Abstract
This study sought to establish the relevance of
International Financial Reporting Standard (IFRS) to small scale enterprises in
Nigeria. The international accounting standard board (IASB), in its objectives
and preamble, suppose that the beneficial effects from IFRS adoption include
transparency, accounting quality and reduced cost of capital. Based on these
assumptions, this study applied timeliness, simplicity/ understandability,
quality, transparency and comparability to find out whether the adoption of
IFRS has relevance to small scale enterprises in Nigeria. The study employed
multiple regression analysis and the findings showed that there is a positive
significant relationship between the variable timely preparation of financial
statement and the adoption of IFRS. The study concluded that the adoption of
IFRS is a big move for the firms, accounting regulatory body and the government
in Nigeria because the benefits are more than the demerits as discussed earlier
in this report. However, the study recommended that the government should
introduce some incentives to motivate the SMEs or introduce compulsory adoption
of these standards to ensure that all SMEs adhere to the adoption.
TABLE OF CONTENTS
Title
Page i
Certification
ii
Dedication
iii
Acknowledgements
iv
Abstract
v
Table
of Contents vi
Chapter One:
Introduction
1.1
Background to the Study 1
1.2
Statement of Problem 4
1.3
Research Questions 5
1.4
Objective of the Study 5
1.5
Statement of Hypothesis(es) 6
1.6
Significance of the Study 7
1.7
Scope of the Study 8
1.8
Limitations of the Study 9
1.9
Definition of Terms 10
Chapter
Two: Review of Related
Literature
2.1 Introduction 11
2.2 International
Financial Reporting Standards for
Small and Medium Scale Enterprises 12
2.3 Advantages
of Adoption of IFRS for SMEs 14
2.4 Disadvantages
or Challenges of Adoption of IFRS 17
2.5 Concept
of Small and Medium Scale Enterprises 20
2.6 Financial
Reporting by SMEs 24
2.7 Empirical
Literature Review 30
Chapter
Three: Research Method and Design
3.1
Introduction 36
3.2
Research Design 36
3.3
Description of Population of the Study 37
3.4
Sample Size 37
3.5
Sampling Techniques 38
3.6
Sources of Data Collection 38
3.7
Method of Data Presentation 39
3.8
Method of Data Analysis 39
Chapter
Four: Data Presentation, Analysis and Interpretation
4.1 Introduction 44
4.2 Data Presentation 44
4.3 Data Analysis 54
4.4 Hypothesis Testing 55
Chapter
Five: Summary of Findings, Conclusion and Recommendations
5.1
Introduction 65
5.2 Summary of Findings 65
5.3
Conclusion 67
5.4
Recommendations 70
References 72
Appendix
I 77
Appendix
II 78
CHAPTER
ONE
INTRODUCTION
1.1
Background to the Study
Government
at all levels in Nigeria have in recent times emphasized on the diversification
of the economy through the promotion of small and medium scale enterprises.
The
importance of small and medium scale enterprises to the economic development of
any country whether developed or developing cannot be
over-emphasized. They are the driving forces of economic and industrial development.
To a large extent, small and medium scale enterprises play significant role in
improving the living standard of the citizens of any nation by creating goods
and services, stimulating private ownership and entrepreneurial skills, creating
sources of revenue to both individuals and government developmental purposes,
creating employment opportunities and aiding the development of indigenous technology.
According to Adelaja (2014) SMEs are generally seen as labour intensive,
capital saving and capable of helping create most of the one million new jobs
the world will need by the end of the century.
Owing
to the enormous benefits inherent in the development and sustainability of
small and medium enterprises, government through the Small and Medium Scale
Enterprises Development Agency of Nigeria (SMEDAN), Manufacturers
Association of Nigeria (MAN), and other organizations such as the International
Accounting Standards Board (IASB) have been on the vanguard of exploring
possible means of promoting the activities of SMEs. According to Osotimehin
(2012), no other development strategy has enjoyed as much prominence in
Nigeria’s development plans as the Small and Medium Scale Enterprises (SMEs)
development strategy.
The
international Accounting Standards Board (IASB) in July, 2009 introduced the
International Financial Reporting Standards (IFRS) for Small and Medium Scale
Enterprises (SMEs) as a way of enhancing the activities of small and medium
scale enterprises through improved accounting and reporting practices. IFRS for
SMEs is a self-contained set of accounting principles that is based on full
IFRS but has been simplified for SMEs (Deloitte, 2010).
Accounting
and reporting information is a critical component of an enterprise business
decision-making strategy. Accounting and reporting information enables an
enterprise to perform the function of measuring its financial standing,
assessing profitability and cash flow. Good accounting and reporting information
can also help an enterprise in accessing funds both locally and
internationally. As a result of the importance of SMEs to the economic and
industrial development of Nigeria and the role of accounting and reporting information
in enhancing the activities and growth of any enterprise, it becomes very
pertinent to examine the relevance of IFRS for SMEs to Small and Medium Scale
Enterprises in Nigeria, using selected enterprises in Benin, Edo State as case
study.
1.2
Statement of Problem
All
over the world, including Nigeria, greater emphasis have been on the growth and
development o SMEs due to their contributions to economic, industrial and
infrastructural development of any country.
However,
according to Deloitte (2012), Nigeria has joined the league of Nations
reporting IFRS and currently in her second phase of IFRS implementation with first phase drawing to a
close on 31st December, 2012 when all listed and significant public
entities are expected to produce first IFRS financial statements.
With
the issuance of IFRS for SMEs by IASB in July, 2009, SMEs in Nigeria are also
expected to adopt and implement IFRS in the preparation and presentation of
their financial statements. This research work is thus intended to
examine/assess the relevance of IFRS for SMEs to Small and Medium Scale
Enterprises in Nigeria and to offer suggestions and recommendations on how
enterprises can benefit from the adoption of IFRS for SMEs with reference to
the selection and study of some SMEs in Benin metropolis.
More so, this research is intended to bridge the gap in knowledge of IFRS and
its importance to SMEs in Nigeria.
1.3
Research Questions
In
relation to the objective of the study, the following research questions are
addressed:
1.
Are Small and Medium Scale Enterprises
in Nigeria aware of the introduction of IFRS for SMEs?
2.
Are accounting and reporting practices
of Small and Medium Scale Enterprises in Nigeria in accordance with IFRS for SM
Es?
3.
Are IFRS for SMEs adoption relevant to
Small and Medium Scale Enterprises in Nigeria?
1.4
Objective of the Study
The
broad objective of the study is to examine the relevance of IFRS to Small and
Medium Scale Enterprises in Nigeria with particular emphasis on Small and
Medium Enterprises in Benin metropolis.
Specifically, the objective of this study are to:
1.
Ascertain whether SMEs in Nigeria are
aware of the introduction of IFRS for SMEs.
2.
Determine whether SMEs in Nigeria have
already adopted 1FRS for SMEs.
3.
Investigate if IFRS for SMEs are
relevant to Small and Medium Enterprises in Nigeria.
1.5
Statement of Hypothesis
The
study seeks to test the following hypotheses:
Hypothesis
One
HO: SMEs in Nigeria are not aware of the
introduction of IFRS for SMEs.
HI: SMEs in Nigeria are aware of the
introduction of IFRS for SMEs.
Hypothesis Two
HO:
SMEs in Nigeria do not carry out their
accounting and reporting practices in accordance with IFRS for SMEs.
HI: SMEs in Nigeria do not carry out their
accounting and reporting practices in accordance with IFRS for SMEs.
Hypothesis Three
HO:
The adoption of IFRS for SMEs is not
relevant to Small and Medium Enterprises in Nigeria.
HI: The adoption of IFRS for SMEs is relevant to
Small and Medium Enterprises in Nigeria.
1.6
Significance of the Study
This
study would be beneficial to practitioners, academicians, management of SMEs
government and interested researchers in the following ways;
i. To practitioners and academicians: this
study provides useful information about the relevance of IFRS to SMEs in
Nigeria.
ii. To management of SMEs: This study provides information
about the theoretical and actual benefits and challenges of adoption of IFRS
for SMEs.
iii. To government, IFRS regulatory body and
management of SMEs, it helps them to be aware of the perceived and actual
benefits and challenges in the adoption of IFRS by SMEs and give insights on
how to benefit from IFRS not effectively.
iv. To interested researchers, it help others
that are interested in conducting detailed and comprehensive research study on
the relevance of IFRS and SMEs in Nigeria to have a spring board to initiate
their study on.
1.7
Scope of the Study
The
topic International Financial Reporting Standard (IFRS) in SMEs in Nigeria is a
wide and complex one. In this study the researcher is quite aware that the
study is supposed to be a comprehensive survey of all small and medium
enterprise in Nigeria but this could not be possible due to the fact that time and
cost does not permit the researcher to move from one enterprise to the other.
However,
the study has been designed to study selected small and medium enterprises in
Benin metropolis. Only companies that fall within range of small and medium
scale enterprises and are located within Benin metropolis are considered in
this study. That means companies that are listed on the Nigerian Stock Exchange
and publish their financial statements to the public are not covered in the
study. A sample size of 50 was employed for effective result.
1.8
Limitations of the Study
This
study is mostly limited by scope. The following are the limitations of this
research study;
·
The research is for small and medium
enterprises in Nigeria but by design is limited to selected small and medium
enterprises in Benin metropolis. This is a small population of the small and
medium enterprises operating in Nigeria.
·
There are larger concentrations of small
and medium enterprises in towns like Lagos, Onitsha, Aba and Kano. It therefore
becomes difficult to generalize the outcome of this research on the whole
population of SMEs in Nigeria.
·
Another limitation of this study is the
difficulty in obtaining data.
·
Most SMEs do not know the importance of
keeping proper books of accounts.
·
Lack of co-operation from management of
SMEs is another trend as most of them are not willing to give their firms
financial information, thinking that if might be misused by their competitors
and fear of being reprimanded by their employer.
1.9
Definition of Terms
IFRS:
This
means International financial Reporting Standards. IFRS is used interchangeably
with IFRS for SMEs which is the abridged version of the International Financial
Reporting Standards for Small and Medium Scale Enterprises.
SMEs:
this
means Small and Medium Scale Enterprises, that is, not quoted privately owned
enterprises that do not publish their financial statements to the public.
IASB:
this
means International Accounting Standards Board. It is the body responsible for
publishing and reviewing of international accounting standards.
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