Abstract
The purpose of this study is to explore the convergence mechanism and process of SME's financial statements into the International Financial Reporting Standards(IFRS) including the benefits and the impact of financial reporting on users of financial statements. The paper also explains the early IFRS adoption in Saudi Arabia according to the guideline provided by Saudi Organizations for Certified Public Accountants (SOCPA). The mechanism of the convergence incudes: nature of information to gather during the convergence, the significant IFRS to include in the financial reports, and financial accounts affected by the convergence. The article results find that the fair value adoption and Zakat rules are the most challenges for SME's in the financial stamens convergence process in addition to lack of adequate guidance by SOCPA and the complexity of IFRS. The Zakat rules need more interpretation and transparency. Therefore, companies spend more effort in financial statements convergence for Zakat purpose. In addition, more collaboration and training are required to improve the quality of financial reporting which would reduce the time consumption and convergence costs including cost of outsourcing (offshoring) financial statements convergence into IFRS.
Highlights
Amidst the diversity of international accounting standards, this paper contributes to existing literature by further exploring the convergence mechanism and process of Saudi Arabian SME’s financial statements into the International Financial Reporting Standards (IFRS)
The IFRS system is a crucial system in the business industry and system will provides reliable, accurate and transparent information, and it eases the work (Steel & Sagga, 2015)
Organizations in Saudi Arabia are confronting a time of progress in their bookkeeping rehearses because of changes being actualized by the Saudi Organization of Certified Public Accountants (SOCPA)
Summary
Amidst the diversity of international accounting standards, this paper contributes to existing literature by further exploring the convergence mechanism and process of Saudi Arabian SME’s financial statements into the International Financial Reporting Standards (IFRS). It is crucial for industry TO strive for reliable, accurate and transparent information to enhance ultimate dissemination of business financial information for all concerned stakeholders. The purpose of this study is to focus on the strategy for convergence, the sequential procedures to follow, collation of data, and the prioritizing of standards to be adopted.
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