Awareness, challenges and adoption of international financial reporting standard for small and medium enterprises in north central nigeria: implications for financial reporting quality

Thesis Overview

<p> </p><p><strong>INTRODUCTION</strong></p><p>International Financial Reporting Standard (IFRS) refers to a set of accounting standards developed by the International Accounting Standards Board (IASB) to be applied when preparing the financial statement and balance sheet of a company (Ball, 2006). IFRS was developed in 2001 by the IASB in the public interest to provide a single set of high quality, understandable and uniform accounting standards. With the globalization of finance, the adoption of IFRS will enable investors to exchange financial information in a meaningful and trustworthy manner. Adoption of IFRS would facilitate decision-making, there by leading to better accountability and compliance with tax legislation (Kenneth and Gracyna, 2013).</p><p>Recently, the IASB has focused its efforts in attempting to harmonize the financial reporting of non-listed firms by introducing the IFRS for Small and Medium Enterprises (SMEs) as an alternative framework that can be applied by eligible entities in place of the full set of IFRSs. This is a self-contained standard, incorporating accounting principles based on existing IFRSs that were simplified to suit the entities that fall within its scope (Christina, Mihaela, &amp; Oana, 2011). Adoption of IFRS for SMEs will help in enhancing the quality and comparability of SMEs financial statement around the world and assist SMEs in gaining access to finance which will not benefit only the SMEs, but also their customers, client and all other users of SMEs financial statement and this brings about growth in every business (IFRS foundation, 2012). The IFRS for SMEs will facilitate the further growth of the SMEs and business sector globally (Mage, 2010). As observed by Kenneth and Gracyna (2013), the adoption of IFRS for SMEs will not only facilitate decision-making, it will also results into better accountability and compliance with tax legislation.</p><p>One significant contribution of the adoption of IFRS for SMEs is improvement in the quality of financial reporting among SMEs. Financial reporting quality refers to quality information about an entity’s financial performance and position during a period. Investors and creditors often use information about the past in assessing the prospects of entities (Ahmed,2011). If quality of financial reporting is poor, it will be difficult to determine correctly the net profit of the business. In the absence of financial reporting, entities cannot ascertain whether they are making profit or loss (David, Thomas and Onsongo, 2011). Studies focusing on the accounting practices of SMEs have provided evidence that majority of the SMEs do not have records of financial statements or the financial position of their business (Karunanda and Jayamaha, 2011; Amaoka, 2013; Adekunle and Taiwo, 2013; Kofi, Adejei, Collins and Christian, 2014). However, none of the existing studies specifically link the adoption of IFRS and financial reporting quality in North-Central Nigeria.</p><p>This study addresses the limitation. This study will not only provide additional information required to boosting financial reporting quality in North-Central Nigeria, it will also boost awareness of the importance of adopting IFRS for SMEs. The study thus intends to provide answer to the question on the extent of awareness; adoption and challenges of IFRS for SMEs with the view of improving financial reporting quality among SMEs in North-Central Nigeria. The study will, in its own way, bring to light the question of whether or not the adoption of IFRS will enhance the financial reporting quality of SMEs in north-central Nigeria and will add to the existing literature on the topic. It will also serve as a guide to economic policy makers in making the necessary restructuring of the IFRS for SMEs in Nigeria if need be. It will also be a reference to future researchers who might want to work on some aspects of this topic.</p> <br><p></p>