International Financial Reporting Standards for SMEs, The Pain Versus the Gain
Chapter One
Objective of the study
The objectives of the study are;
- To ascertain the contribution of international financial reporting standard to SME
- To ascertain the gain of international financial reporting standard for SME
- To investigate the pain of international financial reporting standard for SME
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INTRODUCTION
The choice of subject for our thesis has been based on the concern for the adoption of International Financial Reporting Standards (IFRS) for Small and Medium-sized entities (SMEs) by SMEs in Sweden. There has been much debates and discussions during the last decade regarding the formulation of a set of standards suitable for small and medium-sized entities. In the effort, IFRS for SMEs was launched by International Accounting Standards Board (IASB), while the RRs standards were developed by Swedish Accounting Standards Board for the unlisted companies in Sweden. Full IFRS has been made statutory by the European Union for the listed companies to make their financial statements in compliance with IFRS. But there has not been yet any statutory regulations imposed on SMEs in Europe in reference to the adoption IFRS for SMEs. The external users of SMEs, which include indirectly involved owners, creditors and credit rating agencies, do require financial statements for the appropriate economic decisions to be made by them. Almost all the countries have a national set of accounting standards to be followed by the companies operating within the national boundaries. These accounting standards had been developed over time, and with the purpose of their development was to keep a check and balance on the transactions and events of a company by bringing in quality and control into it. It was understandable to us that the public listed companies have a broad set of creditors and investors, and these stakeholders need to be presented with financial reports as per certain accounting standards in order to occupy them with the knowledge and understanding of the firm‟s financial position and performance. But, the question which we thought of was that why would small and medium-sized companies which do not have such a broad range of shareholders or creditors would need a global set of accounting standards to prepare their financial statements.
Preconceptions:
In order to be objectively involved in the thesis work one needs to have certain preinvolvement or interest in the field of study. This helps in choosing the appropriate methods and tools for data collection and analysis. Being naïve in the chosen field of study can create complications in a way that the author might move around different unrelated objectives without an appropriate idea about where the work might be headed to and what are going to be the end results. Setting objectives is not an easy task, and for our study we had to go through a lot of discussion in order to specify our objectives for this study. The objectives of our study in turn represent the research questions of our study as well. Thus the objective is defined to be the approach of SMEs in terms of their preparedness and willingness to adopt this new set of accounting standards, IFRS for SMEs, into their financial reporting. Both the authors of this thesis come from the same program of study, which is Master in Accounting, and more or less share the same knowledge regarding International Financial Reporting Standards being taught during the module of Advanced Financial Accounting. The authors belong to Pakistan, where companies follow International Accounting Standards (IAS) which is issued by IASB, and IFRS are soon to be implemented by companies in Pakistan. During our studies in Pakistan we were mostly taught about the US GAAP (Generally Accepted Accounting Principles). Working on this specific topic regarding IFRS for SMEs would give us the opportunity to comprehend these standards and their usage in much more depth. Although, we do lack practical experience in Small and Medium-sized Entities or involvement in IFRS oriented financial statements, but we do share sound theoretical pool of knowledge regarding IFRS and SMEs. It was during the course of Advanced Financial Accounting that our interest towards IFRS was developed.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to international financial reporting standards for SME, the pain versus the gain
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information on the study international financial reporting standards for SME, the pain versus the gain. 200 staffs of CBN, Uyo Akwa Ibom state was selected randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was on international financial reporting standards for SME, the pain versus the gain. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of international financial reporting standards for SME, the pain versus the gain
Summary
This study was on international financial reporting standards for SME, the pain versus the gain. Three objectives were raised which included: To ascertain the contribution of international financial reporting standard to SME, to ascertain the gain of international financial reporting standard for SME and to investigate the pain of international financial reporting standard for SME. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staffs of CBN, Uyo, Akwa Ibom. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made economists, administrative staff, accountants and HRM were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
The IFRS for SME is a relatively simple and stable standard internationally acknowledged by the users of the financial statements. Relative facility and stability of the IFRS for SME will secure its application in Nigeria and make financial statements more accurate. The quality financial statement useful, reliable and comparable information boosts the number of its users and as evidenced by the International Accounting Standards Board (IASB) surveys will eventually be beneficial to the enterprises. What is implied is a better quality and more comparable financial statement, accessibility to the capital market, higher potential of financial resources, reduced capital costs and international prospects of companies
Recommendation
What IFRS for SMEs lack the most is the awareness regarding these standards. Majority of the SMEs are not even aware of what IFRS for SMEs is, and what is it all about. Launching of new accounting standards would not serve the purpose because companies already have their existing national accounting standards and are contented with its use. Efforts towards bringing the awareness of IFRS for SMEs among the companies should be prioritized. This can be done by arranging seminars, training programs and conferences regarding the awareness of IFRS for SMEs, its uses and the cost-benefit analysis of IFRS for SMEs from the perspective of SMEs. What the SMEs fear most about the IFRS for SMEs are the complexities and costs associated with the adoption of IFRS for SMEs. It should be brought into the knowledge of SMEs that neither IFRS for SMEs is a complex set of accounting standards nor its costs would be so high that companies would not be able to recover from it. Initially, it would be both complicated and would bear some cost of adoption but later on companies could use it in a normal way just like they use their national accounting standards, but with more enhanced characteristics in terms of quality and comparability.
References
- Amendments to the IFRS for SMEs. (2015, May). Retrieved from http://www.ifrs.org/IFRS-for-SMEs/Documents/IFRS20SMEs
- Bdo-Ifrs for Smes at a Glance. (2015). A sat, 25. Retrieved 1 January 2015, from http://www.bdointernational.com/Services Conceptual Framework for Financial Reporting. (2010, September).
- International Accounting Standards Board, 35-39. Retrieved from http://www.ifrs.org/News/ Ernst, &Yang. (2010, April). IFRS for small and medium-sized entities. A comparison with IFRS-the basics, 28-33. Retrieved from http://www.ey.com/Publication/vwLUAssets/IFRS_for_SMEs_Comparison/$FILE/IFRS_for_SMEs_
- International Financial Reporting Standards (IFRS) for small and medium enterprises. (2012). Why to use this standard in Georgia report on Standards and Codes (ROSC) on the implementation of accounting and audit of the accounts of Tbilisi, Georgia. IFRS Foundation, 20. 30 Cannon Street, London EC4M 6XH, UK. Retrieved 24 September 2015, from http://www.ifrs.org
- International Financial Reporting Standard for Small and Medium-sized Entities (IFRS forSMEs). (2009). Retrieved 13 February 2009, from http://go.iasb.org/
- IFRSforSMEs Module 1-Small and Medium-sized Entities. (2009). IFRS Foundation: Training Material for the IFRS for SMEs, 9. Retrieved from http://www.ifrs.org/IFRS-for-SMEs/Documents Paul Pacter. (2011). IFRS for SMEs. IASB Board Member, 4-12. Retrieved 28 November 2011, from https://doi.org/10.4324/9780203103203.ch21
