IFRS for SMEs: what it means for UAE businesses.

What ifrs for smes means

Also called: IFRS for Small and Medium-sized Entities.

IFRS for SMEs is a shorter, simpler version of the full IFRS Accounting Standards, issued by the International Accounting Standards Board for entities without public accountability. It covers the same ground as full IFRS with fewer options, fewer judgements and lighter disclosures.

In the UAE it matters because of Corporate Tax. Article 20 of the Corporate Tax Law bases Taxable Income on standalone financial statements prepared under accounting standards accepted in the State, and Ministerial Decision No. 114 of 2023 names those standards: full IFRS as the rule, and IFRS for SMEs as an option for a Taxable Person whose Revenue does not exceed AED 50 million. Separately, Article 27 of the Commercial Companies Law requires companies to apply international accounting standards when they prepare their periodic and annual accounts.

For most UAE SMEs it is the practical choice: every intangible asset gets a finite life, end of service gratuity can be measured with a simplified method, and basic financial instruments follow a short set of rules. The third edition, issued in February 2025, applies to periods beginning on or after 1 January 2027, so 2027 accounts need planning now.

How it works

• Ministerial Decision No. 114 of 2023, Article 4: a Taxable Person applies full IFRS, but may apply IFRS for SMEs if its Revenue does not exceed AED 50 million.
• The IASB bars entities with public accountability from claiming compliance: those whose shares or debt trade in a public market, and those that hold assets in a fiduciary capacity for a broad group of outsiders as a main business, such as banks and insurers.
• Taxable Income starts from the accounting profit under the chosen standard. Where the Corporate Tax Law and the standard conflict, the law prevails (Article 20, Clause 7).
• Simplifications include a ten year cap on the life of an intangible asset whose useful life cannot be estimated reliably, and a simplified way to measure defined benefit obligations such as gratuity where the full actuarial method would involve undue cost or effort.
• The third edition was issued in February 2025 and is effective for periods beginning on or after 1 January 2027. Early adoption is permitted, and the 2015 edition may be used until then.

Worked example

A Dubai building materials trader checks each year whether it can keep using IFRS for SMEs. Its Revenue grows from AED 38 million in 2026 to AED 53 million in 2027.

Revenue for 2026	AED 38,000,000
IFRS for SMEs Revenue limit	AED 50,000,000
Headroom in 2026	AED 12,000,000
Revenue for 2027	AED 53,000,000
Amount above the limit in 2027	AED 3,000,000

In 2027 the trader no longer meets the AED 50 million test, so it moves to full IFRS for that tax period, and the same Revenue level also brings the Corporate Tax audit requirement.

Common mistakes

• Choosing IFRS for SMEs once and never testing Revenue again. The AED 50 million test in Ministerial Decision No. 114 of 2023 is applied per Taxable Person, period by period.
• Calling a simple list of receipts and payments IFRS for SMEs accounts. The cash basis is a separate option for Revenue up to AED 3 million, not a version of this standard.
• Ignoring the third edition until the 2027 year end. The revenue section was rewritten, and contracts, systems and comparatives may need work before then.

The law

• Ministerial Decision No. 114 of 2023 on the Accounting Standards and Methods, Article 4 (IFRS and IFRS for SMEs) and Article 2 (cash basis up to AED 3,000,000)
• Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, as amended, Article 20, Clauses 1 and 7
• Federal Decree-Law No. 32 of 2021 on Commercial Companies, Article 27, Clause 3 (international accounting standards)

Frequently asked questions

Can a free zone company use IFRS for SMEs?

Ministerial Decision No. 114 of 2023 draws the line on Revenue, not location, so a free zone company with Revenue up to AED 50 million may use it. A Qualifying Free Zone Person must still have its financial statements audited.

Which edition should our 2026 accounts follow?

The IFRS Foundation allows the 2015 edition until the third edition takes effect for periods beginning on or after 1 January 2027, and permits early adoption of the third edition. Whichever you use, say so in the accounting policies.

Related terms

Audited financial statements · Cash basis accounting · Accrual basis accounting · Taxable income · End of service gratuity. See every term in the UAE tax glossary.

For the full picture, read our guide: Audit Requirements for UAE Companies Under Corporate Tax.

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