International Financial Reporting Standards (IFRS) and Small and Medium-sized Enterprises (SMEs): Assessing the impact of IFRS adoption on SMEs

Abstract

The global adoption of International Financial Reporting Standards (IFRS) has seen significant growth in recent years, impacting not only large corporations but also Small and Medium-sized Enterprises (SMEs). This study is motivated by the need to explore the implications of IFRS adoption on SMEs, recognizing their distinct characteristics and challenges in financial reporting. SMEs constitute a substantial portion of the global economy, yet their unique position in the context of IFRS adoption remains underexplored. While IFRS was initially designed for large corporations, its applicability to SMEs, which differ significantly in terms of size, resources, and operational complexity, is a subject of debate. The problem lies in determining whether IFRS, as currently structured, adequately serves the needs of SMEs and identifying potential modifications or alternatives that can enhance their financial reporting quality without imposing an excessive compliance burden. The broad objective of this study is to assess the impact of IFRS adoption on SMEs, considering their suitability and the challenges they encounter. Additionally, the study aims to propose potential modifications or alternative frameworks to better align IFRS with the unique characteristics of SMEs. Qualitative research methods were employed for this exploratory study. Data collection included a comprehensive review of existing literature, case studies of SMEs that have adopted IFRS, and analysis of regulatory and policy documents. The study discovers that IFRS adoption among SMEs varies globally, with some countries fully embracing IFRS for SMEs as the primary standard, while others maintain a hybrid approach alongside national standards. In conclusion, the study highlights the transformative impact of IFRS adoption on SMEs worldwide, emphasizing the importance of addressing the specific needs and challenges faced by these entities. W

Keywords

References