Adoption of international financial reporting standards (IFRS) for small and medium-sized enterprises (SMEs): problems and challenges

The International Accounting Standards Board (IASB) has pursued a strong agenda to develop a simplified set of International Financial Reporting Standards (IFRS) for small and medium-sized enterprises (SMEs). IFRS for SMEs published in 2009 was derived from full IFRS with significantly reduced recognition and measurement principles, guidance and disclosure requirements in order to satisfy the accounting information needs of the users of SME financial statements. The aim of this thesis is to undertake a comprehensive examination of the conceptual and practical issues in the convergence of IFRS for SMEs and suggest possible ways to address these issues. In particular, the thesis undertakes the following four research projects under the theme of problems and challenges in implementing IFRS for SMEs: (1) critically reviews IFRS for SMEs, including the development and implementation process of the standards; (2) examines whether accountants are able to distinguish between the recognition and measurement principles of full IFRS and IFRS for SMEs when they exercise professional judgment; (3) investigates the impact of the reduced guidance in IFRS for SMEs on the professional judgment of accountants; and (4) investigates whether users of SME financial statements benefit from a simplified set of IFRS for SMEs. This thesis employs exploratory and empirical research methods to examine the controversial issues in the adoption of IFRS for SMEs. The findings of this thesis provide evidence that IFRS for SMEs have been a challenge for non-publicly accountable entities to adopt and there are several conceptual and practical issues with IFRS for SMEs. In particular, the thesis provides evidence that accountants are unable to choose accounting treatments that best reflect the economic substance of a transaction when the recognition and measurement requirements are different across full IFRS and IFRS for SMEs and when guidance is significantly reduced from IFRS for SMEs. This thesis also provides evidence that users perceive disclosure of IFRS for SMEs to be decision useful but they do not regard that the simplification significantly enhances their decision making.