IFRS for SMEs

IFRS for SMEs in Costa Rica: More Than Financial Statements, a True Accounting Transformation

The implementation of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) represents much more than a change in the presentation of financial statements. It involves reviewing, adjusting, and transforming the way an organization recognizes, measures, classifies, records, and discloses its economic transactions.

In Costa Rica, this topic has gained particular relevance following the new guidelines issued by the Ministry of Finance through Resolution MH-DGT-RES-0015-2026, published in the Official Gazette (La Gaceta) on April 29, 2026, with an effective date of January 1, 2027.

This resolution updates the interpretative criteria governing the application of IFRS in relation to Costa Rican tax regulations, establishing different guidelines according to each taxpayer's classification.

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What Does the Ministry of Finance Establish, and What Are the Deadlines?

Resolution MH-DGT-RES-0015-2026 establishes new criteria to harmonize the application of international accounting standards with Costa Rican tax regulations. Its main provisions include:

1. Large National Taxpayers: They must maintain their accounting records and prepare their financial statements under full IFRS.
2. General Tax Regime Taxpayers: They may choose to apply IFRS for SMEs or full IFRS, depending on their financial reporting needs and the requirements of their respective regulatory bodies.
3. Excluded Tax Regimes: Taxpayers registered under the Simplified Tax Regime and the Special Agricultural Regime are excluded from the scope of this resolution.
4. Effective Date: The resolution will take effect on January 1, 2027. Businesses should anticipate the necessary changes to prepare their financial information in accordance with the applicable criteria.
5. Accounting and Tax Harmonization: Criteria are established to address differences between financial accounting treatment and tax regulations, including the need to properly document the corresponding tax adjustments.

It is important to clarify that this resolution does not mean that every business must transition to full IFRS or that every business must adopt IFRS for SMEs from scratch. The applicable framework must be determined based on each taxpayer's classification and specific circumstances.

The effective date should also not be confused with an automatic accounting implementation deadline. Businesses need to prepare their systems, policies, accounting records, and supporting documentation in advance.

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The Most Common Mistake: Financial Statements That Only Appear to Comply with IFRS

One of the most frequent mistakes in accounting practice is assuming that simply changing the format of financial statements, renaming certain accounts, or adding specific disclosures is enough to claim compliance with IFRS for SMEs.

This is incorrect.

Adjusting financial statements so that they look aligned with IFRS for SMEs does not mean that the company is actually complying with the standard.

IFRS establishes specific criteria for the recognition, measurement, presentation, and disclosure of economic transactions. For example, a company may present a properly structured balance sheet while still having issues such as:

• Assets recorded at values that do not comply with the required measurement bases.
• Property, plant, and equipment without appropriate depreciation policies, useful lives, or residual values.
• Accounts receivable without proper recoverability and impairment assessments.
• Inventory without a consistent measurement and costing methodology.
• Liabilities and obligations that have not been properly recognized.
• Revenue recorded without applying the appropriate recognition criteria.
• Provisions and contingencies without the necessary analysis and disclosures.
• Related-party transactions without appropriate supporting documentation and disclosures.

In all these cases, even if the financial statements look professional and follow an IFRS-compatible structure, significant compliance issues may still exist.

Proper implementation requires accounting standards to be effectively applied to the accounting records, supported by appropriate documentation, and accurately reflected in the financial statements.

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Note 1 of the Financial Statements: A Declaration That Must Be True

The first note to the financial statements typically identifies the entity, describes its business activities, and establishes the basis on which the financial information has been prepared.

This is where many companies include a statement indicating that their financial statements have been prepared in accordance with IFRS for SMEs.

This statement is not merely a presentation requirement.

When a company states in Note 1 that its financial statements comply with IFRS for SMEs, that statement must be accurate, supportable, and backed by the effective application of all relevant requirements of the accounting framework.

It is not sufficient to simply include a statement such as:

"The financial statements have been prepared in accordance with the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs)."

Before making this declaration, management and those responsible for financial reporting must ensure that the entity has properly applied the corresponding requirements.

A compliance statement without adequate technical support may undermine the credibility of the financial statements and create risks for management and accounting professionals.

Note 1 should not state what the company intends to comply with, but what it is actually complying with.

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What Are the Main Accounting Areas That Need to Be Reviewed?

Implementing IFRS for SMEs may involve significant adjustments across virtually every area of accounting. Some of the most relevant areas to evaluate include:

1. Property, Plant, and Equipment: Review of costs, components, useful lives, residual values, depreciation, and asset impairment.
2. Inventories: Validation of costing methods, cost allocation formulas, measurement, and recognition of impairment losses.
3. Accounts Receivable: Assessment of recoverability, impairment, and recognition of losses.
4. Financial Instruments: Classification, recognition, measurement, and assessment of associated risks.
5. Revenue Recognition: Review of policies to determine when and how revenue from ordinary activities should be recognized.
6. Leases: Identification and accounting treatment of lease agreements under the applicable accounting framework.
7. Provisions and Contingencies: Recognition of present obligations, estimates, and required disclosures.
8. Employee Benefits: Review of employment-related obligations and short-term and long-term employee benefits.
9. Income Taxes: Assessment of current and deferred income taxes, where applicable.
10. Foreign Currency: Review of foreign currency transactions, balances, and exchange differences.
11. Related Parties: Identification of transactions and preparation of the corresponding disclosures.
12. Accounting Policies: Documentation, approval, and consistent application of accounting criteria.
13. Financial Statements and Notes: Alignment of presentation, classification, comparative information, and required disclosures.

These changes will not necessarily require the same adjustments for every organization. Their scope depends on the company's business activities, financial structure, contracts, transactions, and existing accounting policies.

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The Transition Should Be Managed as a Project Covering at Least Three Accounting Periods

A proper IFRS for SMEs implementation should not be treated as a year-end accounting task or a last-minute adjustment.

We recommend approaching it as a structured project covering at least three accounting periods, allowing for a baseline assessment, an implementation period, and a subsequent validation period.

1. Period 1 – Assessment and Establishment of the Baseline:

   The first period focuses on understanding the company's actual accounting and financial position.

   Financial statements, supporting schedules, accounting records, existing policies, contracts, assets, liabilities, and other relevant documentation are reviewed.

   During this stage, differences between current accounting practices and IFRS for SMEs requirements are identified.

   The result is a Gap Analysis, accompanied by an action plan and a matrix of required adjustments.

2. Period 2 – Implementation and Accounting Alignment:

   Based on the previous assessment, the necessary changes are implemented. This stage may include:

   • Accounting adjustments and reclassifications.
   • Corrections to opening balances.
   • Recognition of assets and liabilities.
   • Removal of accounting entries that do not comply with the applicable framework.
   • Review and adjustment of depreciation and amortization.
   • Updates to accounting policies.
   • Recognition of provisions and estimates.
   • Adjustments to accounting systems and structures.
   • Preparation of reconciliations and supporting documentation.
   • Alignment of financial statements and disclosures.

   This is a technical implementation stage that requires coordination between accounting, administration, operations, and, when necessary, legal and tax advisors.

3. Period 3 – Validation and Consolidation of Compliance:

   The third period allows the company to verify that the implemented changes are working properly and that the new accounting policies are being applied consistently.

   Testing is performed on accounting records, reconciliations, estimates, balances, and disclosures.

   It is also important to confirm that the established procedures are sustainable and that the responsible personnel understand and consistently apply the new accounting criteria.

   The objective is not simply to complete an initial conversion, but to establish an accounting structure capable of maintaining compliance in subsequent periods.

• Important: This three-period approach is an implementation and control methodology recommended by Asicon Consulting. It does not represent a minimum three-year period established by the Ministry of Finance. Formal first-time adoption requirements and the transition date must be determined in accordance with Section 35 of IFRS for SMEs and the specific circumstances of each entity.

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It Is Not Just About Accounting: It Is Also About Business Management

Proper implementation of IFRS for SMEs can provide significant benefits to an organization:

• Greater reliability of financial information.
• Better visibility into the company's financial position and equity.
• More useful information for management decision-making.
• Greater transparency for partners and shareholders.
• Improved preparation for financing processes.
• Stronger internal controls.
• Greater consistency in financial reporting.
• Better ability to respond to third-party requirements and tax reviews.

Financial information should be a tool for managing and directing the business, not merely a document prepared to meet a compliance obligation.

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How Can Asicon Consulting Help Your Business?

At Asicon Consulting and Associates, we understand that every business has its own operational, financial, and accounting realities.

That is why we provide professional support to assess, plan, and execute IFRS for SMEs implementation and accounting alignment projects, considering both technical accounting requirements and their relationship with Costa Rican tax regulations.

Our services may include:

1. IFRS Assessment:
   • Evaluation of the current accounting framework.
   • Identification of regulatory gaps.
   • Review of financial statements and accounting records.
   • Determination of required adjustments.
2. Transition Planning:
   • Definition of project scope.
   • Development of the implementation timeline.
   • Prioritization of accounting adjustments.
   • Identification of responsibilities and deliverables.
3. Accounting Implementation:
   • Reclassifications and accounting adjustments.
   • Alignment of balances and accounting records.
   • Development and updating of accounting policies.
   • Review of assets, liabilities, revenue, and expenses.
4. Financial Statement Preparation:
   • Alignment of financial statements.
   • Preparation of notes and disclosures.
   • Validation of the compliance statement.
   • Review of consistency and supporting documentation.
5. Ongoing Support and Monitoring:
   • Staff training.
   • Continuous technical advisory services.
   • Implementation validation.
   • Monitoring of regulatory changes.

Our objective is to help your business maintain reliable, consistent, and technically supported financial information, ensuring that IFRS compliance is not merely a statement in your financial reports, but an integral part of your accounting processes.

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Is Your Business Really Ready?

Do not wait until an external review, financial institution, or the Tax Administration identifies discrepancies that could have been corrected in advance.

Transitioning to IFRS for SMEs requires planning, technical expertise, and a structured implementation methodology.

At Asicon Consulting, we transform your administrative, technological, and process-related needs into effective solutions.

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At Asicon Consulting and Associates, we work to help your business maintain organized, reliable financial management aligned with current regulations. We support you in reviewing accounting policies, preparing financial statements, aligning procedures, and complying with applicable requirements.

If you would like to learn more about our IFRS for SMEs implementation and advisory services, we are ready to help you plan this process and turn new regulatory requirements into an opportunity to strengthen your organization.

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