Abstract
This paper reviews literature of financial reporting by small and Medium-Sized Enterprises (SMEs) with particular reference to Nigeria. The study justifies the use of International Financial Reporting Standards (IFRS) by Nigerian enterprises. Thereafter, the paper recognises the economic importance of SMEs both globally and in Nigeria. Justification for differential reporting between listed entities and unlisted SMEs was articulated. The paper notes the advantages and challenges related to adopting IFRS for SMEs globally and in Nigeria. It is recommended that further research be undertaken to access empirically the impact and consequences of adopting IFRS for SMEs by unlisted enterprises in Nigeria
Highlights
The adoption of a single set of International Financial Reporting Standards (IFRS) globally, enhances comparability of financial reports within and between countries (Madawaki, 2012)
(i) small and Medium-Sized Enterprises (SMEs) are a major driver of the Singapore economy, accounting for 99 per cent of all enterprises in Singapore, employing seven out of every 10 workers, and contributing over 50 per cent of national gross domestic product (Lee, 2012). (ii) SMEs accounted for 99.7% of actively trading businesses in Australia in June, 2009 and accounted for 70.5% of total industry employment in 2009-2010 (DIISR, 2011). (iii) SMEs in China accounted for 60% of Gross Domestic Product (GDP) in 2009 and created 80% of job opportunities in 2009 (Zhu, Wittman, & Peng, 2012)
The paper could not discuss empirical evidence demonstrating the extent to which Nigerian SMEs have achieved any practical advantages of adopting IFRS for SMEs
Summary
The adoption of a single set of International Financial Reporting Standards (IFRS) globally, enhances comparability of financial reports within and between countries (Madawaki, 2012). In 2007, the IASB proposed an Exposure Draft (ED); IFRS for SMEs affirming the fact that the objective of financial statements is “to provide information about the financial position, performance and cash flows of the entity that is useful for economic-decision making by a broad range of users who are not in a position to demand reports tailored to meet their particular information needs”. Users of accounts of a small company do not require complexities such as deferred tax, finance leases, financial instruments, pensions, share based payments, etc They need to see accounts conveying absolute information about future cash flows rather than relative measures of performance. IFRS for SMEs was designed to lessen the weight of disclosure for SMEs, while simultaneously adhering to the principles of international standards (Cheney, 2004) With the issuance by the IASB of IFRS for SMEs in 2009, tailored for the needs and capabilities of smaller entities; many SMEs around the world have the option of using a much simplified IFRS-based accounting framework to prepare their financial statements
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