Small And Medium-sized Entities Research Articles

Adopting the international financial reporting standard for small and medium-sized entities in Saudi Arabia

PurposeThe paper investigates attitudes towards and perceptions of the adoption of the International Financial Reporting Standard (IFRS) for small and medium-sized entities (SMEs) in Saudi Arabia, immediately before and during the period of adoption.Design/methodology/approachThe study adopts an interpretive approach, using a new institutional theory framework, drawing on concepts of institutional isomorphism and institutional logics. Research was undertaken using extensive interviews of business owners and managers, accountants, auditors, regulators and others. Interviewees were identified using snowball sampling, and the paper discusses the appropriateness of this method for research in management in MENA countries.FindingsThe adoption of IFRS, and in particular IFRS for SMEs, in Saudi Arabia can be understood best as an example of mimetic isomorphism, as many respondents suggested that the country adopted these standards in order to emulate other countries in the Gulf Cooperation Council and the G20 group of countries.Practical implicationsThe study examines issues relating to the adoption of IFRS for SMEs in an emerging economy where adoption was not imposed by international financial institutions.Originality/valueIn addition to being the first study of the adoption of IFRS for SMEs in Saudi Arabia, the paper examines snowball sampling as a particularly useful method in MENA countries.

Concepts and Сriteria for the Classification of Small and Medium-sized Business in Russia

Purpose: The purpose of the article is to study the concepts and criteria for classifying businesses to the category of Small and Medium-sized business according to the legislation of the Russian Federation. In the course of the study, the authors analyzed the criteria by which the subjects are identified as Small and Medium-sized enterprises and, accordingly, are entitled to receive state support. Design/Methodology/Approach: The authors’ analysis is based on the literature review and statistical data analysis regarding the concept of entrepreurship and its legal background. Findings: The authors presented analytical data on business entities, citizens engaged in entrepreneurial activity, state support of entrepreneurial activity and introduced a conceptual classification benchmark. Practical implications: Authors’ findings could be applied in improving the legal and economic entrepreneurial frameworks of Russia. Originality/Value: The contribution of the article is the authors’ approach in classifying SMEs (Small and Medium-sized entities) and their state support as well as recommendations regarding the entrepreneurial activity and its development.

The perceptions of South African accounting practitioners on the post-implementation of IFRS for SMEs in an institutionalised environment

Orientation: Small and medium-sized entities (SMEs) play a crucial role in the South African economy. The financial reporting framework applicable to SMEs may contribute to the success of the SME. This study was exploratory in nature and followed an interpretive approach to seek an in-depth understanding of the application of the International Financial Reporting Standards for Small and Medium-Sized Entities (IFRS for SMEs) in South Africa. Research purpose: This article explores the perceptions of South African accounting practitioners regarding the post-implementation of the IFRS for SMEs in the South African SME sector. Motivation for the study: South African research on IFRS for SMEs is scarce. This study was designed to contribute to the scarce body of literature on IFRS for SMEs and will benefit both the South African and international accounting profession. Research approach/design and method: In-depth semi-structured interviews with 21 accounting practitioners were carried out during 2017 and 2018. An interpretive approach was adopted to analyse the data into themes providing the insight into the perceptions of South African practitioners. Main findings: Overall, there appears to be an approval of IFRS for SMEs. The uniformity associated with IFRS for SMEs is one of the significant advantages, while factors such as the age of the practitioners, the use of automated software systems and South African legislative requirements affect the relative merit of using the standard. Practical/managerial implications: The use of the interpretive style will assist professional accounting organisations, standard setters and regulators in understanding the various benefits and drawbacks of the IFRS for SME framework. Contribution/value-add: This article is the first to explore the in-depth views of accounting practitioners after IFRS for SMEs was adopted in South Africa. The article also highlights the challenges faced by accounting practitioners in developing economies that service SMEs.

The current problems of harmonization of accounting for small and medium-sized enterprises

Financial statements provide significant information about the financial position and performance of an enterprise. In the global world, it is necessary that the information is comparable at the international level. This requirement poses a problem for small and medium-sized enterprises as they do their reporting in compliance with the national legislations, which are based on Directive 2013/34/EU in the EU member states. No application of the Directive in national legislations guarantees the harmonisation of financial statements. Another direction in harmonisation is the IFRS for Small and Medium-sized Entities (SMEs) which the EU has not acknowledged as a basis for financial statement creation although its significance is not negligible globally – around 80 jurisdictions use it or allow its use currently. The paper aims to analyse the current state of harmonisation of financial statements of small and medium-sized enterprises. Based on the identification of essential differences between the national legislation and the Standard, it attempts to answer the question whether (and how) the financial position and performance of an enterprise will change if the accounting framework changes, i.e., in the case of transfer from reporting based on national legislations to reporting based on the Standard.

Challenges of Meeting International Financial Reporting Standards for SMEs in Georgia

The paper focuses on the challenges faced by small and medium-sized entities (SMEs) in Georgia through adopting International Financial Reporting Standards (IFRS) for SMEs. It describes a new law issued in 2015 by the Parliament of Georgia, according to which entities should use translated versions of IFRS, IFRS for SMEs, International Standards for Auditing (ISA) and the last publication of International Ethics Standards Board for Accountants (IESBA) Code from January 1, 2017. International experiences of implementing IFRS for SMEs of several developing countries, which have already overcome the problems of implementation was obsrved. In addition, the paper presents research findings of the study conducted in order to identify problems faced by small and medium-sized entities in Georgia through adopting IFRS for SMEs. The paper offers the ways of resolving these problems by considering international practisesand the analysis of research results and findings. The article highlights the role of the government in this process.Keywords: financial reporting, financial statements, Georgia, International Financial Reporting Standards (IFRS), small and medium-sized entities (SMEs)JEL: M40, M41, M48

The impact of SME access to finance and performance on exporting behaviour at firm level: A case of furniture manufacturing SMEs in Zimbabwe

Orientation: Globally, the majority of Small and Medium-sized entities (SMEs) are resource constrained. As a result, not all SMEs are able to fully exploit the benefits associated with international trade as they face challenges when exporting their produce.Research purpose: This article presents an investigation into the impact of access to finance on firm performance and exporting behaviour of SMEs in Harare, Zimbabwe.Motivation for the study: The article stems from the observation that although there is a growing importance and contribution of SMEs worldwide, research has shown that only a few of these SMEs are involved in international trade.Research design, approach and method: A cross-sectional study was employed with quantitative methods being utilised. The collected data were analysed using a structural equation modelling technique, which employed the Smart partial least squares software (version 2.0).Main findings: The key findings reveal that a significant positive relationship between access to finance and SMEs exporting behaviour does exist. Furthermore, the study’s findings challenge the notion that firm performance has a significant impact on exporting behaviour and show a negative impact of access to finance on SME firm performance.Practical/managerial implications: There is a need to put systems in place in Zimbabwe that that will (1) prioritise the need to have clear routes to market and increase awareness among SME owners, and (2) help SMEs overcome high costs associated with participating in export of goods and services.Contribution/value-add: The article provides a unique empirical analysis of the relationship that exists between access to finance, firm performance and export behaviour of SME firms in Zimbabwe, and thereby makes a valid contribution to SME literature.

The macroeconomic determinants of the adoption of IFRS for SMEs

Small and medium-sized entities (SMEs) represent more than 95% of companies worldwide and account for more than 65% of employment. As a move towards SME harmonization, in 2009 the International Accounting Standards Board (IASB) issued the International Financial Reporting Standards (IFRS) for SMEs. Due to the lack of studies on adoption of IFRS for SMEs, we analyze the relationship between macroeconomic factors and countries’ decision to adopt IFRS for SMEs. Based on a sample of 84 adopters and non-adopters of IFRS for SMEs, both developed and developing countries, we find evidence that countries without a national set of financial accounting standards for SMEs, with experience of applying IFRS and a common law legal system are more likely to adopt IFRS for SMEs. These results may be due to low transaction costs, the importance of having some knowledge of IFRS reporting given its complexity and belonging to IFRS based countries facilitating adoption of IFRS for SMEs. Additionally, we find that European Union (EU) member countries are less likely to adopt the standard. Knowledge of macroeconomic factors affecting the decision to adopt IFRS for SMEs is useful for the various entities that define international accounting harmonization, such as the IASB, regulators and international accounting firms, since this information can help them to promote worldwide adoption of the standard.

A project management framework for small- and medium-sized entities: Accounting software implementation

Small- and medium-sized entities (SMEs) continuously face the challenge of proper implementation of accounting packages. Not managing the package installation and configuration processes properly will result in the accounting software not working properly and not achieving the strategic goals of the SME. The purpose of this study was to examine, by means of an extensive literature review, the potential of PRINCE2 (Projects in Controlled Environments) as a project-management framework for application by SMEs during the implementation of new accounting software. The potential of scaling down PRINCE2 to a version usable to SMEs was investigated. PRINCE2 was found to be a suitable framework for use by SMEs in the implementation of accounting software packages, but only if tailored properly to incorporate the specific needs of the SME and adjusted to specifically address strategic alignment issues. Recommendations by other researchers on the weaknesses and shortcomings of the PRINCE2 framework were also investigated and included in the development of a new model for SMEs. This article contributes to the academic literature by providing it with a standard tailored version of PRINCE2 that can be used by SMEs in the implementation of new accounting software.

Cash Conversion Cycle and Profitability of Nigerian Small and Medium-Sized Entities: An Empirical Analysis

The aim of this study was to investigate the relationship between cash conversion cycle and firm performance of small and medium-sized entities (SMEs) in Nigeria. SMEs are potentials for Nigerian economy growth; contributing to gross domestic product, employment generation, poverty reduction and industrialization. The study employed the panel data regression analysis using financial data from a sample of 311 Nigerian SMEs for the period 2007-2013. The findings of the study revealed a negative association between cash conversion cycle, inventory holding period and accounts payable period with SMEs profitability; and a statistically significant negative relationship between accounts receivable period and SMEs’ profitability. The findings also found a significant positive relationship between firm size, leverage, growth opportunities and firm age and SMEs’ profitability. Thus, the result of the study indicates that Nigerian SMEs with a shorter cash conversion cycle and low growth opportunities hold more cash. This study contributes to existing literature on the relationship between cash conversion cycle and SMEs’ profitability in developing economies. However, this study is limited to non-financial and non-service SMEs.

Međunarodni standard finansijskog izveštavanja za male i srednje entitete u Republici Srbiji

The paper is devoted to the review of the position of the International Financial Reporting Standard (IFRS) for Small and Medium-sized Entities (SMEs) in the financial reporting regulation and practice in the Republic of Serbia. After considering the global importance of this standard, its position in the regulatory framework for financial reporting in the Republic of Serbia, in which it was included in 2013, is analyzed, while a deeper insight into the position of the standard in practice is achieved by the empirical research on a sample of 175 enterprises. Since it has the potential to facilitate financial reporting to many companies that had previously had to apply the full IFRSs, its adoption in the Republic of Serbia is useful, but the potential problem arises from the fact that it is not adopted at the European Union (EU) level. The research in the paper reveals that the enterprises in the Republic of Serbia that can choose between the IFRS for SMEs and the full IFRSs, however, are more likely to choose the full IFRSs. This finding should be considered in the context of the long-term application of the full IFRS before the implementation of the IFRS for SMEs. Subsidiary enterprises less often choose the IFRS for SMEs than the enterprises that do not have this characteristic.

The Influence of Human Capital Development Strategies on Competitiveness of Small and Medium-Sized Practices in Uganda

Purpose: Small and medium-sized practices (SMPs) in Uganda play an important role in providing professional services to Ugandan organizations, especially the Small and medium-sized entities (SMEs). The increasing number of SMPs in Uganda means that each firm must devise means of outcompeting the others. This study aimed to ascertain how human capital development strategies may be influential in the competitiveness of SMPs in Uganda. Human capital development strategies are schemes or programmes by which SMPs train their partners and professional staff to offer effective and top-quality work and promote the trust and confidence of their clients. There is also an ethical requirement to undertake work with due care and diligence. Methodology: The SMPs in Uganda were selected randomly to respond to a structured questionnaire. A total of 124 responses were used for data analysis representing almost 90% of the sample size. Results: Confirmatory factor analysis was used to determine how human capital development strategies influence the competitiveness of SMPs in Uganda. There was evidence that human capital development strategies significantly influence the competitiveness of SMPs in Uganda. Whereas there were only 18 out of 124 SMPs in Uganda that are part of an Accounting Association or Network, evidence showed that there was a significant difference between the two groups in terms of the composite human capital development index and development spend. However, there was no significant difference in terms of development days allocated to assistants, supervisors or partners. Over 60% of the SMPs in Uganda spent less than USD 2000 per annum on human capital development programmes. The SMPs in Uganda were put into five groups depending on their level of spend. Evidence showed there was significant difference between SMPs that spent less than USD 1000 per annum and those that spent over USD 3000 per annum, with the latter showing higher levels of competitiveness. Significance of study: This study will supplement the worldwide SMP surveys conducted by the International Federation of Accountants, the latest of which was conducted in 2018. In particular, the study reveals a need for SMPs in Uganda to invest more days (at least 20 per professional staff) and money on human capital development programmes. In addition, the argument for an outputs-based continuing professional development regime is supported. Whilst SMPs have invested time/money (inputs-based approach) on continuing professional development, it has not yet translated into higher levels of competitiveness with 96% of SMPs in Uganda earning less USD 1million in annual fee revenue. Keywords: Human capital, development, strategies, competitiveness, Small and Medium-sized Practice

Editorial. Small and Medium-sized Entities Reporting in Central and Eastern Europe

This special issue of the journal of Accounting and Management Information Systems groups recent research into reporting by Small and Medium-sized Entities (SMEs) in four countries of Central and Eastern Europe (CEE), namely Poland, Romania, Slovenia and Turkey. SMEs represent the vast majority of entities in many jurisdictions around the world, contribute significantly to the economic development and employ a significant number of staff in their totality, despite overcoming sometimes severe difficulties in accessing funding, staffing or procuring resources to secure their survival and development. The editorial introduces the special issue by outlining the motivation that led to its publication, the common themes and the contribution of the papers presented, and by suggesting some future research avenues in light of recent developments. We strongly encourage our readers to discover the commonalities and differences that characterize the business and reporting environment of SMEs across the CEE region, as well as the diversity of approaches and practice existing in the region.

Does simplified accounting limit small and micro companies’ access to bank financing?

Enterprises that use simplified accounting can provide less information to lenders, thereby possibly hampering risk analysis. In this paper I investigate whether simplified accounting is a barrier for Polish Small and Medium-sized Entities (SMEs) enterprises to access financing resources, or makes funding more expensive for them. Telephone interviews with managers of banks and a review of statistical data are used to show that simplified accounting methods may influence the cost of capital of Polish SMEs, but it does not create a barrier to accessing external sources of financing.

Adoption process of IFRS for SMEs in Turkey: Insights from academics and accountants

In 2009, the International Accounting Standards Board (IASB) issued International Financial Reporting Standards (IFRS) for Small and Medium-sized Entities (SMEs) as a simplified version of the full IFRS addressing the financial reporting needs of SMEs. Although IFRS for SMEs is still not required in this jurisdiction, Turkey was one of the first ones that have taken substantive steps towards adoption of IFRS for SMEs. The main purpose of this research is to investigate the perceptions of Turkish accountants, academicians, and auditors regarding the adoption process of IFRS for SMEs via in-depth interview methodology. The findings of the research confirmed the need for a stand-alone standard set for SMEs. The interviewees asserted that more simplification on IFRS for SMEs may hinder comparability of financial statements. While high-quality financial information will be the most important advantage of applying IFRS for SMEs, cost burdens on firms and lack of trained personnel will be the major obstacles for the implementation process.

Private SME accounting in Poland. Does bank lending influence their accounting and financial reporting practice?

Using data from private Polish Small and Medium-sized Entities (SMEs) for 2003-2013, I investigate in this paper the influence of bank borrowing on their book-tax conformity and accounting practices. In order to verify the importance of the link between tax law and the accounts of private firms, I created variables capturing the records according to local GAAP and I separated records in line with tax rules reflecting the impact of tax law on the accounting practices. Besides the book-tax differences measurement proposed by Watrin et al. (2014), I applied Tang's (2015) approach to estimate book-tax conformity that captures permanent and temporary book-tax differences. I find that bank lending increases the book-tax conformity of profitable firms. Tax avoidance applied by borrowers has a lower impact on book-tax differential than in the case of non-borrowers. Moreover, the findings indicate that monitoring by lenders force SMEs to adopt more advanced accounting practices by adhering to the prudence principle. This allows lenders to learn more about the ability of borrowers to repay loans thanks to more informative earnings. However, only 22.5% of borrowers applied accounting standards that are not recognized by tax law.

The Role and Current Status of IFRS in the Completion of the National Accounting Rules – Evidence from Estonia

The main purpose of this paper is to provide an overview of International Financial Reporting Standards (IFRS) application in Estonia. After restoration of independence, development of the Accounting and Financial Reporting System in Estonia has been based on internationally accepted accounting principles where IFRS and EU Directives have had an important role. From 2003 to 2013, the system based on the Full IFRS and after that, the switch from the Full IFRS to the IFRS for Small and Medium-sized Entities (SMEs) took place. Estonian position on IFRSs is very positive. IFRSs were heavily used in the system of setting local guidelines and despite switching to the IFRS for SMEs as base for the local guidelines, they are still used as a very important reference point and source of interpretation for national accounting rules based on the EU Accounting Directive.

Addressing The Challenge Of Strategic Alignment Faced By Small And Medium-Sized Entities During The Selection Of Accounting Software Packages

Alignment between an entity’s strategic business objectives and its information systems (ISs) has recently received research attention. Currently, small and medium-sized entities (SMEs) still face the challenge of successfully aligning their strategic business objectives with their ISs. Various small generic accounting software packages are available for purchase by SMEs. These accounting packages all have functionalities that enable SMEs to keep proper accounting records. However, due to their generic nature, these accounting packages do not always have sufficient functionalities to drive the SMEs’ strategic business objectives, resulting in IS misalignment. Not selecting the correct accounting software package will result in the accounting software not addressing the strategic business needs of the SME. The purpose of this study is to review and discuss the challenges faced by SMEs when selecting generic accounting packages and to develop a mapping between strategic business objectives commonly found within SMEs and software package functionalities that SMEs can refer to during the selection and implementation of new accounting software packages. This is accomplished on a non-empirical basis through a review of pertinent literature. In order for a SME to select the correct accounting software package, it is important that it invest time and effort in considering the software functionalities provided by the software package and map it against its strategic business imperatives to prevent failure of the package.

Implementation of Accounting Standard on Small and Medium-Sized Entities (SMEs)

Objective - Small- and medium-sized entities (SMEs) have an important role in economic growth. SMEs are a key source of employment and economic growth in Indonesia. Unfortunately, the growth of SMEs is not accompanied by the implementation of accounting and reporting, in accordance with applicable of Indonesian Accounting Standards for Non-Publicly-Accountable Entities (SAK-ETAP). SAK-ETAP is a self-contained of accounting standard for many transactions and events that a small or medium-sized entity or a private entity that is not publicly accountable may face. This research aims to analyse the implementation of Indonesian Accounting Standard for Non-Publicly-Accountable Entities on SMEs. Methodology/Technique - This research was conducted with the approach of surveys and field observations. The collection of data through surveys using questionnaires, direct observation and interviews according to respondents' experiences. Unit of analysis in this study is organizational or business unit. Its mean, that this study uses the organization as the subject to conclude the process of identification, implementation and evaluation Indonesian Accounting Standards for Non-Publicly-Accountable Entities or SMEs. Findings The results of this study showed that only a small percentage of SMEs that have used SAK-ETAP as a guide in the preparation of the accounting and financial statements. This contrasts with the important role of SMEs in GDP of almost 58%. For that is very necessary the role of related institutions in supporting the development of SMEs in Indonesia, particularly in the financial statements standard. The majority of SMEs just recording to identify the transaction and recording the amount of revenue. Primary problem faced was the lack of their knowledge of SAK-ETAP and the competence of accounting staff were less. Novelty This financial report is a major concern, as the financial statements providing financial information, financial performance, and cash flows of business units. If there are weaknesses in recording in the financial statements of SMEs it becomes a challenge for an institution that is competent to fix it. Socialization and guidance of SAK-ETAP are needed and more intensive to SMEs in Indonesia. Type of Paper Empirical Keywords Accounting Standard, small- and medium-entities (SMEs), SAK-ETAP, Indonesia.

Influence of gender on SME performance in emerging economies

Research purpose: The aim of this article was to establish whether or not performance between male-owned and female-owned small and medium-sized entities (SMEs) differs significantly and to assess the extent to which the gender gap in SME performance (if any) could be allocated to gender differences in levels of business-related experience.Motivation for the study: The influence of gender on SME performance is well documented from an international perspective. However, what lacks in extant literature is the understanding of whether the performance gap between male and female entity owners with similar business-related experience exists or not. This study investigated gender influence through data collected from both male and female entity owners.Research design, approach and method: The study was descriptive by design. Primary data were collected through self-administered questionnaires. Data analysis was undertaken through t-test and chi-square analysis.Main findings: The findings confirm that male- and female-owned SMEs perform at similar levels, given that such owners possess high business-related experience. Therefore, gender gap in firm performance does not exist among male and female entrepreneurs who fall either in low or high business-related experience categories.Contribution/value-add: The value of this research lies in the findings contrary to extant literature; that gender plays no role in the performance of SMEs. However, the level of business-related experience the owner holds, regardless of gender, influences the entity’s performance.Conclusion: Contrary to evidence provided in literature, the study concludes that focusing on the impact of gender on entrepreneurship with the aim of comparing business outcomes of male- and female-owned entities, while ignoring the role of key variables such as business-related experience, may yield misleading results.

Orientation of the development of vietnam financial reporting standards for small and medium - sized entities compatible with the international financial reporting standards for small and medium sized entities

Differences in financial reporting systems for small and medium sized entities(SMEs)and large ones have caused plenty of controversies in the last few decades, especially after the introduction of the International Financial Reporting Standards for Small and Medium sized Entities (IFRS for SMEs) by International Accounting Standards Board (IASB). Bohusova & Blaskova [3]suggested that there existed a preference in many developing countries where the quality of financial reporting was normally considered sub-average for applying the IFRS for SMEs due to strong demand in international economic integration and higher quality financial reporting standards, to which Vietnam is also no exception. Therefore, further research of the IFRS for SMEs in Vietnam is highly desired. This paper shall present a review of concepts of SMEs and the IFRS for SMEs, followed by a comparison of some notable differences between the IFRS for SMEs and the current Vietnamese Accounting Standards (VAS) for SMEs. A summary of many worldwide, mainstream thoughts of the development of financial reporting standards for SMEs is also included. On that basis, prospective proposals for the development orientation of financial reporting standards for SMEs in Vietnam are suggested in order to help Vietnamese SMEs to meet the universal trend of convergence of international accounting.