IFRS for SMEs in Georgia: What You Need to Know

Georgia requires businesses to follow International Financial Reporting Standards (IFRS). For small and medium enterprises, a simplified version called IFRS for SMEs applies. This guide explains who must use it, how it differs from full IFRS, and practical implementation tips.

Accounting Standards in Georgia

Georgia adopted IFRS as the mandatory accounting framework. The specific standard depends on company size:

Category	Criteria	Standard
Large Entities	Revenue > 60M GEL or Assets > 30M GEL	Full IFRS
Medium Entities	Revenue 12-60M GEL	IFRS for SMEs
Small Entities	Revenue 2-12M GEL	IFRS for SMEs
Micro Entities	Revenue < 2M GEL	Simplified (cash basis allowed)

What is IFRS for SMEs?

IFRS for SMEs is a self-contained standard published by the International Accounting Standards Board (IASB). It's designed specifically for entities without public accountability—meaning they don't have publicly traded securities.

Key Differences from Full IFRS

Simplified Topics: Complex areas like financial instruments, share-based payments, and defined benefit pensions have simplified treatments.

Fewer Disclosures: Disclosure requirements are significantly reduced compared to full IFRS.

Stable Standard: IFRS for SMEs is updated less frequently, providing more stability for businesses.

Single Document: All requirements are in one ~250-page document versus thousands of pages for full IFRS.

Core IFRS for SMEs Requirements

Financial Statements Required

IFRS for SMEs requires:

• Statement of Financial Position (Balance Sheet)
• Statement of Comprehensive Income (or separate Income Statement)
• Statement of Changes in Equity
• Statement of Cash Flows
• Notes to Financial Statements

Recognition and Measurement

Revenue: Recognized when goods are delivered or services are performed, and collection is probable.

Inventory: Measured at lower of cost or selling price less costs to complete and sell.

Property, Plant & Equipment: Measured at cost less depreciation. Revaluation model is allowed but not required.

Intangibles: Generally amortized over useful life (max 10 years if uncertain).

Leases: Simplified approach—most leases can be treated as operating leases.

Practical Implementation

Chart of Accounts

Georgia has a standard chart of accounts that maps to IFRS requirements. Your accounting system should follow this structure for consistent reporting.

Accrual Basis

IFRS for SMEs requires accrual accounting—recording transactions when they occur, not when cash changes hands. This means:

• Revenue when earned (not when paid)
• Expenses when incurred (not when paid)
• Year-end adjustments for prepayments, accruals, and provisions

Monthly Bookkeeping

For IFRS compliance, maintain:

• Proper documentation for all transactions
• Bank reconciliations
• Accounts receivable and payable aging
• Fixed asset register
• Inventory records (if applicable)

Annual Financial Statements

Filing Requirements

Georgian companies must submit annual financial statements to the Service for Accounting, Reporting and Auditing Supervision (SARAS) by:

• Small entities: September 30 of following year
• Medium entities: June 30 of following year
• Large entities: June 30 (audited)

Audit Requirements

Audit is mandatory for:

• Large entities
• Medium entities (starting from 2025)
• Entities with specific regulatory requirements

Common Challenges

Transition from Cash to Accrual: Many small businesses struggle to move from cash-basis thinking to accrual accounting.

Fixed Asset Accounting: Proper depreciation calculations and asset register maintenance require systematic approach.

Year-End Adjustments: Provisions, accruals, and deferrals require judgment and can significantly impact financial statements.

Related Party Transactions: IFRS for SMEs requires disclosure of related party transactions, which many businesses overlook.

Benefits of Proper IFRS Implementation

Bank Financing: Banks require IFRS-compliant financial statements for loan applications.

Investor Ready: Proper financials make your business attractive to potential investors.

Management Decisions: Accurate financial information supports better business decisions.

Compliance: Avoid penalties for non-compliance with Georgian accounting law.

IFRS for SMEs vs Tax Accounting

Important: IFRS financial statements are different from tax declarations. Key differences:

• Depreciation rates may differ
• Some expenses recognized under IFRS may not be tax-deductible
• Revenue recognition timing may vary

Your accountant should maintain both IFRS books and tax records, reconciling differences as needed.

Getting Help with IFRS

At Modern Consulting, we provide comprehensive IFRS for SMEs services:

• Monthly bookkeeping in compliance with IFRS
• Annual financial statement preparation
• SARAS filing
• Transition assistance from cash to accrual basis
• Training for in-house staff