after 1 January 2027, with early adoption permitted. The Standard provides significant simplifications over full IFRS and a draft amendment may further ease requirements around group consolidation for qualifying investment entity parents.

Who the IFRS for SMEs Standard is for

The IFRS for SMEs Accounting Standard is designed for entities that do not have public accountability and publish general purpose financial statements for external users. Typical eligible companies include privately held businesses, including those in the UAE, that are not listed on public markets and do not hold assets for a broad group such as a bank or insurer. The aim is to reduce complexity compared to full IFRS, focusing on the needs and capabilities of smaller businesses.

The IFRS Foundation lists five main ways IFRS for SMEs is simpler than full IFRS:

• Some topics not relevant to SMEs are omitted.
• Certain accounting policy options allowed under full IFRS are not permitted.
• Recognition and measurement principles are simplified in many areas.
• Disclosure requirements are reduced.
• The language is clearer and more accessible.

If your UAE business does not meet the full IFRS definition of a publicly accountable entity, IFRS for SMEs may be an option. In practice, whether you can use it depends on UAE regulatory requirements and user expectations (such as banks or investors). These local requirements are beyond the scope of the Standard itself.

Key dates: 2025 edition and early adoption

The third edition of IFRS for SMEs was released in February 2025. This edition is effective for periods starting on or after 1 January 2027. An entity may opt to apply the 2025 edition earlier if it chooses, or may continue with the previous (2015) edition until the new effective date. Supporting material for both versions is provided by the IFRS Foundation.

In practical terms, for UAE businesses, this means January 2027 is the main switchover date, unless an early adoption decision is made.

Simplification highlights

IFRS for SMEs simplifies both the recognition and disclosure of many items. A few examples:

• Fewer mandatory disclosures compared to full IFRS.
• Some complex topics (such as interim reporting, earnings per share, segment reporting) are omitted as they are not usually relevant for SMEs.
• Some options, such as revaluation of property, plant, and equipment, are not available under IFRS for SMEs.

For a UAE SME, this could mean less administrative work in producing annual accounts and preparing for external review, as well as clearer reporting for management and owners.

Consolidation exception: draft changes for investment entity parents

The International Accounting Standards Board (IASB) has released an exposure draft proposing a new consolidation exception. This relates to SMEs that are subsidiaries of an investment entity parent (or intermediary parent) which itself does not produce consolidated financial statements, but instead measures subsidiaries at fair value through profit or loss, as allowed under IFRS 10.

Under the current IFRS for SMEs (paragraph 9.3), a subsidiary is only exempt from having to present consolidated financial statements if its parent does so. This created an inconsistency compared to full IFRS, where an exemption exists if the ultimate parent is an investment entity as described. The proposed amendment would bring the SME standard in line, providing relief to eligible investment-entity structures.

The exposure draft was released in May 2026, with the comment period closing on 9 September 2026. If finalised, any amendments are planned to take effect for annual periods beginning on or after 1 January 2027, with early application permitted if the third edition is adopted early.

What this means in brief

• If your UAE company is a subsidiary of an investment entity parent which does not consolidate its results, the upcoming amendment may remove the need to consolidate, provided certain conditions are met.
• This is not yet final as of mid-2026, but timing is set to coincide with the third edition’s effective date.

Ongoing changes and available support

The IFRS for SMEs Standard is reviewed periodically, with recent amendments and implementation support material released by the IFRS Foundation. Supporting materials for both the 2015 and 2025 editions are made available in several languages, including English and Arabic. These cover practical guidance, educational modules, and Q&A on common application issues.

If your company is considering adopting or continuing with IFRS for SMEs, staying informed about the current edition, upcoming changes, and supporting materials helps ensure correct application and efficient reporting.