The Accounting and Auditing Regulator (ACAR) has fully adopted the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) as the Cambodian International Financial Reporting Standard for SMEs (CIFRS for SMEs).
With the International Accounting Standards Board (IASB) issuing the Third Edition of the IFRS for SMEs Accounting Standard in February 2025, Cambodia—being a jurisdiction that automatically adopts IFRS and IFRS for SMEs—will apply this updated standard as CIFRS for SMEs (2025 or third edition).
The new Standard is effective for annual periods beginning on or after 1 January 2027, with early adoption permitted.
For Cambodian SMEs currently applying the 2015 CIFRS for SMEs (Second Edition), this change requires preparation across accounting policies, financial systems, and staff capability.
1. Cambodia’s Full Adoption of IFRS for SMEs
Since the establishment of ACAR under the Law on Accounting and Auditing (2016) and sub-degree No. 113 ANKR/PK on The Organization and Functioning of Entities under the Supervision of Non-Bank Financial Services Authority, and based on Prakas No. 068 MEF/BK (2009) — On Promulgation of Cambodian Financial Reporting Standards, Ministry of Economy and Finance, as well as the Announcement No. 097/09 MF-NAC (2009) — On Introduction of CIFRS and CIFRS for SMEs, National Accounting Council, Ministry of Economy and Finance, Cambodia has implemented a clear policy of 100% adoption of international standards.
This means IFRS becomes CIFRS for entities with public accountability; and IFRS for SMEs becomes CIFRS for SMEs for non-publicly accountable entities.
As a result, when the IASB issues the new IFRS for SMEs (2025 edition), it automatically becomes the national reporting standard in Cambodia—without modification or delay.
In practice:
All Cambodian SMEs currently reporting under CIFRS for SMEs 2015 will need to transition to CIFRS for SMEs 2025 for financial years starting 1 January 2027, or earlier if they choose early adoption.
2. Confirm That Your Entity Qualifies as an SME
Under Section 1 – Small and Medium-sized Entities of the new Standard: An SME is an entity without public accountability; and it prepares general purpose financial statements for external users such as investors, authority, regulator, lenders, or tax authorities.
Entities that issue debt or equity instruments publicly, or hold assets for a broad group of outsiders (like deposit-taking institutions), have public accountability and must apply CIFRS (full IFRS) instead.
Tip for Cambodian SMEs:
If your company files annual financial statements with ACAR and is not listed or regulated as a financial institution, you are likely within the CIFRS for SMEs scope.
3. Key Conceptual and Framework Updates
The Third Edition introduces conceptual improvements aligned with the IASB’s 2018 Conceptual Framework.
The most important updates in Section 2 – Concepts and Pervasive Principles include:
- Reinforcement of faithful representation and relevance;
- Clearer definitions for assets, liabilities, and equity; and
- Emphasis on substance over form and materiality.
For Cambodian accountants and auditors, these conceptual refinements strengthen the link between CIFRS for SMEs and full CIFRS, supporting consistency in financial reporting across all sectors.
4. Major Technical Changes from the 2015 Edition
The 2025 CIFRS for SMEs, adopted directly from the IFRS for SMEs Accounting Standard (Third Edition, February 2025), introduces a number of significant revisions aimed at aligning SME reporting with the principles of full CIFRS while maintaining the proportionality and simplicity required for smaller entities.
These revisions affect both recognition and measurement requirements as well as disclosures, particularly in areas such as financial instruments, business combinations, fair value measurement, and revenue recognition.
Below is a summary of the key changes most relevant to Cambodian SMEs.
a. Section 9 – Consolidated and Separate Financial Statements
The new edition introduces a single control model (paras. 9.4–9.6) that simplifies how SMEs assess whether one entity controls another.
Under the updated definition, an investor controls an investee when it has:
- Power over the investee;
- Exposure or rights to variable returns from its involvement; and
- The ability to use its power to affect those returns.
This replaces the more complex combination of voting power, risks, and rewards used in the 2015 edition.
SMEs are now required to reassess all existing investments and determine whether they meet the new definition of control.
Cambodia context:
In Cambodia, where many SMEs operate as family-owned groups or through investment holding structures, entities that previously considered certain subsidiaries as associates may now need to consolidate them.
Proper documentation of control assessment and supporting evidence will be important for audit and ACAR filing purposes.
Reference: Section 9.4–9.6, CIFRS for SMEs (2025)
b. Section 11 – Financial Instruments (Merged from Previous Sections 11 and 12)
The 2025 edition merges the former Sections 11 and 12 into a single, comprehensive Section 11 – Financial Instruments, providing a clearer framework for recognition, measurement, and disclosure.
Key revisions include:
- Retention of two measurement categories (amortised cost and fair value through profit or loss),
- Removal of the option to apply IAS 39,
- Enhanced disclosure requirements covering credit risk, liquidity risk, and maturity analysis, and
- Clarified guidance on derecognition, offsetting, and simple hedge accounting.
The impairment model continues to follow the incurred loss approach (paras. 11.25–11.28), under which losses are recognised only when there is objective evidence of impairment—such as default, significant financial difficulty, or breach of contract—rather than through a forward-looking expected credit loss (ECL) model.
Cambodia context:
Under CIFRS for SMEs 2025, SMEs with significant loan receivables, intercompany balances, or lease-back arrangements should review their measurement and impairment processes.
While the incurred loss model is retained, SMEs must enhance disclosure of credit quality, maturity, and liquidity positions, especially where financing and supplier credit are common.
Reference: Section 11.1–11.3, 11.14–11.28, 11.33–11.43B, CIFRS for SMEs (2025)
c. Section 12 – Fair Value Measurement (New Section)
A major addition to the 2025 edition is the introduction of Section 12 – Fair Value Measurement, which consolidates fair value guidance that was previously dispersed across various sections.
Key features include:
- A clear and consistent definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (para. 12.5),
- Enhance a three-level fair value hierarchy (paras. 12.9–12.13) prioritising observable inputs and market-based evidence, and
- Enhanced requirements for disclosing valuation techniques, key inputs, and sensitivity to assumptions.
Cambodia context:
This new section is particularly relevant to Cambodian SMEs with investment properties, financial instruments, or related-party financial assets measured at fair value.
Entities should ensure that valuations are supportable and appropriately documented. Where active markets are absent, valuation techniques must be transparent and reasonable.
Reference: Section 12.1–12.13, CIFRS for SMEs (2025)
d. Section 19 – Business Combinations and Goodwill
The guidance in Section 19 has been substantially updated to align with the IFRS 3 (2008) framework.
Key changes include:
- Determine whether a transaction represents a business combination or an asset acquisition (paras. 19.4A–19.4C).
- Enhanced application of the acquisition method, requiring identification of the acquirer, determination of the acquisition date, and recognition of identifiable assets and liabilities at fair value (paras. 19.7–19.13).
- Goodwill must continue to be amortised, but the Standard provides clearer guidance on determining its useful life, not exceeding 10 years, and on performing impairment reviews (paras. 19.23–19.24).
- Acquisition-related costs must be expensed as incurred (para. 19.18).
Cambodia context:
Many Cambodian SMEs grow through acquisitions, restructuring, or group reorganisations. Entities must ensure that the accounting treatment correctly reflects the nature of the transaction—distinguishing between a true business combination and an asset purchase—and that goodwill is systematically amortised and tested for impairment.
Reference: Section 19.4A–19.24, CIFRS for SMEs (2025)
e. Section 23 – Revenue from Contracts with Customers
Perhaps the most transformative revision, the 2025 Standard replaces the old revenue recognition model with a new five-step framework based on the core principles of IFRS 15 (para. 23.5):
- Identify the contract with a customer;
- Identify the performance obligations;
- Determine the transaction price;
- Allocate the transaction price to the performance obligations; and
- Recognise revenue when (or as) the performance obligations are satisfied.
The focus shifts from “transfer of risks and rewards” to transfer of control (paras. 23.9–23.12), aligning SME revenue recognition with the underlying economic reality of the transaction.
Cambodia context:
SMEs in sectors such as construction, real estate, education, and professional services will be most affected.
Revenue should now reflect the pattern of transfer of control to the customer, requiring more careful analysis of contracts, performance milestones, and variable consideration clauses.
Reference: Section 23.5–23.12, CIFRS for SMEs (2025)
f. Section 7 – Statement of Cash Flows
The 2025 revision enhances transparency by introducing new disclosure requirements for:
- Reconciliation of changes in liabilities arising from financing activities (para. 7.19A); and
- Supplier finance arrangements (paras. 7.19B–7.19C).
These disclosures improve users’ understanding of how SMEs obtain and manage financing, and how supplier credit arrangements impact liquidity and solvency.
Cambodia context:
SMEs that rely on short-term supplier credit or bank overdrafts—common in trading and manufacturing sectors—must now disclose these arrangements clearly in their financial statements to provide a transparent view of cash management and debt repayment activities.
Reference: Section 7.19A–7.19C, CIFRS for SMEs (2025)
5. Transition from 2015 CIFRS for SMEs to 2025 CIFRS for SMEs
The transition process is guided by Section 35 – Transition to the IFRS for SMEs Accounting Standard.
Effective Date
- Mandatory for periods beginning on or after 1 January 2027.
- Early adoption permitted, for instance from 2026.
Transition Procedures
At the date of transition (beginning of the earliest comparative period, normally 1 January 2026):
- Recognize all assets and liabilities required under the new Standard.
- Derecognize items no longer permitted (e.g., outdated deferrals).
- Reclassify items as necessary (e.g., cost to fair value).
- Adjust retained earnings for cumulative effects.
Exemptions and Options
Section 35 provides flexibility:
- Completed customer contracts before the transition date need not be restated.
- Option to apply new revenue and business combination rules prospectively.
- Simplified fair value restatements for existing assets.
Cambodia context:
For SMEs audited under the 2015 CIFRS for SMEs, early planning allows time to prepare opening balances, update working papers, and coordinate with auditors and ACAR filing deadlines.
6. Update Accounting Systems, Documentation, and Policies
Cambodian SMEs should begin:
- Updating the chart of accounts and mapping new disclosures.
- Revising accounting policy manuals to align with 2025 requirements.
- Ensuring ERP or accounting software can capture new data—particularly for fair value, financing liability reconciliations, and revenue recognition.
Tip: Include your external accountant or auditor in reviewing system outputs to ensure compliance before your first 2027 reporting cycle.
7. Strengthen Internal Controls and Professional Judgement
The new CIFRS for SMEs relies more on principle-based interpretation than detailed rules.
Hence, management judgment becomes critical, particularly in:
- Assessing control relationships,
- Determining fair value,
- Allocating revenue to performance obligations, and
- Estimating expected credit losses.
Documenting such judgments will not only support compliance but also improve audit readiness.
8. Train Your Finance Team and Communicate with Stakeholders
Transition success depends on people, not just policies.
Cambodian SMEs should:
- Conduct staff training on updated CIFRS for SMEs sections.
- Engage auditors, consultants and tax advisors early to align interpretations.
- Communicate expected changes in financial results to shareholders, banks, and regulators.
9. Consider Early Adoption for Strategic Advantage
Although 2027 is the official effective year, early adoption of CIFRS for SMEs (2025 Edition) can:
- Demonstrate leadership in transparency and governance.
- Simplify comparability with multinational partners using full IFRS.
- Strengthen credibility with investors and financial institutions.
- Avoid a last-minute rush to meet ACAR filing requirements.
