Statement of Cash Flows under the New IFRS for SMEs: What’s Changed?

The statement of cash flows is a cornerstone of financial reporting, providing critical insight into an entity’s liquidity and financial health. With the 2025 update to the IFRS for SMEs Accounting Standard, significant enhancements have been introduced to improve transparency and comparability in cash flow reporting for small and medium-sized entities (SMEs).

These changes are part of the IASB’s third edition of the IFRS for SMEs, effective 1 January 2027, and aim to align SME reporting closer to full IFRS while maintaining simplicity.

What’s New in Section 7: Statement of Cash Flows?

The updates to Section 7 include two key changes:

1. Reconciliation of Changes in Liabilities from Financing Activities

• SMEs must now disclose a reconciliation of changes in liabilities arising from financing activities, covering both:

  • Cash flows (e.g., loan repayments, new borrowings)

  • Non-cash changes (e.g., foreign exchange effects, new leases, or changes in fair value of liabilities)

Why This Matters:
This disclosure improves transparency around debt movements and helps stakeholders better understand how financing decisions affect cash flow and leverage.

2. Disclosure of Supplier Finance Arrangements

• SMEs must provide specific disclosures about supplier finance arrangements (also known as reverse factoring or supply chain financing).

What to Disclose:

• The terms and conditions of the arrangement

• The outstanding balance at reporting date

• The impact on the entity’s liquidity and working capital

Why This Matters:
Supplier finance arrangements can mask true liquidity risk. Enhanced disclosure helps users assess short-term financial flexibility and credit risk exposure.

Impact on SMEs

• Additional Data Requirements: SMEs will need to track non-cash movements and maintain detailed records of supplier finance arrangements.

• Process Changes: Accounting teams must update their reporting templates and systems to capture new disclosure items.

• Training Needs: Staff may require guidance on identifying and reporting these financing activities.

Transition and Effective Date

The new requirements apply to annual periods beginning on or after 1 January 2027, with retrospective application under Section 10. Transition reliefs are available to ease adoption.

How Dawgen Global Can Help

The transition to the updated IFRS for SMEs may appear overwhelming for many organizations, especially those with limited accounting resources. However, with Dawgen Global’s expertise, you can transform this regulatory challenge into an opportunity to strengthen your financial reporting processes and governance framework.

Here’s how we can guide your journey:

✅ Comprehensive Gap Analysis

We start by assessing your current financial reporting practices against the new IFRS for SMEs requirements. This diagnostic review identifies gaps in:

• Data capture and classification

• Disclosure completeness

• Control processes and internal reporting workflows

This ensures your organization understands the scale of change before implementation begins.

✅ System and Template Updates

The changes to Section 7 require enhanced data tracking, especially for financing activities and supplier finance arrangements. Dawgen Global will:

• Update your financial reporting templates to incorporate new disclosure fields

• Recommend system enhancements for ERP or accounting software

• Implement practical solutions to reduce manual effort and error risk

✅ Customized Training and Capacity Building

Regulatory changes are most successful when your team understands and owns the process. Dawgen Global offers:

• Tailored workshops for accounting staff, CFOs, and finance teams

• Hands-on training on preparing reconciliations and disclosures

• Guidance on industry-specific scenarios and best practices

Our training goes beyond theory—it equips your team to apply the Standard confidently.

✅ Ongoing Support and Compliance Assurance

We remain by your side post-implementation to ensure sustained compliance. Our services include:

• Pre- and post-year-end reviews to confirm correct application

• Audit support for smooth regulator and external auditor interactions

• Continuous monitoring for future IFRS updates

Why Dawgen Global?

As a leading accounting and advisory firm in the Caribbean, Dawgen Global combines technical expertise with practical solutions tailored for SMEs. Our holistic approach ensures your organization meets compliance requirements while improving financial transparency and decision-making.

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