Susan Maina is a content writer at Mugo and Company, where she simplifies Accounting, Auditing, and Forensic Audit services with her finance expertise.
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If you run a small or medium-sized business in Kenya — maybe a retail shop in Nairobi’s CBD, a manufacturing plant in Thika, or a tech startup in Konza — you already know how much work goes into keeping your financial records in order.
Sounds familiar?
Here’s the good news — IFRS for SMEs in Kenya was designed to make all this easier.
This simplified reporting standard helps SMEs prepare financial statements that are shorter, clearer, and far less complicated than full IFRS, while still keeping you fully compliant and investor-ready.
In this guide by Mugo & Company, we’ll break down what IFRS for SMEs in Kenya really means, who qualifies, the benefits you can expect, and how your business can start taking advantage of it.
Let’s get started!
Still wondering how IFRS for SMEs can make your accounting easier?
Request your FREE IFRS Consultation with Mugo & Co todayBefore we go any further, let’s quickly break down a few terms you’ll keep seeing.
| Term | What It Means (Simple English) |
|---|---|
|
SME |
– This simply means a Small or Medium-sized Enterprise. – In Kenya, that’s typically a business with up to 100 employees or about KES 100 million in annual turnover. – In other words — most of the growing businesses you see around you every day. |
|
IFRS
|
– Short for International Financial Reporting Standards. – These are the global rules on how companies should prepare and present their financial information. |
|
IFRS For SMEs |
– Think of this as a “lighter” and more practical version of IFRS. – It’s specifically designed for small and medium businesses that don’t handle public money. |
|
Public Accountability |
– A business is considered publicly accountable if it deals with money from the public — like banks, SACCOs, insurance companies, or companies listed on the Nairobi Securities Exchange.
|
Think of IFRS for SMEs in Kenya as the “lighter, easier-to-work-with” version of full IFRS — built specifically for smaller businesses.
Picture this:
You run a clothing store in Westlands. Every month you’re dealing with stock counts, sales records, rent payments, salaries — the usual day-to-day operations. Now, if you were using full IFRS, you’d probably end up with pages upon pages of technical disclosures for even the simplest transactions.
But with IFRS for SMEs in Kenya?
You only include what actually matters to the people reading your financial statements — the owners, the bank, your investors, and regulators.
Just clear, meaningful financial information.
So at its core, IFRS for SMEs in Kenya makes your reporting:
In a nutshell,
IFRS for SMEs in Kenya enables small and medium-sized businesses to produce clear, focused financial statements, eliminating unnecessary pages, technical notes, and complex disclosures that are rarely needed or read.
Let Mugo & Company guide you step-by-step through simplified financial reporting tailored for Kenyan SMEs.
Request your FREE IFRS Consultation with Mugo & Co todayIFRS for SMEs in Kenya was first issued globally by the International Accounting Standards Board (IASB) in July 2009.
Since then, it has been updated several times, with the third edition released in February 2025, set to take effect for financial periods starting 1 January 2027.
Good news: eligible businesses can adopt it early if their auditors and regulators agree — meaning you can start simplifying your financial reporting sooner rather than later.
We’ll help you determine the right time and approach for your business.
Request your FREE IFRS Consultation with Mugo & Co todayFiguring out if your business can use IFRS for SMEs in Kenya is simpler than it sounds.
In general, the IFRS for SMEs in Kenya is meant for Small and Medium-sized Businesses that don’t handle public funds and prepare financial statements for external users like banks, investors, and regulators.
| Eligibility Criteria | Description | Example in Kenya | Eligible? |
|---|---|---|---|
|
You are an SME |
– Small or medium-sized business, usually privately owned
|
Family-owned bakery in Mombasa
|
Yes |
|
No public accountability |
– You don’t manage public funds or trade shares on the NSE
|
Safaricom Limited
|
No |
|
Prepare general-purpose financial statements
|
– Reports are for banks, investors, owners, and regulators
|
Centum Investment’s small subsidiary
|
Yes |
Our team will assess your business structure and guide you on the correct reporting approach.
Request your FREE IFRS Consultation with Mugo & Co todaySmall and medium-sized enterprises (SMEs) form the backbone of Kenya’s economy, but Kenya does not have a single, universal definition for them yet.
Generally, SMEs are categorized based on the number of employees and annual turnover:
Kenya doesn’t have a single universal SME definition, but commonly:
| Category | Employee | Annual Turnover (KES) |
|---|---|---|
|
Micro |
– Less than 10 Employees
|
– Less than 5 Million
|
|
Small |
– 11-50 Employees
|
– Less than 50 Million
|
|
Medium |
– 51-100 Employees
|
– Less than 500 Million |
These businesses typically deal with simpler transactions, have fewer investors, and require less complex reporting.
This makes IFRS for SMEs a perfect fit, as it simplifies financial reporting while remaining fully compliant with accounting standards.
In Kenya, IFRS for SMEs is not mandatory.
That said, ICPAK recommends it for businesses that:
Note:
Some SMEs in Kenya may still opt for full IFRS, especially if they anticipate going public or listing on the NSE in the future.
IFRS for SMEs in Kenya is designed to cover all the essential accounting areas that matter to your business while leaving out complex rules that you probably don’t need.
This means your financial reporting becomes simpler, faster, and more relevant.
| Accounting Area | What It Means for You | Example in Your Business |
|---|---|---|
|
Revenue & Expenses
|
– How to record your income and costs correctly
|
– You run a Nairobi bakery and track daily sales and ingredient purchases
|
|
Property, Plant & Equipment
|
– How to account for your assets like machinery, vehicles, and buildings
|
– You own a Thika factory and record depreciation for your machines
|
|
Inventories |
– How to value your stock and cost of goods sold
|
– You manage clothing or electronics inventory in your Mombasa retail shop
|
|
Financial Instruments
|
– How to track loans, receivables, and payables
|
– You run a small tech startup and need to account for your bank loan and client invoices
|
|
Business Combinations |
– How to account for mergers or acquisitions
|
– Your subsidiary in Kenya acquires a smaller local business
|
|
Earnings per share |
– Not included |
– You don’t need to worry about this unless your company is listed
|
|
Segment Reporting |
– Not included |
– Your business likely operates as a single unit, so segment breakdown isn’t necessary
|
|
Interim Reporting |
– Not included |
– You can focus on annual reporting; quarterly reports are optional
|
|
Insurance Contracts |
– Not included |
– You don’t need complex insurance accounting for most SMEs
|
Key Takeaway:
IFRS for SMEs in Kenya focuses on what you really need — simplifying your reporting while keeping it transparent and fully compliant.
IFRS for SMEs in Kenya was created with your business in mind.
Its main goals are to make financial reporting simpler, clearer, and more useful for you and anyone who relies on your financial statements. Here’s what it means for your business:
| Objective | What it Means For You |
|---|---|
|
Simplify Financial Reporting
|
– You spend less time preparing statements and dealing with unnecessary disclosures
|
|
Align with IFRS principles
|
– Your reporting follows global standards, but without the full complexity of IFRS
|
|
Reduce cost and effort
|
– You save money on audits, accounting software, and staff time
|
|
Ensure transparency and reliability
|
– Banks, investors, and regulators can trust your financial statements
|
In short: IFRS for SMEs is all about helping you run your business smarter while keeping your accounting transparent, compliant, and aligned with international best practices.
IFRS for SMEs in Kenya keeps the important accounting rules but simplifies them for smaller businesses.
Here’s what you need to know, with references to the equivalent full IFRS standards:
| Provision | What It Means for You | IFRS Reference | Example? |
|---|---|---|---|
|
Revenue Recognition (Section 23)
|
– Recognize income when you’ve delivered goods or services using a simplified five-step approach.
|
– A Nairobi furniture store records revenue when furniture is delivered, not when cash is received.
|
|
|
Fair Value Measurement (Section 12) |
– Helps you value assets like land, buildings, or equipment without complex fair value calculations.
|
Based on IFRS 13 (Fair Value Measurement) |
– Your factory land can be reported at a reasonable market value without a full professional valuation each year.
|
|
Business Combinations (Section 19)
|
– Guides how to account for mergers or acquisitions using the acquisition method.
|
Based on IFRS 3 (Business Combinations) |
– If you buy another small company, IFRS for SMEs shows how to record assets and liabilities clearly. |
|
Financial Instruments (Section 11) |
– Simplifies how you measure and report loans, receivables, and payables.
|
Based on IFRS 9 (Financial Instruments) |
– Bank loans or customer credit can be reported without complex fair value adjustments
|
In short: These rules let you prepare clean, simple, and reliable financial statements while keeping alignment with the full IFRS standards.
| Benefit | What it Means For You |
|---|---|
|
Less paperwork |
– Prepare shorter, simpler financial statements that are easier to read and understand.
|
|
Lower Costs
|
– Save on audit and reporting expenses because you’re not dealing with unnecessary complexity.
|
|
Faster Reporting
|
– Generate monthly or quarterly reports more quickly, giving you more time to focus on your business.
|
|
Global Alignment
|
– Make it easier to work with banks, investors, or foreign partners who are familiar with IFRS standards.
|
|
Better decision-making |
– Focus on the financial information that really matters, helping you make informed business decisions.
|
Mugo & Co can help you confidently implement IFRS for SMEs in your business.
Request your FREE IFRS Consultation with Mugo & Co todayWhile IFRS for SMEs in Kenya can simplify your financial reporting, there are some challenges you should be aware of:
In short: Implementing IFRS for SMEs in Kenya is achievable, but it requires planning and training.
Many Kenyan SMEs are already taking steps to get ready for IFRS for SMEs:
The effective adoption date is 1 January 2027, but ICPAK allows early adoption if your auditors and regulators agree.
This means you can start simplifying your reporting sooner and gain the benefits of clearer, more focused financial statements.
1. What is IFRS for SMEs in Kenya?
2. Is IFRS for SMEs in Kenya mandatory?
3. Who does IFRS for SMEs apply to in Kenya?
4. What is the difference between the other IFRS and IFRS for SMEs in Kenya?
5. What is the difference between IFRS 15 Revenue recognition and IFRS for SMEs in Kenya?
learn more about IFRS 15 Revenue Recognition, check out our detailed article : IFRS 15 in Kenya – Revenue Recognition
IFRS for SMEs in Kenya is truly a game-changer for small and medium-sized businesses.
It strikes the perfect balance between simplicity and compliance, helping you reduce paperwork, lower costs, and produce financial statements that banks, investors, and regulators can trust.
If you run a Kenyan SME, it’s worth considering starting your transition now. Preparing early will make adoption smoother, improve your financial reporting efficiency, and give you greater confidence in your business decisions.
Partner with us for smooth adoption and clear, professional financial statements.
Request your FREE IFRS Consultation with Mugo & Co todayReady to simplify your financial reporting and start your transition to IFRS for SMEs in Kenya?
Mugo & Company is here to help.
We offer a free IFRS advisory consultation to guide you through the process, answer your questions, and help you determine how IFRS for SMEs can work for your business.
Get in touch today to schedule your consultation and take the first step toward clearer, simpler, and fully compliant financial statements.
This guide is for general information only and should not replace professional advice. Always consult your accountant or auditor for guidance specific to your business situation.
The IFRS for SMEs Accounting Standard
IFRS for SMEs | Grant Thornton
IFRS for SMEs Accounting Standard modules
IASB issues third edition of IFRS for SMEs accounting standard | EY
IFRS 15 in Kenya – Simple Guide to Revenue from Contracts with Customers | Mugo & Company
IFRS 13 in Kenya | Fair Value Measurement Made Simple
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