New Simplified Financial Reporting Standard for MSMEs

On June 26, the newly simplified Financial Reporting Standard for Category IV-Entities was adopted with the goal to improve the quality and transparency of corporate financial statements, according to the decree of the Head of Service for Accounting, Reporting and Auditing Supervision (SARAS).

The Standard aims to lower the administrative burden by reducing compliance obligations, improving the financial reporting process, enabling micro, small and medium enterprises (MSMEs) to focus on business growth, and increasing access to finance for about 80,000 micro entities.

This has been developed by PricewaterhouseCoopers (PwC) in partnership with PMCG under the Good Governance Fund (GGF) Managed Fund (MF). The project team conducted a needs assessment of Category IV-Entities, surveying approximately 17,000 such entities, holding in-depth interviews with professional accountants dealing with such entities as well as organizing workshops with consultative groups of key stakeholders.

The Standard was developed based on the International Financial Reporting Standard (IFRS) for MSMEs, the relevant EU Directives and the best practices of Estonia, the UK, Ireland, Singapore and Poland.

Ultimately, with increased access to finance, MSMEs can expand and develop production, improve their infrastructure, comply with various international and national standards, attract potential investors, and increase working capital. Moreover, greater access to finance will improve their competitiveness in the long term.