International Financial Reporting Standards For SME, The Pain Versus The Gain
This study was on international financial reporting standards for SME, pain versus gain. 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.
- Background of the study
The globalization becomes more and more important for the international capital markets. Therefore, it is crucial creating a comparable information-basement worldwide and account similar entities in a similar way. The biggest groups of the entities, acting on the markets (public or local) are the small and medium-sized entities with about 95 % (IASB 2009). So the IASB released an own standard for them in July 2009 and so they created “a new form of the full IFRS”
The International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) is designed to apply to all entities that do not have public accountability. The International Accounting Standards Board (IASB) developed the IFRS for SMEs in recognition of the cost and difficulty to relatively small private entities of preparing fully compliant IFRS information. The IASB also recognised that users of private entity financial statements may have a different focus to those interested in publicly listed companies.
In addition, the IFRS for SMEs contains fewer disclosure requirements in a dramatically shorter document, compared to that of the IFRS, and therefore appeals to both the users and preparers of financial statements.
The IFRS for SMEs standard is potentially available for immediate use, however it is for the relevant standard setters and authorities in each country to decide which entities are permitted and/or required to apply IFRS for SMEs.
As a result of broad discussion of SMEs and common standards for SMEs worldwide, the International Accounting Standard Board (IASB) introduced an International Financial Reporting Standard (IFRS) designed for use by small and medium-sized entities (SMEs) on July 9, 2009 (International Accounting Standards Board (IASB), 2010). According to IFAC chief Executive Ian Ball, “This global accounting standard represents a very significant step on the path to global convergence of financial reporting practices by SMEs. It will contribute to enhancing the quality and comparability of SME financial statements around the world and assist SMEs in gaining access to finance.” This standard is helpful not only for SMEs, but also for their clients, customers, management and all other users of SME financial statements
Statement of the problem
Many companies irrespective of their size are bound by the statutory rules of a particular country in which they operate to prepare financial reports that conform to specified set of accounting principles. There has been much ongoing debate regarding the suitability of one set of accounting standards in a country for all its operating enterprises, regardless of their size. IASB in their publication of IFRS for SMEs describe the SMEs as those entities which are not publically accountable and thus publish financial statements with general purpose for its external users. These external users refer to the non-managerial owners, current and prospective creditors and credit-rating agencies. IFRS for SMEs cannot be used by publicly accountable enterprises because of its limited application designed only for small and medium-sized entities. Subsidiaries of a big company are not prohibited from using IFRS for SMEs, if they themselves are not publicly accountable to anyone. Financial statements of SMEs provide their intended users with the information about the firm’s financial position, its performance and cash-flows of the firm. Variety of users of these financial statements relies on the information provided in these statements for their future economic decisions (IASB, 2009, p. 10-11)
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
For the successful completion of the study, the following research hypotheses were formulated by the researcher;
H0: there is no contribution of international financial reporting standard to SME.
H1: there is contribution of international financial reporting standard to SME.
H02: there is no gain of international financial reporting standard for SME
H2: there is gain of international financial reporting standard for SME
Significance of the study
The study will be very significant to students and SME’s owner. The study will also give a clear insight on the international financial reporting standards for SME, the pain versus the gain. The study will also serve as a reference to other researcher that will embark on the related topic
Scope and limitation of the study
The scope of the study covers international financial reporting standards for SME, the pain versus the gain.
Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
DEFINITION OF TERMS
International financial reporting standard: International Financial Reporting Standards, commonly called IFRS, are accounting standards issued by the IFRS Foundation and the International Accounting Standards Board.
SME: Small and medium-sized enterprises or small and medium-sized businesses are businesses whose personnel numbers fall below certain limits. The abbreviation “SME” is used by international organizations such as the World Bank, the European Union, the United Nations and the World Trade Organization