IFRS for SMEs in the UAE: Who May Use It, and What It Changes

Article 4 of Ministerial Decision No. 114 of 2023 has two limbs and they are short.

Article 4(1): for the purposes of Article 20(1) of Federal Decree-Law No. 47 of 2022, a taxable person shall apply the International Financial Reporting Standards ("IFRS").

Article 4(2): a taxable person deriving revenue that does not exceed AED 50,000,000 may apply IFRS for SMEs.

That is the whole of the concession. Three things follow from the drafting, and each of them is regularly got wrong.

It is permissive, not automatic. Nothing switches a small company onto IFRS for SMEs. Full IFRS is the standing requirement in Article 4(1); Article 4(2) opens a door the taxable person chooses to walk through. A company under the threshold that has always run full IFRS is compliant and may carry on.

The test is revenue and only revenue. There is no asset test, no employee count, no restriction by company form, no mainland-or-free-zone distinction and no group-size test in the article. Revenue for the tax period is the whole enquiry.

It is a different standard, not a shorter version of the same one. IFRS for SMEs changes recognition and measurement, not only disclosure. Adopting it changes the numbers, the comparatives and the accounting policy note together.

This is the single most useful thing to know about the threshold, and it is why finance teams should watch it a year ahead rather than at the year end.

Crossing AED 50,000,000 of revenue removes the IFRS for SMEs option under Article 4(2) of Ministerial Decision No. 114 of 2023 — and, quite separately, it triggers a statutory audit obligation for corporate tax purposes under Article 2(1)(a) of Ministerial Decision No. 84 of 2025, which requires audited financial statements of a taxable person that is not a tax group and whose revenue exceeds AED 50,000,000 in the relevant tax period. Ministerial Decision No. 84 of 2025 applies to tax periods commencing on or after 1 January 2025 (Article 4).

So a company that grows past the line in one year faces a change of accounting framework and a first audit in the same reporting cycle. The framework change alters the comparatives the auditor is being asked to sign.

The two decisions are constantly confused with each other, so it is worth stating plainly which does what: Ministerial Decision No. 114 of 2023 sets the accounting standard. Ministerial Decision No. 84 of 2025 sets who must be audited. They share the AED 50,000,000 figure, and share nothing else.

Article 4(2) tests revenue derived by the taxable person, for the tax period. Three practical points follow.

Revenue, not profit and not taxable income. A loss-making entity with AED 60,000,000 of turnover is over the line. A highly profitable consultancy with AED 8,000,000 of fees is under it.

The tax period, not the calendar year. Article 57 of the Corporate Tax Law fixes the tax period as the financial year or part of it. A company with a June year end tests its own twelve months.

In dirhams. Article 43 of the Corporate Tax Law requires amounts to be quantified in United Arab Emirates dirham, with any other currency converted at the exchange rate the Central Bank sets, subject to conditions the Authority prescribes. A company reporting in dollars converts before it applies the test — and a company sitting near the line should not assume the answer is stable across a currency move.

Where the entity is part of a tax group, note that the group's own reporting works differently. Article 42(11) of the Corporate Tax Law requires a tax group to prepare consolidated financial statements under the accounting standards applied in the State, and Article 3 of Ministerial Decision No. 114 of 2023 defines what that means here: standalone financial statements prepared on the basis of aggregating the standalone statements of the parent and each subsidiary, eliminating transactions between them.

Ministerial Decision No. 114 of 2023 grants the permission on a revenue test. The IFRS for SMEs Accounting Standard has its own scope conditions, set by the IFRS Foundation, and they are not a revenue test. Broadly, the standard is written for entities without public accountability that publish general purpose financial statements for external users; entities with public accountability are directed to full IFRS.

We are not going to reproduce the standard's scope wording here. The IFRS Accounting Standards are behind registration and licensing on ifrs.org — free of charge for non-commercial purposes such as preparing corporate disclosures, licensed for anything else — and paraphrasing a scope test from memory is precisely how a company ends up on the wrong framework. Read Section 1 of the standard itself, or have your auditor confirm scope in writing before you elect.

The practical consequence is that clearing AED 50,000,000 is necessary but not sufficient. A small entity that takes deposits, holds assets in a fiduciary capacity for a broad group of outsiders, or has securities traded publicly, is the kind of entity the standard steers away from — even if its revenue is well under the UAE threshold. The IFRS Foundation's UAE jurisdiction profile records the shape of the UAE position: entities meeting the SME definition are permitted to use IFRS for SMEs, and those that do not use it must use full IFRS, because there is no third framework to fall back on.

The IFRS Foundation issued the third edition of the IFRS for SMEs Accounting Standard in February 2025, effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted; the 2015 edition remains available until then. Verified on the Foundation's own page, 21 August 2026.

Ministerial Decision No. 114 of 2023 refers to "IFRS for SMEs" without naming an edition or a version. On the face of the decision, the UAE has no endorsement mechanism that would freeze a version: the IFRS Foundation's UAE profile records that where a new or amended standard is issued, it becomes effective on the effective date specified in the standard itself, with no local adoption step. The natural reading is therefore that the third edition takes effect in the UAE on its own terms from 2027.

We have not found a Ministry of Finance or Federal Tax Authority statement confirming that reading, and we are not going to present it as settled. Anyone planning a 2027 comparative should treat the transition as an accounting project with an unresolved legal edge, and watch mof.gov.ae for a clarifying decision. Checked 21 August 2026.

There is no application form and no Federal Tax Authority approval attached to Article 4(2). The election shows up in the financial statements themselves — in the basis of preparation note, in the comparatives, and in the numbers the return is built from.

That makes the timing point the important one.

Four boundaries are worth stating explicitly, because the term "SME" invites the assumption that everything gets lighter at once.

Company law does not soften. Article 27(3) of Federal Decree-Law No. 32 of 2021 requires International Accounting Standards and Practices of every company, with no size carve-out, and Article 27(1) requires a yearly audit of every limited liability company and joint stock company irrespective of revenue.

Record keeping does not shorten. Article 56 of the Corporate Tax Law requires records to be kept for seven years following the end of the tax period; Article 26 of the Commercial Companies Law requires accounting books to be kept at the head office for at least five years; Cabinet Decision No. 74 of 2023 sets its own retention clocks. None of them refers to which accounting standard you used.

Small Business Relief is a different thing entirely. It is an election that treats a person as having no taxable income, at revenue of AED 3,000,000 or less, under Ministerial Decision No. 73 of 2023 as amended by Ministerial Decision No. 131 of 2026 — now available for tax periods ending on or before 31 December 2029. It sits in the corporate tax law, not in the accounting standards decision, and electing it does not change your reporting framework.

Qualifying free zone status does not interact with it. A qualifying free zone person may use IFRS for SMEs if its revenue is under AED 50,000,000, and must still have audited financial statements at any revenue under Article 2(1)(b) of Ministerial Decision No. 84 of 2025.