The International Accounting Standards Board (IASB) has taken another step towards a proposed consolidation exception for some entities applying the IFRS for SMEs Accounting Standard. The proposal could reduce duplicate consolidation work for qualifying subsidiaries, but South African finance teams should treat it as a development to monitor rather than a current reporting rule.

In its 28 October 2026 update, the IASB said it had tentatively decided to proceed with proposals that would allow an entity using the IFRS for SMEs Accounting Standard to apply a consolidation exception where its ultimate or intermediate parent prepares financial statements measuring its investment in the entity at fair value through profit or loss under IFRS 10.

What the IASB has decided so far

The proposal is aimed at a specific group structure. It is not a general exemption for all subsidiaries or all private companies. The relevant entity would need to fall within the scope of the IFRS for SMEs Accounting Standard and meet the conditions set out in the eventual amendment.

The IASB also tentatively supported additional disclosure requirements. An entity using the exception would be expected to disclose that it has applied the relief, together with the name and principal place of business of the parent whose financial statements measure the investment at fair value. The IASB decided not to add requirements for owner approval, public availability of the parent’s financial statements or a list of the parent’s subsidiaries.

These decisions remain part of the standard-setting process. The IASB expects to issue the amendment by the end of 2026, with an effective date of periods beginning on or after 1 January 2027. Early adoption would be permitted only for entities that also adopt the third edition of the IFRS for SMEs Accounting Standard.

Who should monitor the development?

The issue is most relevant to South African private groups that prepare financial statements under IFRS for SMEs and have subsidiaries or intermediate holding companies within a wider group. It may also matter to finance teams that currently prepare consolidation information which is substantially duplicated in a parent’s financial statements.

However, the proposed relief should not be assumed to apply merely because a company is privately held. The group’s reporting framework, ownership structure, investment measurement, financial year-end and local filing obligations will all need to be considered. The final amendment may also contain wording that affects how entities qualify and what they must disclose.

What finance teams should check now

  • Confirm the reporting framework: establish which entities in the group use IFRS for SMEs, full IFRS or another permitted framework.
  • Map the group structure: identify ultimate and intermediate parents, subsidiaries and entities whose investments are measured at fair value through profit or loss.
  • Document current consolidation work: record the time, systems and evidence currently required to prepare group reporting packs and consolidated information.
  • Review disclosure data: check whether the group already maintains the parent-name, location and investment-measurement information likely to be needed.
  • Plan for 2027: do not remove existing consolidation procedures until the amendment is issued, its effective date is confirmed and the entity’s eligibility has been assessed.

The practical message is to prepare early, not to change accounting policies prematurely. The final amendment and the third edition of the IFRS for SMEs Accounting Standard should be reviewed together before any 2027 implementation decision is made. Businesses needing help with reporting processes or year-end preparation can explore YFP’s accounting and advisory services.