Small And Medium-sized Entities Research Articles

Features of the Association between Debt and Earnings Quality for Small and Medium-Sized Entities

The main source of financing is bank loans for Portuguese small and medium-sized entities (SMEs), which implies several constraints to obtaining additional funds. Relying on the argument of Positive Accounting Theory (PAT) that accounting choices are not neutral and on Agency Theory that information asymmetry prevails between insiders and outsiders, we analyzed the impacts of debt on earnings quality, focusing on its level, its increases, and its term of payment. We estimated econometric regressions using panel data with fixed effects over 2013–2019, using discretionary accruals as an inverse proxy of earnings quality. We found empirical evidence that the relationship between debt and earnings quality tends to vary in sign, as the quality of financial information deteriorates with debt, but as debt becomes high, firms tend to increase the quality of earnings. Furthermore, we found that short-term debt tends to decrease earnings quality more than long-term debt. This article aimed to contribute to the prior literature by collecting evidence that debt levels tend to be an incentive to increase earnings management and fill the gap by analyzing the influence of different debt features. This evidence is useful because earnings management may compromise both stakeholders’ confidence and the efficient allocation of capital.

International Financial Reporting Standards Convergence Process for Small and Medium-Sized Entities

The "International Financial Reporting Standards (IFRS) Convergence Process for Small and Medium-Sized Entities (SMEs)" seeks to address the unique challenges and requirements faced by smaller businesses in adhering to international accounting and reporting standards. This initiative recognizes that SMEs operate in diverse economic environments and have distinct financial reporting needs compared to larger enterprises. The primary purpose of this convergence process is to enhance the relevance, accessibility, and practicality of IFRS for SMEs, fostering consistency in financial reporting practices across global markets.A project to create accounting standards appropriate for small and medium-sized businesses (SMEs) is being worked on by the International Accounting Standards Board. This abstract provides an overview of the convergence process involving International Financial Reporting Standards (IFRS) for Small and Medium Sized Entities (SMEs). With the global landscape of financial reporting constantly evolving, the integration of IFRS tailored specifically for SMEs marks a pivotal transition towards harmonizing financial reporting practices. This paper examines the essential elements and implications of this convergence, addressing the challenges and benefits faced by SMEs as they align with these international standards. The analysis delves into the driving factors behind the convergence, including the necessity for a unified and transparent financial reporting framework, aiming to facilitate comparability and accessibility of financial information across borders. Furthermore, the abstract discusses the potential impact on SMEs' financial reporting quality, decision-making processes, and access to capital. Through a comprehensive review of the convergence process, this abstract seeks to contribute to the understanding of the significance and implications of adopting IFRS for SMEs, thereby providing valuable insights for practitioners, regulators, and stakeholders in the financial reporting ecosystem.

Audit Entitas Kecil dan Menengah serta Penggunaan Cloud dalam Berbagi Data (Studi Kasus pada Kantor Akuntan Publik ABC)

This study aims to implement a special audit manual for small and medium-sized entities (SME) and the application of the cloud in the audit process to improve the efficiency of financial statement audits by small and medium-sized practitioners (SMP). This a qualitative research with a case study approach in a public accounting firm in Indonesia (KAP). The design of the audit manual and the use of the cloud in this study has been designed by the authors in previous research. The cloud can speed up the audit process through easy data sharing, electronic data archives, and teamwork monitoring. In addition, the scalability of using the cloud can help SMPs increase their productivity. The scope of the implementation manual design is only at the risk assessment stage. Applying the cloud in the audit process only uses the free features of the service provider. The results of the study helped SMPs to implement a simple audit manual and use the cloud to increase the audit efficiency of SMEs. This study pays great and specific attention to the audit of SMEs. The majority of the audit research studies concentrate on big audit firm practices.

An elite perspective on interviewing entrepreneurs – methodological considerations for the entrepreneurship field

PurposeElite interviewing is a well-established area of interview research methods. Nevertheless, the actual casting of an “elite” has been generally conducted in a prima facie or broad manner. A consideration of entrepreneurs and owner-managers as “elites” has been less profiled and received less attention, therefore the paper views the entrepreneurs and owner-managers as constituting a form of “local elite” within given and varying sectorial, regional and community boundaries. The authors argue that a consideration of entrepreneurs as “local elites” and transferring knowledge from an elite interviewing perspective may strongly support scholarly research in the entrepreneurship field.Design/methodology/approachThe study conducts a comprehensive narrative literature review of elite interviewing literature and transfers key methodological insights to the entrepreneurship field. The methodological contribution based on literature is complemented by experiences and observations from an extensive inductive interview study with over 30 entrepreneurs of German manufacturing Small and Medium-sized Entities (SMEs) and are used to reflect on, and refine, interview research approaches with entrepreneurs.FindingsThe reflections and discussions in this paper provide valuable insights for other researchers conducting research in entrepreneurship domains regarding the power dynamics of negotiating access, procedural issues of interviews and thereby enhancing the quality of data.Originality/valueThe contribution to knowledge is mainly of a methodological nature. While the paper takes a novel act of recasting elite interviewing in the SME and entrepreneurship context, the paper methodologically contributes to the entrepreneurship and elite interview literature thereby facilitating higher quality interviews.

Financial reporting in times of crisis: The case of the Serbian developing economy during COVID-19

This study examines the impact of the COVID-19 pandemic on financial reporting in Serbia from the perspective of preparers of financial statements. Notably, the pandemic affected financial reporting in Serbia and preparers faced more professional difficulties during than before the pandemic. Financial reporting problems regarding future expectations and uncertainty are an important source of concern for preparers. The preparers who apply International Financial Reporting Standard (IFRS) for Small and Medium-sized Entities (SMEs) perceive some more difficulties than those who apply full IFRSs. This study contributes to the scarce literature regarding the impact of the COVID-19 pandemic on financial reporting. JEL Classification: M41, G01

SME owners and accountants' perceptions of financial information in small- and medium-sized entities: a Sri Lanka case study

PurposeThis paper aims to examine the perceptions of owners and accountants of small- and medium-sized entities (SMEs) on the users and their financial information needs of SME financial reporting.Design/methodology/approachPostal questionnaire surveys with owners and accountants of SMEs were used to identify users and their financial information needs. In total, 1,498 questionnaires were sent to SME owners and accountants. A total of 358 questionnaires were returned, generating 323 useable questionnaires. The management branch of stakeholder theory is used for the study which asserts that company management is expected to meet the expectations of those stakeholders who are more powerful than others.FindingsThe users of Sri Lanka SME financial information were limited to owners, banks and Department of Inland Revenue. Users and financial information needs of owners varied in relation to the size of the SME. Financial information are useful for making capital investment and planning decisions for owners regardless of the size of the SME. By sharing information with outside parties, disclosures can diminish information asymmetries between the firms and its stakeholders. The top three reasons for which owners use SME financial information are for planning purposes, estimating income tax liabilities, and taking marketing and pricing decisions.Research limitations/implicationsSince the study focuses only on the views of owner-managers and accountants of SMEs, the holistic understanding of uses of SME financial information by other user groups cannot be achieved.Practical implicationsThe results of this study provide international and local standard setters with an indication of future direction for SME financial reporting.Social implicationsThis paper extends existing knowledge on users and their financial information needs of SMEs in developing countries. Consequently, the findings of this paper make a valuable contribution to the work of practitioners such as local and international standards-setters and regulators who may be considering developing/revising financial reporting framework for SMEs either worldwide or in developing countries.Originality/valueAlthough SME financial reporting has attracted enormous attention in the recent accounting literature, academic research into SME financial reporting is scant. This paper extends existing knowledge on users and their financial information needs of SMEs in developing countries. The general purpose financial reporting model and the accounting standard IFRS for SMEs in particular would not be applicable to Sri Lankan SMEs unless it modifies to reflect the financial information needs of users of Sri Lankan SME financial information.

The role of auditors and banks in the tax aggressiveness of private firms

This study examines the role of auditors and monitoring banks in the tax aggressiveness of private firms. We use a unique data set of private small and medium‐sized entities (SMEs) in Finland where book–tax alignment is high and the auditing of private firms (exceeding a low threshold) is mandatory. We add to the existing literature by investigating the auditing of small private firms and using more detailed measures for bank monitoring. Our results suggest a positive association between tax aggressiveness and audit quality, implying that auditors play a greater role in providing tax‐related planning services than restraining tax aggressiveness. Furthermore, bank monitoring is positively associated with tax aggressiveness. This is consistent with lending banks being more interested in cash savings than reducing tax aggressiveness. Finally, we find no evidence of a joint effect of auditing and bank relationships. These results will interest the owners and managers of private companies, tax authorities and banks and the accounting and auditing profession.

Implementing Robotic Process Automation in small and medium-sized enterprises - implications for organisations

Process automation is most often associated with physical solutions used in industry. However, in addition to hardware robots, a separate group are software robots that can be used to replace human labour in terms of repetitive, structured business processes. Robotic Process Automation (RPA) solutions are becoming feasible for small and medium-sized entities (SMEs) due to their price and ease of use. The aim of this study is to diagnose the relationship between a company's orientation towards employee education and retraining, the provision of support from the company's management and the implementation of RPA understood as a change in work organisation and process change. Empirical research was conducted on a sample of 248 SMEs, via a survey questionnaire. They confirmed the relationships between the analysed variables indicating the necessity of treating the implementation of RPA technology in the organisation as a change not only as an IT solution, but in a broader scope - organisational, affecting employees and processes.

Primena Međunarodnog standarda finansijskog izveštavanja za male i srednje entitete u zemljama Evrope

The paper is focused on researching the International Financial Reporting Standard (IFRS) for small and medium-sized entities (SMEs) in European countries and the frequency of adoption and application of this standard. The first part of the paper highlights the importance of this standard, its benefits and some of the obstacles to its application, which are recognized as significant in the previous literature. All references in the previous literature reviewed for the purposes of this paper are followed by the research that was conducted. The research aims to determine how often IFRS is applied to SMEs in European countries. The data were collected from reports published by the IFRS Foundation, which contain data on the application of the standard adapted for MSE. The data were processed with descriptive statistics. The research showed that a small number of European countries apply IFRS for MSEs, and that European countries in the EU are not more inclined to apply IFRS for MSEs.

IFRS FOR SMEs: EVOLUTION AND DISCUSSIONS

Research on the harmonization of financial reporting of SMEs worldwide is currently focusing on the global application of IFRS for SMEs as an alternative for the financial reporting of entities whose securities are not listed on a regulated market. Several principles of recognition and valuation of assets have been simplified as a result of revisions made to the entire set of IFRS standards in order to meet the specific demands of small and medium-sized entities (SMEs) in meeting the information needs of readers of financial statements. The proposed goal was reached through the application of the historical research methodology, which involved an examination of the background and development of the IASB s project on the financial reporting of small and medium-sized enterprises, as well as subsequent events following the first and second revisions of the standard. Starting in 2000, when the first discussions about the need for a distinct standard for small and medium-sized entities emerged, to March 2021, when the feedback received following the second Request for Information for revision, the time period studied covered a number of significant events, taking into account that this provides a better understanding of the evolution of the IFRS standard for SMEs. Hence, three time periods were examined: the standard s pre-publication period (2000–2009), its first revision (2009–2015), and its second revision (2019-2021).

SME corporate governance: a literature review of informal mechanisms for governance

Purpose This paper takes a structured literature review (SLR) approach to identify gaps in the literature and suggest future research opportunities. It focuses on corporate governance (CG) performed outside the formal board of directors’ structure and examines research of alternative CG of small and medium-sized entities (SMEs). Design/methodology/approach The authors use the SLR method to search the Scopus database, extracting and synthesising findings relating specifically to SMEs’ CG. These are tabulated and described using bibliometric software. Findings The authors highlight an absence of tailored theoretical approaches to understanding CG in SMEs, which differs from the governance of larger entities. They also find evidence of alternative governance structures in SME CG. Research limitations/implications Further research should embrace management and other theoretical perspectives and expanded methodologies, nuances in understanding offered in contextualised settings and awareness of practical implications to better understand the specific setting of CG in SMEs. Practical implications SMEs seek to access the scarce resources and skills external to their formal CG structures. Regulators and resource providers should mobilise facilitation and training for this expansion. Originality/value The authors synthesise a large body of literature to extract findings specific to SMEs. A unique contribution is our focus on alternative forms of CG in SMEs. Evidence of alternative boards points to resolutions for human capital shortages in SMEs.

Small- and medium-sized accounting firms’ learning processes regarding standards updates

Small- and Medium-Sized Accounting Firms (SMAFs) are a separate category of small- and medium-sized entities (SMEs) that operate in a highly regulated environment. If they fail to comply with professional standards, their survival could be in jeopardy. The purpose of this study is to understand how SMAFs acquire and absorb standards updates. This is a qualitative field study centered on the main concepts of organizational learning. Based on interviews conducted with 36 professional members of 33 SMAFs, results show that SMAFs are heterogeneous in terms of this learning. Learning mechanisms (or tools) are presented for each of the main concepts of the learning process and by firm category (size), providing information about how learning occurs in these firms. This is complemented with comments about who (individual, group, organization) is doing what (actions) to acquire and disseminate knowledge, interpret information and store knowledge. Findings led to the identification of three SMAFs learning profiles: ‘highly proactive,’ ‘somewhat proactive’ and ‘slightly proactive.’ These findings contribute to the literature on SME organizational learning by showing different learning profiles. They also contribute to the accounting literature as they highlight differences in SMAFs instead of treating them as a uniform group.

Voluntary sustainability assurance in small and medium‐sized entities: The role of country origin in Europe

AbstractThe assurance of sustainability information by small and medium‐sized entities (SMEs) has not attracted much research interest to date. To rectify this, we draw on a sample of European firms (from the EU, the United Kingdom and Norway) extracted from the Global Reporting Initiative (GRI) database and explore the disclosure variable in relation to country‐specific factors. Assurance rates are found to be low among SMEs, and moreover, the level of disclosure is limited. The assurance market is dominated by accounting firms, above all by the Big Four. Legal origin is found to be a highly relevant factor, with Scandinavian countries presenting the highest percentage rates of sustainability report assurance. Among the cultural variables analysed, power distance, masculinity and uncertainty avoidance have a significant negative impact on the decision to assure sustainability information. Overall, the study serves to enhance understanding of SME practices in different countries of origin.

Financial Accounting as a Tool to Enhance Non-Government Organisations’ Performance: A Case Study of a Large NGO in Durban, South Africa

Numerous non-governmental organisations (NGOs) in South Africa and elsewhere do not have standardised financial accounting practices to follow in preparing their financial statements and it is not clear whether the International Financial Reporting Standards (IFRS) for Small and Medium-sized Entities (SMEs) can be used to enhance NGOs performance (Kaya et al., 2015). This article explored the applicability of financial accounting practices as a relevant tool to enhance NGO performance with particular reference to a large NGO in Durban, South Africa. A qualitative approach was employed and data was collected through the use of semi-structured interviews and conventional thematic and document analysis. Evidence from this study showed that despite adopting accounting and financial policy and procedures, the selected NGO finds it difficult to maximise its financial performance due to failure to fully comply with IFRS for SMEs in South Africa. This article provides necessary recommendations applicable to other similar NGOs globally.

National Cultural Dimensions and Adoption of the International Financial Reporting Standard (IFRS) for Small and Medium-Sized Entities (SMEs)

SynopsisThe research problemThis study investigates whether the adoption of the International Financial Reporting Standard (IFRS) for small- and medium-sized entities (SMEs) is linked to national culture.Motivation or theoretical reasoningLittle is known about the role of cultural dimensions in explaining countries’ adoption of the IFRS for SMEs. Focusing on this topic could contribute to a better understanding of the adoption of the IFRS for SMEs and would enrich the international accounting literature. Conducting a specific empirical investigation into the IFRS for SMEs is motivated by the difference between the full IFRS and the IFRS for SMEs, by the inherent characteristics of SMEs, and by differences between the number of countries that adopted the full IFRS and those that have adopted the IFRS for SMEs.The test hypothesesWe used Hofstede’s dimensions of national culture (Power Distance, Individualism, Masculinity, Uncertainty Avoidance, Long-term Orientation, and Indulgence) to capture a country’s culture. We expected that these six dimensions would play a crucial role in countries’ decision to adopt the IFRS for SMEs. Based on previous relevant studies, we developed a research hypothesis for each of the mentioned cultural dimensions.Target populationWe selected the 101 countries included in Hofstede’s study. For each country, we looked at the data available on the IFRS website to identify its position in relation to the IFRS for SMEs. The final sample included 97 countries.Adopted methodologyAfter classifying countries in three groups (Non-Adopters, Voluntary Adopters, and Mandatory Adopters), we performed several statistical regressions with adoption of the IFRS for SMEs as the dependent variable and the cultural dimensions as the relevant independent variables.AnalysesAmong others, we used several logistic regressions to estimate the association between national culture and the use of the IFRS for SMEs. We initially performed a statistical estimation for each of the six dimensions of national culture. Then, we included all cultural dimensions simultaneously. Finally, we performed robustness tests by applying multinomial regressions and focusing on the group of full IFRS adopters.FindingsEmpirical results revealed that the adoption of the IFRS for SMEs was less likely in countries with the highest levels of individualism. This conclusion held for both Mandatory and Voluntary Adopters. In contrast, the other dimensions of national culture were not significant in explaining the adoption of the IFRS for SMEs by national accounting regulators.

Has Excel Become a “Golden Hammer”: The Paradox of Data Analytics in SME Clusters

ABSTRACTDemand for data analysis skills in the accounting profession is well-documented and necessarily informs accounting curriculum and pedagogy. This empirical survey study focuses on small- and medium-sized entities (SMEs). SME cluster research suggests different adoption rates for technology between this segment and large firms. Investigating SME demands for skills and abilities of new job entrants differs from the large organizations that served as the original drivers of analytic skills and technology recommendations. Findings in this study suggest SMEs continue performing their leading accounting tasks using Excel spreadsheets and lag in adoption of data analytics technology. SMEs are a significant business sector in the economy, competing with large firms but with fewer resources. The findings presented here may inform educators in SME markets regarding SME firms' need for a unique skillset from new hires.

Is fair value information fairly priced? Evidence from IPOs in global capital markets✰

We study how the information conveyed by fair value (FV) reporting is considered during an initial public offering (IPO). By examining how pre-IPO FV earnings are perceived by underwriters and investors, we document numerous original findings. First, IPOs with higher FV earnings have higher initial valuations and subsequent price revisions, indicating that underwriters and institutional investors value the information conveyed by FV reporting. Second, there is a significantly negative relation between FV earnings and post-IPO initial returns, whereas no such relation exists between non-FV earnings and initial returns. Third, we document robust positive associations between FV earnings and various measures of post-issue long-run stock performance. Fourth, we confirm the informational content of FV earnings by showing their predictive power for future earnings. We interpret these findings as supportive of the underreaction hypotheses, whereby aftermarket investors underreact to the information contained in FV reporting in the short run and gradually recognize the value of such information in the long run. We perform numerous tests to confirm the robustness of our results, including a test to address potential sample selection bias using the adoption of IFRS for small- and medium-sized entities (SMEs) as an exogenous determinant of FV reporting. Taken together, our findings advance our understanding of how fair value information is considered during an IPO issuance.

Pollution source of Cileungsi-Cikeas-Bekasi River

Sources of pollutants in the Cileungsi-Cikeas-Bekasi River Basin were inventoried, through data from the district’s Environmental Agency where the three rivers cross. Pollutant sources were also determined based on searches in the form of type, number, and location, using google maps and google earth. The search results are mapped by applying ArcGIS. The aim of the research was to determine land-based source of pollution entering the river. The types and sources of pollutants vary greatly in terms of type, location, and number. In the three river basins, it is known that there were 413 industrial sectors, 538 restaurants, 457 housing complexes, 80 hospitals, 92 hotels, 53 shopping centers, 37 livestock, 147 small and medium sized entities (SMEs), and 59 domestic. The source of pollutants entering the Cikeas River was dominated by housing complexes. The source of pollutants entering the Cileungsi River was dominated by industry. Meanwhile, the sources of pollutants entering Bekasi River were mostly shopping centers, hotels, hospitals, and restaurants.

Challenges and Prospects for Small-and Medium-sized Entities in Japan

Challenges and Prospects for Small-and Medium-sized Entities in Japan

International Financial Reporting Standards for small and medium-sized entities: A survey showing insights of South African accounting practitioners

Orientation: The International Financial Reporting Standards (IFRS) for small and medium-sized entities (SMEs) was adopted in South Africa in 2009 to reduce the complex burden of financial reporting for SMEs. Research purpose: The purpose of the article is to explore the insights of accounting practitioners a decade after introducing the IFRS for SMEs. Motivation for the study: The article increases the body of research into decision usefulness in relation to IFRS for SMEs, drawing attention to the possible benefits and challenges of the practical use of the IFRS for SMEs as an acceptable reporting framework. Research approach, design and method: The article uses prior literature on the application of IFRS for SMEs in South Africa to construct a structured questionnaire which was completed by 103 qualified accounting practitioners operating in South Africa. Main findings: Overall, the insights of accounting practitioners demonstrated reduced scepticism, as compared to previous research, concerning the extent to which the IFRS relieve the burden of financial reporting in the SME sector. Practical/managerial implications: The design of an accounting framework affects its use by accounting practitioners. Decisions usefulness theory demonstrates that standard setters should familiarise themselves with the challenges faced by accounting user groups to improve the relevance and reliability of financial statements. Contribution/value-add: This article will be useful to policymakers in debates regarding the appropriateness of IFRS for SMEs as a reporting framework and whether amendments are required. More specifically, whether amendments are required in relation to reducing the burden of financial reporting even further for smaller-scale SMEs.