IFRS for SMEs in Georgia: who it applies to and why

Accounting in Georgian companies follows international standards rather than a national chart of accounts in the familiar post-Soviet sense. Small and medium businesses apply a separate standard: IFRS for SMEs.

How it differs from full IFRS

Full IFRS is designed for companies whose securities are publicly traded and demands a volume of disclosure that is excessive for an ordinary business. The SME standard is a reduced version of the same logic.

• fewer disclosure requirements;
• simplified measurement for a number of items;
• no obligation to apply complex sections SMEs never meet;
• the same foundation: accrual, not cash basis.

Which statements are required

• the balance sheet;
• the profit and loss statement;
• the statement of changes in equity;
• the cash flow statement;
• notes to the financial statements.

The statements are filed with SARAS, the service supervising accounting and audit. Deadlines and scope depend on the company's category: the larger the business, the stricter the requirements, up to a mandatory audit.

What it means in practice

Accrual basis

Revenue is recognised when the service is delivered, not when the money arrives. For a business used to watching the bank balance, this is the biggest shift in thinking.

Source documents

Reporting under the standard is impossible without orderly source documents. Contracts, acts and invoices are not bureaucracy: they are what the report is assembled from and what defends it in a review.

Accounting and tax are not the same thing

Financial statements and the tax base are computed under different rules. Profit under IFRS and profit for tax can differ, and that is normal. The mistake is keeping tax records only and hoping the statements will assemble themselves out of them.

Typical difficulties

• books kept on a payment basis while the standard requires accrual;
• source documents gathered at year end rather than as you go;
• a chart of accounts that does not match the structure of the statements;
• the company category assessed incorrectly, so the wrong set of requirements applies.

We run full-cycle accounting under IFRS for SMEs: from source documents and the chart of accounts through to the annual statements and the SARAS filing.