AN ANALYSIS OF SME FINANCIAL STATEMENTS AFTER THE ADOPTION OF IFRS FOR SMES A SOUTH AFRICAN CASE STUDY
AN ANALYSIS OF SME FINANCIAL STATEMENTS AFTER THE ADOPTION OF IFRS FOR SMES A SOUTH AFRICAN CASE STUDY

Summary/Abstract: The adoption of International Financial Reporting Standards by many countries is fundamental to global accounting harmonization. However the reporting requirements were often criticized as being too comprehensive and not necessarily applicable to all levels of businesses, especially smaller businesses. As a result the International Accounting Standards Board developed an accounting framework for small and medium enterprises entitled IFRS for SMEs. Even though the IFRS for SMEs might be easier to apply, many commentators warned that the framework is still too complex. They also argue that the framework is a mere scaled-down version of IFRS and that the specific disclosure requirements of small and medium enterprises have not been taken into consideration in developing the framework. In August 2007, despite the afore-mentioned concerns, South Africa became the first country to formally adopt the IFRS for SME as an accounting framework. Whether the adoption of the IFRS for SMEs in South Africa, and perhaps elsewhere, could be described as a process of accounting harmonization for small and medium enterprises remains uncertain. The focus of the study is therefore on disclosure practices by small and medium enterprises in South Africa. Based on a sample of financial statements the results suggest that despite the availability of the IFRS for SMEs, and the acceptance thereof as SA GAAP, limited South African SME’s actually embraced the accounting standard.

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