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Journal of Financial Reporting and Accounting

The International Financial Reporting Standard for Small and Medium-sized Entities
(IFRS for SMES): Suitability for small businesses in Ghana
Francis Aboagye-Otchere Juliet Agbeibor

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To cite this document:
Francis Aboagye-Otchere Juliet Agbeibor, (2012),"The International Financial Reporting Standard for Small
and Medium-sized Entities (IFRS for SMES)", Journal of Financial Reporting and Accounting, Vol. 10 Iss 2
pp. 190 - 214
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JFRA
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190

The International Financial


Reporting Standard for Small
and Medium-sized Entities
(IFRS for SMES)
Suitability for small businesses in Ghana
Francis Aboagye-Otchere

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Accounting Department, University of Ghana Business School,


University of Ghana, Accra, Ghana, and

Juliet Agbeibor
Gimpa Business School,
Ghana Institute of Management and Public Administration, Accra, Ghana
Abstract
Purpose The purpose of this paper is to assess the suitability of the International
Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMES) for small
businesses (micro entities and SMEs) in Ghana by assessing their need for the IFRS for SMEs and the
appropriateness of the IFRS for SMEs as the accounting standard of choice for small businesses in
Ghana. The paper also aims to investigate the firm characteristics likely to influence small businesses
need for the Standard and the appropriateness of the Standard for small businesses.
Design/methodology/approach The survey method was used. A questionnaire survey of
305 small businesses was conducted, from which 149 useable questionnaires were returned.
Findings It was found that small businesses in Ghana have limited international structures and
activities which do not result in a need for internationally comparable financial reporting information.
Small businesses also do not receive requests to provide such information. In total, 19 of the 27 issues
addressed by the Standard and assessed in the study were found to be irrelevant to small businesses in
Ghana. Size, legal form and number of owners influence the suitability of the Standard for small
businesses in Ghana.
Originality/value The paper provides some of the early empirical evidence on the final version of
the IFRS for SMEs in Africa. The study also brings a fresh perspective by applying institutional
theory to the adoption and implementation of the IFRS for SMEs.
Keywords Ghana, Small enterprises, International standards, Financial reporting
Paper type Research paper

Journal of Financial Reporting and


Accounting
Vol. 10 No. 2, 2012
pp. 190-214
q Emerald Group Publishing Limited
1985-2517
DOI 10.1108/19852511211273723

1. Introduction
In July 2009, the International Accounting Standards Board (IASB) issued the
International Financial Reporting Standard for small and medium-sized entities (IFRS
for SMEs). The IASB argues that global SME financial reporting standards are needed
because the benefits of internationally comparable accounting information are not
limited to large businesses whose debt or equity instruments are traded in public capital
markets. SMEs and the users of their financial statements also stand to benefit from
internationally comparable financial reporting information because SMEs deal with

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financial institutions, suppliers, customers, credit rating agencies, venture capital firms
and investors outside their home countries (IASB, 2009b, p. 16).
The need for internationally comparable SME financial statements cannot however
be met by extant IFRSs as they were designed to meet the financial reporting needs of
large businesses operating within globalised financial markets with little regard for
their economic and compliance burden on smaller businesses (Devi, 2003; IASB, 2009b;
Sian and Roberts, 2006). SMEs are also not merely smaller versions of large businesses.
Consequently, their financial statement users and how the financial statements are used
by those users, accounting expertise, and ability to bear the costs of financial reporting
differ from those of larger publicly accountable entities (IASB, 2009b).
The IASB considers the differences between SMEs and larger publicly accountable
entities to be significant enough to warrant a separate set of global financial reporting
standards geared towards SMEs. The IFRS for SMEs is thus the IASBs response to
the need for global financial reporting standards tailored to the needs of preparers and
users of SME financial statements. The board intends the IFRS for SMEs to apply to
the financial reporting needs of all entities that do not have public accountability and
publish general purpose financial statements for external users (IASB, 2009a, p. 10).
The IASB thus does not prescribe quantified size criteria in determining the entities for
which the standard would be most appropriate. National regulators and
standard-setters may however decide to prescribe quantified size or other additional
criteria for their particular jurisdictions (IASB, 2009b).
The IASBs arguments about the need for the IFRS for SMEs, the standard itself,
and the standards intended user group have met with mixed views in the literature.
Researchers are divided on the boards fundamental premise that SMEs are
characterised by a high enough degree of internationalisation as to result in a need for
internationally comparable SME financial reporting information (Chand et al., 2006;
Eierle et al., 2007; MAZARS, 2008; Sian and Roberts, 2008). Other researchers (Eierle et al.,
2007; Fulbier and Gassen, 2010; Neag et al., 2009; Sian and Roberts, 2008) explore whether
the IFRS for SMEs actually represents a single set of high quality financial reporting
standards appropriate to the financial reporting needs of SMEs. Arguments about
the standards intended user group centre on the ability of a single set of financial
reporting standards to meet the financial reporting needs of all the many different entities
that are considered to be SMEs all over the world and fall within the boards SME
definition (Chand et al., 2006; Coetzee, 2007; Sian and Roberts, 2008; Van Wyk and
Rossouw, 2009). Notwithstanding these concerns, a number of countries have adopted
the standard; and if the case of full IFRS is anything to go by, this trend may continue to
encompass a lot of countries, especially in developing and emerging economies.
Institutional theory offers some explanation as to why countries may follow this trend.
The theory posits that countries adopt international accounting standards to gain legitimacy
and to share in the benefits associated with such legitimacy. Isomorphic pressures on
countries to adopt international accounting standards do not automatically result in
implementation of the adopted standard at the firm level. For such an implementation to
occur, the institutional pressures must filter down through organisational fields to
individual firms (Irvine, 2008). Where weak enforcement or technical challenges hinder
firms willingness to respond positively to institutional pressures, there may be a decoupling
or loose coupling of adoption image from implementation reality (Carruthers, 1995).

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This study focuses on the potential response of small businesses in Ghana to


prospective institutional pressures[1] to implement the IFRS for SMEs. We argue that
individual firms willingness to respond positively to institutional pressures such
that adoption image translates into implementation reality depends on their cost-benefit
considerations. We also argue that the potential cost-benefit tradeoffs at the firm level
can be indicated by firms need for the standard and the extent to which the IFRS for
SMEs addresses their financial reporting needs. Further, we investigate the
characteristics of firms likely to find the standard needed and appropriate for their
financial reporting needs so as to be able to identify the firms which are likely to achieve
isomorphism should the IFRS for SMEs be adopted in Ghana.
Although there exists some literature on the need and appropriateness of the IFRS for
SMEs (Chand et al., 2006; Eierle et al., 2007; MAZARS, 2008; Sian and Roberts, 2008;
Fulbier and Gassen, 2010; Neag et al., 2009; Van Wyk and Rossouw, 2009), there is a need
for additional research as the prior research are limited in number, context specific, use
varying SME definitions and are mostly based on the exposure draft instead of the final
version of the standard. There also appears to be a dearth of literature on the subject
in developing and African countries context.
This study helps to fill the gaps in the literature by providing some of the first
empirical evidence on the final version of the IFRS for SMEs in Africa. The study also
brings a fresh perspective by applying institutional theory to the adoption and
implementation of the IFRS for SMEs. Finally, the findings of the study will be useful to
the actors in Ghanas SME financial reporting regulation in their bid to implement an
effective financial reporting framework for small businesses in Ghana.
The rest of the paper is organised as follows: Section 2 reviews the prior literature and
concludes with the research questions; Section 3 describes the research methodology
and sample; and Section 4 presents the research results. The summary, conclusions
and recommendations are set out in Section 5.
2. Prior literature and research questions
2.1 Institutional theory and accounting standard adoption by countries
As noted by Irvine (2008), several researchers have attested to the usefulness and
integrity of institutional theory to explain and interpret accounting activity.
Institutional theorists propose that organisations must conform to societal norms of
acceptable practice so as to achieve the continuous support necessary for survival from
their stakeholders (Covaleski and Dirsmith, 1993). These isomorphic pressures can be
identified as coming from three main sources: coercive, normative and mimetic
institutional pressures. Coercive isomorphic pressures primarily entail rules enshrined
in regulatory systems and the political influence exerted by institutions such as the
global network of multinational corporations on which organisations depend for critical
resources and long-term survival (Guler et al., 2002). Normative isomorphic pressures
are organisational behaviours that have been taken for granted and are manifest in the
works of professionals and inter-organisational networks (Haunschild, 1993). Mimetic
isomorphic pressures on the other hand describe situations where organisations copy
the successful organisational behaviour of other organisations, especially in situations
of symbolic uncertainty (DiMaggio and Powell, 1983).
Although institutional analysis is normally undertaken at the level of the
organisational field, Dillard et al. (2004) expanded the level at which institutions come

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into being by incorporating a structural perspective into their interpretation of


institutional theory (Irvine, 2008). Dillard et al. (2004) posited that the economic and
political context in which organisations and organisational fields exist provides the
foundation for institutional practice. Irvine (2008, p. 11) extends this view further by
suggesting that in an increasingly globalised world, powerful institutional forces operate
at an international level on individual nation states, which then become a field for the
transmission and adoption of acceptable institutional practices. Practices legislated or
developed at a nation state level are then transmitted to more specific organisational
fields, and then to individual organisations.
In the case of international accounting standard adoption by nation states, coercive
pressures may arise from the World Bank and capital markets; normative pressures
from the Big Four accounting firms; and mimetic pressures from trade partners and
multinational corporations (Irvine, 2008). These pressures are for the most part more
significantly felt by developing and emerging economies as they are often less endowed
and desirous of participating in the resources of developed countries and international
organisations. Compliance with these pressures bestows powerful legitimising benefits
on the adopting countries. This legitimacy gives adopting nations the credibility to
compete for FDI in world capital markets. Aside the symbolic legitimacy benefit, other
technical benefits may accrue to adopting nations. These benefits have generally been
held to include greater mobility of capital at a decreased cost, more efficient allocation of
resources, improved quality of financial reporting and avoidance of the necessity of
having to develop national accounting standards. Notwithstanding the significant
legitimacy and technical benefits that developing countries can derive adopting such
international accounting standards (albeit at a cost), the adoption of such standards does
not necessarily translate into implementation at the firm level. Although countries may
easily pass laws requiring firms operating in specific organisation fields to adopt the
standards, ensuring actual compliance by individual firms is much harder. Where
individual firms perceive significant technical challenges from implementation, they
may decouple their adoption image from their implementation reality (Carruthers, 1995).
The successful adoption and implementation of international accounting standards
such as the IFRS for SMEs thus depends to some extent on individual firms.
2.2 What factors make individual firms amenable to institutional pressures to implement
the IFRS for SMEs?
The IASB appears to have taken account of such firm-level considerations in developing
the IFRS for SMEs. In its basis for conclusions to the standard, the IASB argues that the
need for global SME financial reporting standards arises out of the international
structures and activities of SMEs and their financial statement users (IASB, 2009b, p. 16).
The board further argues that extant IFRSs cannot meet this need for internationally
comparable SME financial reporting information as they are complex and would pose
significant compliance and economic burdens on SMEs. By fitting the IASBs argument
into the institutional theory framework, this study proposes that firms with a need for
internationally comparable accounting rules and which find the IFRS for SMEs
appropriate for their financial reporting needs are less likely to decouple their
implementation reality from their adoption image. The rest of this subsection explores
the findings of the prior research as to whether SMEs have a need for the IFRS for SMEs
and whether the IFRS for SMEs adequately addresses the financial reporting needs

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of SMEs. The subsection also reviews the prior literature on the characteristics
of firms likely to find the IFRS for SMEs necessary and appropriate for their financial
reporting needs.
2.2.1 Do SMEs have a need for international SME accounting rules? The IASB
argues that the need for international SME accounting rules arises out of specific
corporate structures and international activities of SMEs. Specifically, the board asserts
that SMEs deal with financial institutions, suppliers, customers, credit rating agencies,
venture capital firms and investors outside their home countries (IASB, 2009b, p. 16).
The conclusions of the prior research on this argument are mixed.
The literature provides some evidence that SMEs do engage in international
activities, albeit to a more limited extent than envisaged by the IASB. For instance,
Eierle et al. (2007) in a survey of 4,000 (410 useable questionnaires returned representing
a 10.3 percent response rate) large German SMEs[2] find that the international activities
of German entities have mainly to do with exports, imports and investments in foreign
subsidiaries with larger entities having more cross-border activities than smaller
entities. Similar to the results of Eierle et al. (2007), the Conseil National de la
Comptabilite (n.d.) survey of 10,000 French companies[3] (678 questionnaires returned
representing a 6.78 percent response rate) found that the international activities of
French businesses have mainly to do with imports and exports.
These international activities however do not necessarily result in a need for
international SME accounting rules as customers and vendors are not important users of
SME financial statements (Eierle et al., 2007). Suppliers, customers and investors are also
unlikely to rely on financial statement information for their decision needs (New Zealand
Ministry of Economic Development, 2002 as cited in Samujh, 2007). Eierle et al. (2007)
and Conseil National de la Comptabilite (n.d.) also do not find a significant proportion of
respondents in favour of international accounting rules, even among the entities
involved in international activities. Nevertheless, entities involvement in international
activities influences their attitudes towards the need to provide internationally
comparable financial information.
Further evidence of SMEs involvement in international activities not necessarily
leading to a need for international SME accounting rule is provided by Sian and Roberts
(2008). Sian and Roberts (2008) conduct focus group interviews with Micro Entity[4]
owners, financiers and preparers in the UK, Kenya, Italy, Poland and Uruguay. Sian and
Roberts (2008) found no need for international SME accounting standards in the UK and
the reverse in Kenya. All things being equal, SMEs in the UK should have more
international activities than SMEs in Kenya. Participants in two other developed
Western countries Italy and Poland also generally favoured national SME
accounting standards that are fully compliant with tax laws.
Contrary to Eierle et al. (2007), Conseil National de la Comptabilite (n.d.), Sian and
Roberts (2008) and MAZARS (2008), in a survey of 1,593 SMEs[5] in six EU countries
France, Germany, Italy, The Netherlands, Spain and the UK finds that most entities
(more than 80 percent in each country and irrespective of size) are in support of
internationally comparable accounting rules. MAZARS (2008) thus finds far greater
support for international financial reporting information in Germany and France than
found by Eierle et al. (2007) and Conseil National de la Comptabilite (n.d.), respectively.
An equivocal view of SMEs need for international accounting rules is provided by
Chand et al. (2006). Chand et al. (2006) based on a literature review on SMEs[6] in two

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emerging economies (Fiji and Papua New Guinea) and two developed economies
(Australia and New Zealand) in the South Pacific Region argue that SMEs are generally
domestically based, less exposed to the global environment, and consequently, less likely
to have universal financial reporting needs. Chand et al. (2006) however appear to
consider some extent of international comparability necessary as they argue for at least
a two-tiered model of international SME accounting standards which encompasses the
distinctive characteristics of SMEs in emerging and developed economies rather than for
national SME accounting standards. Table I summarises the prior research on the need
for International SME Accounting Rules.
2.2.2 Does the IFRS for SMEs meet the financial reporting needs of SMEs? With the
exception of MAZARS (2008, p. 11) who finds that overall, the IASB has correctly
identified the accounting needs of SMEs and does not identify any issues in the
exposure draft of the standard as being irrelevant to SMEs, there is consensus in the
literature that the modifications made by the IASB are not fully reflective of the financial
reporting needs of SMEs.
The areas for modifications identified by the prior empirical evidence (all of which
were based on the ED IFRS for SMEs) vary and include finance leases with the SME as a
lessor; share based payments; investment properties; sale of business units and
discontinued operations; the revaluation of intangible assets; the revaluation of property
plant and equipment where market prices do not exist and fair values have to be
estimated; mergers and acquisitions; investments in subsidiaries; taxation; joint
ventures; construction contracts and investment property among others (Conseil
National de la Comptabilite, n.d.; Eierle et al., 2007; Sian and Roberts, 2008; Van Wyk and
Rossouw, 2009).
It is interesting to note that even studies focusing on large SMEs in some of the most
developed countries in the world (Eierle et al., 2007; Conseil National de la Comptabilite, n.d.)
do identify issues that are either irrelevant or pose significant challenges to the entities
studied. Some of the changes made by the IASB to the ED IFRS for SMEs such as not
permitting a revaluation option for intangible and tangible assets reflect the concerns
raised by the prior literature. Other changes such as not permitting a capitalisation option
for research and development costs may adversely affect the relevance of the final standard
Paper

Findings

Eierle et al. (2007)

No need for the IFRS for SMEs as the international activities of the entities
studied are limited and do not result in a need for internationally
comparable accounting rules. Respondents also do not express a need for
such rules
Findings consistent with Eierle et al. (2007)

Conseil National de la
Comptabilite (n.d.)
Sian and Roberts (2008)

MAZARS (2008)
Chand et al. (2006)

More support for international SME accounting rules in developing


countries than in developed countries. Developing countries support for
the IFRS for SMEs is not due to greater international activities as they
generally have less international activities than developed countries
SMEs in six EU countries are in support of the IFRS for SMEs
Argues for a two-tiered model of international SME accounting standards:
one for developing and emerging economies and the other for developed
economies

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195

Table I.
Summary of prior
research on the need for
international SME
accounting rules

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to SMEs in jurisdiction such as France. It is thus likely that like the provisions of the ED, the
issues covered in the final version of the IFRS for SMEs are not of equal relevance to SMEs
all over the world.
2.2.3 Characteristics of firms that find the IFRS for SMEs necessary and appropriate
for their financial reporting needs. Although the IASB (2009b, pp. 25-6) argues that the
standard is appropriate for all non-publicly accountable entities that prepare general
purpose financial statements, the prior literature provides significant evidence to the
contrary.
Eierle et al. (2007) find a positive influence of size on SMEs involvement in
international activities, SMEs need for international accounting rules, and the relevance
of specific accounting issues to SMEs. Haller et al. (2008) also observe size effects as
banks see an increasing need for international financial reporting information especially
for larger entities. Banks that see little need are mostly those with small sized customers
with little or no international activities. Eierle and Haller (2009) based on the survey
results of the Eierle et al. (2007) study find a positive impact of an entitys economic size
on the entitys involvement in international activities. Eierle and Haller (2009) however
do not find size effects with regard to entities assessment of the usefulness and costs of
specific accounting treatments. Concerns about the suitability of the standard for Micro
Entities (Sian and Roberts, 2006; Neag et al., 2009; Van Wyk and Rossouw, 2009) also
suggest a size effect.
MAZARS (2008) however finds no size effects as regards SMEs support for
international SME accounting rules. Nonetheless, MAZARS (2008) finds smaller entities
generally favour optional adoption whilst larger entities are evenly divided between
mandatory and optional adoption. MAZARS (2008) does not assess the influence of size
on the relevance of specific accounting issues or on the benefits and costs of the standard.
The possible impact of other firm specific factors such as sector, legal form and
number of owners has not been studied. We however assess these factors as we consider
that they may have an impact on the types of activities undertaken by firms and
consequently on the relevance of specific accounting issues. For instance, in Ghana,
businesses organised as sole proprietorship (a classification according to legal form),
cannot engage in share based transactions as they are not registered with shares.
Moreover, studies on full IFRSs have found these factors to be significant in the IFRS
adoption and implementation decision by firms. Strouhal et al. (2009) for instance
provide evidence to show that sector (manufacturing, trade or service) influences Czech
SMEs[7] attitudes towards future reporting according to full IFRSs and the importance
of particular accounting topics.
2.3 Research questions and analytical framework
There are significant gaps in the literature on the IFRS for SMEs. First, the conclusions of
the prior research regarding the need for the standard and the appropriateness of the
standard for SME financial reporting are mixed. Second, even in areas of consensus, prior
research findings on the IFRS for SMEs cannot be readily generalised due to the limited
number of papers, the wide variety of entities considered to be SMEs; the diversity in the
economic environments in which SMEs operate, and the varying SME definitions used
by the prior literature. Third, the conclusions of the prior research are also mostly
based on the exposure draft of the standard which contains at least 34 significant
changes from the final version of the standard. Although these differences might have

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little impact on studies investigating the need for global SME financial reporting
standards, the same cannot be said for the impact on studies investigating the
appropriateness of the issues addressed by the standard. Finally, there appears to be a
dearth of literature on the subject in developing and African countries context.
This study attempts to fill these gaps in the literature by assessing the suitability of
the final version of the standard for small businesses in Ghana, a developing country
in Africa. By applying an institutional theory perspective, the study argues that SMEs
in any particular jurisdiction must have a need for the standard and find the content of
the standard relevant to their financial reporting needs if their implementation reality is
not to be loosely coupled or decoupled from their adoption image. The two central
research questions of the Study are thus:

IFRS for SMES

197

RQ1. Do small businesses in Ghana have a need for the IFRS for SMEs?
RQ2. Is the content of the IFRS for SMEs relevant to small businesses in Ghana?
We also consider it necessary to investigate the characteristics of firms that have a need
for the IFRS for SMEs and find the standard appropriate for their financial reporting
needs. We do this to be able to identify the kinds of entities within the IASBs broad SME
definition which are likely to achieve isomorphism should the IFRS for SMEs be adopted
in Ghana. The final research question of this study is thus:
RQ3. What are the characteristics of firms likely to find the IFRS for SMEs
necessary and appropriate for their financial reporting needs?
These research questions form the base of the studys analytical framework. Figure 1
shows the framework. We use the term suitability to describe a situation where firms
have need for the standard and find the content of the standard relevant.
From Figure 1, SMEs need for international SME accounting rules can be assessed
by evaluating SMEs international structure and involvement in international activities;

Firm
Characteristics
Size?
Sector?
Legal form?
Ownership
dispersion?
Etc?

Need for the Standard:


International structures
International activities
Frequency of receipt of
requests
Respondents
assessment of need

SUITABILITY OF THE
IFRS FOR SMES
AT THE FIRM LEVEL

Relevance of the
Content of the Standard:
Appropriateness of
topics covered by the
IFRS for SMEs
Other issues not
considered in the
current study

Figure 1.
Suitability of the IFRS for
SMEs at the firm level

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198

the frequency with which SMEs receive requests to prepare financial statements
according to international rules; and respondents assessment of the need for their
entities to provide internationally comparable financial information (Eierle et al., 2007;
Conseil National de la Comptabilite, n.d.; IASB, 2009a, b, c).
Whether or not the content of the IFRS for SMEs is relevant to the financial reporting
needs of small businesses in Ghana depends on the topics, accounting policy options,
recognition and measurement principles, disclosure and language of the standard. This
study limits the evaluation of the content of the IFRS for SMEs to an assessment of the
topics covered by the standard. This decision was necessitated by anecdotal evidence
which suggest that entities traditionally considered to be SMEs (which are the focus
of the current study) have limited financial expertise and consequently might find
it difficult to assess the usefulness and costs of the detailed accounting policy options,
disclosures and recognition and measurement principles contained in the standard.
Indeed, the Conseil National de la Comptabilite (n.d.) survey which included all unlisted
entities including very large entities which are not traditionally considered to be
SMEs in a developed Western country recorded a significant number of neutral or
do not know answers to questions about the accounting policy options and recognition
and measurement principles of the standard.
3. Research method and sample
3.1 Research method
The study was carried out as a questionnaire survey of 305 small businesses selected
using the judgment sampling technique. In this study, a small business is any
non-financial business in Ghana with annual sales revenue less than US$2,370,000.00.
Within this range, Micro Entities have annual turnover less than US$23,700.00 whilst
SMEs have annual turnover between US$23,700.00 and US$2,370,000.00[8].
The questionnaire was loosely based on that of Eierle et al. (2007) and Conseil
National de la Comptabilite (n.d.), and was made up of closed-ended mostly likert item
questions. The questions were related to three different aspects:
(1) General questions about the entity (firm characteristics).
(2) Questions about the need for the IFRS for SMEs.
(3) Questions about the relevance of specific accounting issues.
Appendix 1 provides further details of the variables that were used in developing the
specific questions under each section. The write-up is organised along the lines of the
analytical framework shown in Figure 1. The questions were prepared such that
respondents did not need to have any knowledge of full IFRSs or the IFRS for SMEs to be
able to respond. A five-point rating scale was provided for most questions.
All of the study data are either nominal or ordinal in nature. Consequently, only
non-parametric methods are employed in the data analysis. Specifically, the study
makes use of frequency distributions, cross tabulations, x 2 analysis and Spearmans
rank correlation analysis. All significance tests are two-tailed and are conducted at the
5 percent level.
3.2 Sample
Of the 305 questionnaires sent out, 194 (64 percent) were returned. Out of this number,
45 questionnaires could not be included in the study because the entities had annual

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revenue greater than US$2,370,000.00 or respondents left a significant portion of the


questionnaires unanswered. A final sample size of 149 (representing 49 percent of the
questionnaires administered) was thus achieved and used in the study. Eierle et al. (2007)
and Conseil National de la Comptabilite (n.d.) who also conducted questionnaire surveys
on the IFRS for SMEs achieved much lower final response rates of 10 and 7 percent,
respectively[9].
In total 41 (28 percent) of the participating entities are Micro Entities (annual sales
less than US$23,700.00). The rest 108 (72 percent) are SMEs (annual sales between
US$23,700.00 and US$2,370,000.00). The participating entities also differ by business
sector, legal form, number of owners, and participation of owners in management
(Tables II and III).
With the exception of 1 unlimited liability company, all the entities with Company
as legal form are limited liability companies. The category other is made up of an entity
run as a co-operative (Table IV).

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199

4. Data analysis and discussion of results


4.1 Do small businesses in Ghana have a need for the IFRS for SMEs?
Frequency distributions show that the international structures and activities of small
businesses in Ghana have mainly to do with exports, imports and competition with
foreign businesses. These structures and activities occur at least some of the time in a
quarter or more of the participating entities. Other cross-border structures and activities
occur never or rarely in more than 75 percent of the participating entities and
consequently, are considered to be of limited importance to the small businesses studied.
Cross tabulations reveal that the nature and extent of these international structures and
activities differ between Micro Entities and SMEs.
Business sector

Frequency

Manufacturing
Trading
Service

22
74
53

15
50
35

Legal form

Frequency

Sole proprietorship
Partnership
Company
Other

63
19
65
1

42
13
44
1

Number of owners

Frequency

84
59
2
1

58
40
1
1

One
Two to five
Six to ten
Greater than 20

Table II.
Participating entities
according to their
business sector

Table III.
Participating entities
according to their legal
form

Table IV.
Participating entities
according to number of
owners

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200

For Micro Entities, the relevant international structures and activities are imports and
competition with foreign businesses. For SMEs, the relevant structures and activities are
exports, imports and competition with foreign businesses. The importance of exports
and imports has been documented by Conseil National de la Comptabilite (n.d.) and
Eierle et al. (2007). Eierle et al. (2007) and Conseil National de la Comptabilite (n.d.) also
find that competition with foreign business is an issue for nearly 30 percent of the entities
they surveyed. They do not however consider this percentage to be significant.
Investments in foreign subsidiaries was found significant (occurring in 36 percent of
German SMEs) by Eierle et al. (2007). This structure is however uncharacteristic of small
businesses in Ghana.
Imports and exports do not result in a need for internationally comparable accounting
rules as Spearmans rank correlation analyses show no significant association between
imports and the choice of suppliers as financial statement users (rs (119) 20.09,
p 0.305) and no significant association between exports and the choice of customers as
financial statement users (rs (118) 20.04, p 0.665). The questionnaire did not include
competitors in the list of financial statement users. Respondents however had the
opportunity to tick the other category and specify competitors if they considered their
competitors to be users of their businesses financial statements. No respondent took the
opportunity to do so. Taken together with the literature on the users of SME financial
statements, the results suggest that competition with foreign businesses is not likely to
result in a need for international SME accounting rules as competitors are not important
users of SME financial statements. Similar conclusions were reached by Eierle et al. (2007).
Consistent with the findings up to this point, the survey results show that nearly
85 percent of the entities surveyed rarely or never receive requests to prepare financial
statements according to international financial reporting rules. Cross tabulation shows
that compared to Micro Entities, a higher percentage of SMEs receive requests to prepare
internationally comparable financial reporting information. The percentage of entities
receiving such requests is still negligible for both groups of entities.
Respondents assess the need for their businesses to prepare internationally
comparable financial information higher than suggested by their international
structures and activities and the frequencies with which they receive requests to
prepare internationally comparable financial statements. The nearly 30 percent of small
businesses who see at least an average need to provide internationally comparable
financial information represent a considerable proportion of the entities surveyed.
Eierle et al. (2007) see a similar percentage of large unlisted German firms expressing such
a need. Eierle et al. (2007) however consider this percentage to be low. Conseil National de la
Comptabilite (n.d.) finds a much lower percentage (3.7 percent) of French entities
expressing such a need. MAZARS (2008) finds a much higher percentage (more than
80 percent) of SMEs in five European countries expressing a need for such information.
As in the case of the frequency with which small businesses receive requests to
prepare internationally comparable financial reporting information, cross tabulations
show that compared to Micro Entities, a higher percentage of SMEs see a need to provide
internationally comparable financial information. About 25 percent of Micro Entities
and 50 percent of SMEs see at least an average need to provide such information.
With the exception of credit rating by credit rating agencies outside Ghana, imports
and having owners who live outside Ghana which have no significant association with
respondents assessment of the need for their entities to prepare internationally

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comparable financial information, Spearmans rank correlation analyses show a


significant low positive association between respondents assessment of the need for
their entities to prepare internationally comparable financial information and all the
other international structures and activities with rs ranging from a low of 0.15 to a high of
0.34. Tables AI and AII in the Appendix 2 present the results of the correlation analyses.
It can thus be seen that whilst the relevant international activities of small businesses do
not result in a need for internationally comparable accounting information, entities
expressing a need for such information have more international structures and activities
than those entities not expressing a need. These findings are consistent with the
conclusions of Eierle et al. (2007) and Conseil National de la Comptabilite (n.d).

IFRS for SMES

201

4.2 Is the content of the IFRS for SMEs relevant to small businesses in Ghana?
Only seven of the 27 accounting issues addressed in the IFRS for SMEs and assessed in
the current study occur at least some of the time in 25 percent or more of the entities
studied. Cross tabulation shows that the relevance of specific accounting differs
between Micro Entities and SMEs (Table V).
The finding that not all of issues addressed by the IFRS for SMEs are relevant to
SMEs in a particular jurisdiction is consistent with the results of Conseil National de la
Comptabilite (n.d), Eierle et al. (2007), Sian and Roberts (2008) and Van Wyk and
Rossouw (2009). The items found to be of low relevance by these researchers vary
by jurisdiction, type of entities studied, and respondents (that is, SME owners, practicing
accountants, lenders, etc.) among other issues.
The current study finds the following issues addressed by the IFRS for SMEs to be
of negligible relevance to small businesses in Ghana:
.
paying for goods or services with own shares;
.
preparing financial statements in a foreign currency;
Accounting issues of relevance
to small businesses in general

Accounting issues of
Accounting issues of relevance
relevance to micro entities to SMEs

Sharing profits with or paying


bonuses to employees

Sharing profits with or


paying bonuses to
employees
Buying or selling goods
in a foreign currency
Transactions to offset
fluctuations in foreign
currency exchange rates

Buying or selling goods in a


foreign currency
Undertaking research and
development projects
Transactions to offset
fluctuations in commodity prices
Employment benefits that are due
at least 12 months after the end
of the period in which the employee
rendered the related service
Provision of regular monetary or
other benefits to former employees
Making payments to employees
for terminating their appointments
before the normal retirement date

Sharing profits with or paying


bonuses to employees
Buying or selling goods in a
foreign currency
Undertaking research and
development projects
Transactions to offset fluctuations
in commodity prices
Employment benefits that are due
at least 12 months after the end of
the period in which the employee
rendered the related service
Provision of regular monetary or
other benefits to former employees
Making payments to employees for
terminating their appointments
before the normal retirement date

Table V.
Accounting issues of
relevance to small
businesses in Ghana

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.
.
.
.

202

.
.
.
.

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.
.
.
.
.
.

obtaining government grants;


lending or borrowing money in a foreign currency;
selling an asset and leasing back the same asset from the buyer;
undertaking construction or other long-term contracts;
sale or discontinuation of business units;
joining with another business to become a single entity;
buying another business;
holding land or building for rent or capital appreciation only;
operating a joint venture;
owning 20-50 percent of another business;
owning or controlling more than half of another business;
leasing assets to another organisation or person;
leasing assets from another organisation or person;
transactions to offset fluctuations in interest rates;
making payments to employees who decide to accept voluntary redundancy in
exchange for monetary or other benefits from the business;
transactions were a supplier can decide whether to be paid with cash or the
business shares; and
transactions where the amount to be paid to a supplier is based on the price or
value of the business shares.

The IFRS for SMEs in its current state is thus not the accounting standard of choice for
small businesses in Ghana. As outlined by Jarvis and Collis (2003), one of the arguments in
favour of separate SME financial reporting standards is that SMEs do not engage in
complex transactions. Consequently, financial reporting rules which provide specific
guidance about who to deal with such transactions are irrelevant to SMEs. In formulating
the IFRS for SMEs, the IASB started from full IFRSs and omitted issues it considered to be
of little or no relevance to SMEs (IASB, 2009b, c) among other modifications. The IASBs
efforts in this direction are however not fully reflective of the financial reporting needs of
small businesses in Ghana. This is hardly surprising as opponents of international SME
accounting standards have argued that due to differences in culture, legal systems and
stages of economic development, the importance of many financial statement items will
differ across countries. The wide diversity in size, structure, adaptability and information
needs of SMEs; and the fact that SMEs are often domestically based and less exposed to
the global environment also have consequences for the importance of accounting issues
(Chand et al., 2006; Neag et al., 2009; Scicluna, 2004; Sian and Roberts, 2006).
4.3 What are the characteristics of firms likely to find the IFRS for SMEs necessary and
appropriate for their financial reporting needs?
Table AIII in Appendix 2 presents the results of Spearmans correlation analysis carried
out to assess the characteristics of firms likely to find the IFRS for SMEs needed and
appropriate for their financial reporting needs. As already discussed, firms need for the
standard is influenced by their international structures and activities, the frequency

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with which they receive requests to provide internationally comparable financial


reporting information and respondents assessment of the need for their entities to
provide such information. The appropriateness of the standard for specific firms is
evidenced by the relevance of the accounting issues addressed by the standard to the
firms. The firm characteristic considered are business sector, legal form, number of
owners and size (Micro Entity or SME).
4.3.1 Business sector. Business sector has a significant low positive association with
only two of the 44 items assessed (frequency with which entities receive requests
to provide internationally comparable financial information, and paying for goods or
services with its own shares). It is also important to note that none of the items associated
with business sector has been found by the survey results to be important to small
businesses in Ghana.
4.3.2 Legal form. Legal form has a significant low positive association with 23 of the
44 items assessed. Of particular interest is the association between legal form and two
out of the three international activities undertaken by small businesses in Ghana
(competition with foreign businesses and exports) and five out of the eight accounting
issues found to be of relevance to small businesses in Ghana (research and development
projects, purchase/sale of goods in a foreign currency, sharing profits with or paying
bonuses to employees, employee benefits not wholly due within 12 months of the period
in which the employee rendered the related service and transactions to offset
fluctuations in foreign currency exchange rates). Legal form is also positively associated
with the frequency with which entities receive requests to prepare internationally
comparable financial reporting information and respondents assessment of the need for
their entities to provide such information. These results imply that the standard is likely
to be more suitable and less challenging for companies (coded as 3) than for partnerships
(coded as 2). Partnerships are also likely to find the standard more suitable and less
challenging than sole proprietorships (coded as 1).
4.3.3 Number of owners. Number of owners has a significant low positive association
with 19 of the items assessed. Number of owners is positively associated with two out of
the three international activities undertaken by small businesses in Ghana (competition
with foreign businesses, and exports); six out of the eight relevant accounting issues
(research and development projects, sharing profits with or paying bonuses to
employees, employee benefits not wholly due within 12 months of the period in which
the employee rendered the related service, provision of regular monetary or other
benefits to former employees, transactions to offset fluctuations in commodity prices,
and transactions to offset fluctuations in foreign currency exchange rates); the frequency
with which entities receive requests to prepare financial reports according to
international accounting rules; and respondents assessment of the need for their entities
to prepare internationally comparable financial reporting information.
4.3.4 Size. Size has a significant low positive association with 17 of the 44 items
assessed. Size is positively associated with two of the three relevant international
activities of small businesses (exports and imports); the frequency with which entities
receive requests to prepare internationally comparable financial reporting information;
and respondents assessment of the need for their entities to provide such information.
Size is also positively associated with seven of the eight relevant accounting issues
(research and development projects, sharing profits with or paying bonuses to
employees, employee benefits not wholly due within 12 months of the period in which

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203

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204

the employee rendered the related service, provision of regular or other monetary or
other benefits to former employees, payments to employees for terminating their
appointment before the normal retirement date, transactions to offset fluctuations in
commodity prices, and transactions to offset fluctuations in foreign currency exchange
rates). The influence of size on the suitability and challenges of the IFRS for SMEs has
been documented by Eierle et al. (2007), Eierle and Haller (2009) and researchers such as
Sian and Roberts (2006), Coetzee (2007) and Neag et al. (2009) who question the
applicability of the standard to Micro Entities.
4.3.5 Interaction among the influencing factors. The analyses show that the legal
form, number of owners and size are positively associated with the suitability and
challenges of the IFRS for SMEs. Spearmans rank correlation analysis reveals a
moderate association between legal form and number of owners (rs (143) 0.64,
p , 0.001). This is the strongest association found in the study thus far and is hardly
surprising. Sole proprietorships, as a rule, have fewer owners than partnerships who in
turn can be expected to have fewer owners than companies. A significant low positive
association is also observed between size and legal form (rs (146) 0.28, p 0.001).
Larger entities are more likely to be organised as companies than partnerships and as
partnerships than sole proprietorships. A low relationship is also observed between size
and number of owners. Spearmans rank correlation analysis however shows that this
relationship is not significant (rs (144) 0.15, p 0.072).
5. Summary of findings, conclusions and recommendations
5.1 Summary of findings
This study sought to assess the suitability of the IFRS for SMEs for small businesses in
Ghana by assessing small businesses need for the standard; the relevance of the content
of the standard to small businesses in Ghana; and the characteristics of firms that find
the standard necessary and appropriate for their financial reporting needs.
The study finds that the relevant international activities of Micro Entities are
imports and competition with foreign businesses. For SMEs, the relevant activities are
imports, exports and competition with foreign businesses. All of the international
structures studied are of limited relevance to Micro Entities and SMEs in Ghana. The
relevant international activities of Micro Entities and SMEs do not result in a need for
international accounting rules as suppliers, customers and competitors are not
important users of small business financial statements. This is reflected in 92 percent
of Micro Entities and 81 percent of SMEs rarely or never receiving requests to
provide internationally comparable financial information. Inconsistent with these
results, a considerable number of respondents (25 percent of Micro Entities and
50 percent of SMEs) express a need for their entities to prepare such information.
There is a significant low positive association between international structures and
activities and respondents assessment of their entities need for international SME
accounting rules.
Only eight of the 27 issues addressed by the IFRS for SMEs and assessed in the
current study are relevant to small businesses in Ghana. Three of the eight issues are
relevant to Micro Entities and seven are relevant to SMEs. The rest 19 issues are not
relevant to either group of participating entities.
Legal form, number of owners and size are positively associated with the need for the
IFRS for SMEs and the relevance of specific accounting issues. Business sector is not

associated with the need for the IFRS for SMEs and the relevance of specific accounting
issues to small businesses in Ghana. The firm specific factors that could influence the
suitability and challenges of the IFRS for SMEs are thus legal form, number of owners
and size. Two significant associations are observed among the influencing factors:
a significant positive moderate association between legal form and number of owners;
and a significant low positive association between size and legal form.

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205
5.2 Conclusions
The study thus concludes that:
.
Small businesses in Ghana whether Micro Entities or SMEs have limited
need for the IFRS for SMEs due to their limited international structures and
activities and the frequency with which they receive requests to prepare
internationally comparable financial reporting information. Respondents on the
other hand express a need for their entities to prepare internationally comparable
financial reporting information. The positive association observed between
international structures and activities and respondents assessment of need lends
weight to the conclusion that small businesses have little, if any, need for the
IFRS for SMEs. Respondents high assessment of the need for international SME
accounting rules may thus be due to factors such as their perception of the
quality of international accounting standards not considered in the current
study. Alternatively, respondents assessment may be reflective of a limited
knowledge of their financial reporting needs.
.
The IFRS for SMEs is not an appropriate accounting standard for small
businesses in Ghana. More than two-thirds of the accounting issues addressed in
the IFRS for SMEs and evaluated in the current study are of little or no relevance
to small businesses in Ghana. An accounting standard that is more simplified is
thus preferred for small businesses in Ghana. Such a simplification should
also take account of recognition, measurement and disclosure issues not
considered in the current study.
.
Size is the discriminating factor for the suitability and challenges of the IFRS for
SMEs. Size, legal form and number of owners have low positive associations with the
suitability and challenges of the IFRS for SMEs. The analyses also show that larger
entities are more likely to be organised as companies (as opposed to partnerships or
sole proprietorships). Companies are also likely to have more owners than
partnerships and sole proprietorships. Discriminating among entities on the basis of
size thus results in the standard being more appropriate for larger entities which are
likely to be organised as companies and have more owners[10].
The significant size effects observed are all low. One would however be hesitant to
conclude that size is not an important discriminator of the entities for which the IFRS
for SMEs would be most suitable. The low size effects may be due to the differences
between Micro Entities and SMEs being much smaller than the differences between
Micro Entities or SMEs and large businesses. The size effects may become stronger as
small businesses are compared with large businesses.
The low size associations observed also imply that Micro Entities and SMEs may
conveniently be subject to the same financial reporting framework. There is thus little
need to distinguish between Micro Entities and SMEs for financial reporting purposes.

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206

Taken together, the above conclusions suggest that firms within the size category
studied may decouple their actual financial reporting practices from their adoption
image if significant isomorphic pressures such as legal requirements are brought to
bear on them to adopt the IFRS for SMEs.
5.3 Recommendations for regulating small business financial reporting in Ghana
The limited relevance of the issues addressed by the standard for the entities studied
makes a case for adaption as opposed to adoption of the standard. Such an adaption
should not concentrate solely on eliminating issues of little or no relevance to small
businesses in Ghana, but should also take account of possible recognition, measurement,
disclosure and accounting policy options simplifications. The limited need for
internationally comparable small business financial reporting information means that
regulators will not have to be very concerned about the international comparability of
the adapted standard. Such an adaption may however have adverse legitimising effects
and the tradeoffs of symbolic gains and actually meeting the financial reporting needs
of SMEs must be carefully balanced.
5.4 Recommendations for future studies
Future studies on the IFRS for SMEs could consider:
.
The suitability of the standard from the perspective of other stakeholders in SME
financial reporting such as bankers and tax authorities. There is however a
limited need for studies focusing on the perspectives of accountants/auditors as
the conclusions of the IASB on the IFRS for SMEs are biased towards the views
of these stakeholders (Schiebel, 2007; Samujh, 2007).
.
The suitability of the standard for other size categories of entities that fall within
the IASBs broad SME definition.
.
The usefulness and challenges of the recognition and measurement principles,
disclosures and accounting policy options of the standard.
Studies focusing on entities on the larger end of the IASBs SME definition could also
consider whether the IFRS for SMEs would reduce the informativeness of the financial
statements of these entities or fail to provide guidance on certain pertinent issues.
Notes
1. A 2011 interview with the technical director of Ghanas accounting standard setting body,
the Institute of Chartered Accountants Ghana (ICAG), revealed that the ICAG is considering
a timetable for non-public interest entities to adopt the IFRS for SMEs.
2. Eierle et al. focused on large SMEs by using the IASBs definition and excluding entities with
annual revenue less than e8.00 million.
3. The Conseil National de la Comptabilite (n.d.) study does not provide an operational
definition of SMEs. However, the characteristics of the participating entities included in the
appendix to the report suggest that the study included all non-listed businesses regardless of
size. It is however not known whether the study excluded financial institutions in line with
the IASBs SME definition.
4. Sian and Roberts (2008) define a Micro Entity as an entity with less than ten employees.

5. MAZARS (2008) does not provide an operational definition of SMEs. A review of the paper
however suggests that the study considered all sizes of enterprises in the survey.

IFRS for SMES

6. Chand et al. (2006) do not provide an operational definition of SMEs. A review of their paper
however suggests a focus on entities that are traditionally considered to be SMEs.
7. Defined as businesses with less than 250 employees.
8. These definitions combine components of the SME definitions put forward by Gibson and
van der Vaart (2008) and IASB (2009b).
9. The typical response rate for the postal survey conducted by Eierle et al. (2007) and Conseil
National de la Comptabilite (n.d.) is lower than the typical response rate for questionnaires
personally delivered and picked up used in this study.

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10. This argument does not intend to suggest in any way that correlation equals causation.
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Scicluna, B. (2004), Accounting by Small and Medium-Sized, available at: www.miamalta.org/
MagJUne02Page05.htm
Sian, S. and Roberts, C. (2006), Micro-entity financial reporting: perspectives of preparers and
users, IFAC consultation paper.
Sian, S. and Roberts, C. (2008), Micro-entity financial reporting: some empirical evidence on the
perspectives of preparers and users, IFAC information paper.

Strouhal, J., Mullerova, L., Cardova, Z. and Pasekova, M. (2009), National and international
financial reporting rules: testing the compatibility of Czech reporting from the SMEs
perspective, WSEAS Transactions on Business and Economics, Vol. 6 No. 12, pp. 620-9.
Van Wyk, H.A. and Rossouw, J. (2009), IFRS for SMEs in South Africa: a giant leap for
accounting, but too big for smaller entities in general, Meditari Accountancy Research,
Vol. 17 No. 1, pp. 99-116.

IFRS for SMES

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209
Further reading
Ampofo, A.A. and Sellani, R.J. (2005), Examining the differences between United States
Generally Accepted Accounting Principles (US GAAP) and International Accounting
Standards (IAS): implications for the harmonization of accounting standards, Accounting
Forum, Vol. 29, pp. 219-31.
IASB (2006a), IASB press release, International Accounting Standards Board, available at:
www.iasb.org/news/iasb.asp?showPageContentno&xml10_806_29_06042006.htm
IASB (2006b), Statement of Best Practice: Working Relationships Between the IASB and Other
Accounting Standard-setters, International Accounting Standards Board, February,
available at: www.iasb.org/uploaded_files/documents/8_1500_SOBPFebruary2006final.pdf
Mullerova, L., Pasekova, M. and Hyblova, E. (2010), Harmonisation of financial reporting of
small and medium-sized enterprises in the Czech Republic, Journal of Modern Accounting
and Auditing, Vol. 6 No. 1, pp. 55-64.
Turner, L.E. (2001), Disclosure and accounting in a global market: looking to the future, an
issues paper prepared for Securities Regulation in the Global Internet Economy
Conference, 14-15 November, available at: www.iasplus.com/usa/0111turner.pdf
World Accounting Summit (2005), Deloitte chairman will speak at IFRS Conference in Dubai,
25 May, available at: www.iasplus.com/pastnews/2005may.htm
Corresponding author
Francis Aboagye-Otchere can be contacted at: faotchere@yahoo.com
(The Appendices follow overleaf.)

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210

Appendix 1. Analytical framework variables


1. Need for international SME accounting rules
(a) International structures:
(i) owners located in a different jurisdiction from the entity;
(ii) owners with ownership interest in other SMEs located in a different jurisdiction from
the entity;
(iii) subsidiaries or branches located in a different jurisdiction from the entity; and
(iv) parent company or head office located in a different jurisdiction from the entity.
(b) International activities:
(i) funds from venture capitalists located in a different jurisdiction from the entity;
(ii) exports;
(iii) imports;
(iv) capital from investors located in a different jurisdiction from the entity;
(v) credit rating by credit rating agencies located in a different jurisdiction from the entity;
(vi) loans from banks or other financial institutions located in a different jurisdiction from
the entity;
(vii) competition with entities located in a different jurisdiction from the entity;
(viii) accounting or auditing services located in a different jurisdiction from the entity;
(ix) loans from friends or relatives located in a different jurisdiction from the entity;
(x) grants from foreign governments; and
(xi) grants from international agencies.
(c) Frequency with which SMEs receive requests to prepare financial statements according to
international rules.
(d) Respondents assessment of the need for their entities to provide internationally
comparable financial reporting information.
2. Relevance of the content of the IFRS for SMEs
(a) topic/accounting issues addressed by the standard;
(b) accounting policy options;
(c) recognition and measurement principles;
(d) disclosures; and
(e) language of the standard.
The current study is limited to an assessment of the topics/accounting issues addressed by the
standard. The accounting issues assessed in the study were developed from a content analysis of
the standard and can be gleaned from Section 4 of this report.
3. Firm characteristics
(a) size;
(b) business sector;
(c) legal form; and
(d) number of owners.

rs
p
n
2 0.173
0.038 *
144
20.185
0.026 *
145

Prnt/HdOffc
0.022
0.801
128

Ownrs OtsdGhana

2 0.195
0.031 *
123

Ownrshp IntrstFr

Notes: *Correlation is significant; despite the negative sign, the association between respondents assessment of need and having a foreign
subsidiary/branch, having a foreign head office/parent and having owners with ownership interests in foreign SMEs is positive; the negative
signs are only because of the way the questions were coded; specifically, having those international structures was coded 1 for yes and
2 for no; respondents assessment of need was however coded 1 for no need through to 5 for very high need; in the case of having
owners who live outside Ghana, the question read: do all of your business owners live in Ghana? In this case, a no coded as 2 indicated
the presence of that international structure; the association between having owners who live outside Ghana and respondents assessment of
need is thus positive; the results thus show that respondents whose entities have international structures express a higher need for their
entities to prepare internationally comparable financial statements

RspdtNd

Sbsdry/Brnch

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Appendix 2

IFRS for SMES

211

Table AI.
Spearmans correlation
between respondents
assessment of need and
firms international
structures

rs
p
n

0.157
0.057
148

0.324
0.000 *
141

Note: *Correlation is significant

RspdtNd

Table AII.
Spearmans correlation
between respondents
assessment of need and
firms international
activities
Imprt
0.338
0.000 *
147

Exprt
0.200
0.016 *
146

CptlInv
0.313
0.000 *
148

Ln(Bnk/
FnInst)
0.199
0.016 *
148

Ln(Frnd/
Rltv)

0.178
0.031 *
147

Grnt
(Gvmnt)

0.180
0.029 *
147

Grnt(Int
Agncy)

0.207
0.012 *
147

Acct/
Adtng

0.197
0.017 *
147

VntrCptl

212

Cmptn

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0.153
0.066
146

CrdRtng

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rs
p
n
LegForm rs
p
n
NoOwners rs
p
n

BusSector

rs
p
n
LegForm rs
p
n
NoOwners rs
p
n
Size
rs
P
n

BusSector

rs
p
n
LegForm rs
p
n
NoOwners rs
p
n
Size
rs
p
n

BusSector

Prnt/HdOffc
0.063
0.447
146
2 0.094
0.261
145
2 0.118
0.160
143
2 0.016
0.847
146
Grnt (Int Agncy)
2 0.108
0.193
147
0.228
0.006 *
146
0.108
0.197
144
0.031
0.707
147
Jt. Vntr
2 0.089
0.298
138
0.032
0.712
138
0.059
0.494
136

Sbsdry/brnch
0.040
0.634
145
2 0.052
0.538
144
2 0.003
0.973
142
2 0.031
0.712
145
Grnt (Gvmnt)
2 0.002
0.981
148
0.187
0.023 *
147
0.106
0.203
145
2 0.051
0.540
148

Assoc.
2 0.120
0.154
144
2 0.210
0.012 *
143
2 0.210
0.012 *
141

Inv. Prop
2 0.033
0.691
147
0.184
0.026 *
146
0.120
0.151
144

Ownrs
OtsdGhana
0.142
0.108
129
0.069
0.442
128
0.153
0.086
127
0.073
0.410
129
Acct/Adtng
0.097
0.242
148
0.091
0.271
147
0.061
0.465
145
0.016
0.845
148
Acqn.
0.007
0.931
143
0.105
0.216
142
0.035
0.684
140

Ownrshp
IntrstFr
0.055
0.545
124
2 0.204
0.024 *
123
2 0.194
0.032 *
122
2 0.134
0.139
124
VntrCptl
0.059
0.473
148
2 0.007
0.933
147
0.023
0.786
145
0.116
0.161
148
Merger
0.029
0.727
145
0.091
0.279
144
0.005
0.956
142

Cmptn
0.034
0.692
142
0.256
0.002 *
141
0.213
0.012 *
139
0.112
0.183
142
CrdRtng
0.015
0.859
147
0.082
0.324
146
0.140
0.094
144
0.104
0.210
147
Disc. Op
2 0.005
0.951
147
0.152
0.067
146
0.137
0.103
144

Imprt
2 0.081
0.328
149
0.153
0.064
148
0.156
0.060
146
0.202
0.013 *
149
Rec Rqsts
0.180
0.029 *
148
0.179
0.030 *
147
0.185
0.026 *
145
0.170
0.039 *
148
R&D
0.122
0.144
146
0.391
0.000 *
145
0.235
0.005 *
143

Exprt
0.042
0.615
148
0.256
0.002 *
148
0.229
0.006 *
145
0.164
0.046 *
148
RspdtNd
0.092
0.265
148
0.443
0.000 *
147
0.344
0.000 *
145
0.199
0.015 *
148

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Ln (Bnk/
CptlInv
FnInst)
0.062
0.024
0.456
0.767
147
149
0.127
0.123
0.128
0.137
146
148
0.247
0.111
0.003 *
0.184
144
146
0.000
0.124
1.000
0.131
147
149
Lessee
Lessor
0.048
0.075
0.567
0.369
146
147
0.361
0.318
0.000 *
0.000 *
145
146
0.209
0.134
0.012 *
0.110
143
144
0.336
0.195
0.000 *
0.018 *
146
147
Cnstrtn Sale & lease
Ctrct
back
2 0.022
2 0.046
0.794
0.586
147
145
0.104
0.017
0.211
0.836
146
144
0.082
2 0.110
0.326
0.192
144
142

Ln (Frnd/
Rltv)
0.038
0.649
149
0.105
0.204
148
0.041
0.623
146
0.168
0.041 *
149
Subs.
2 0.023
0.785
146
2 0.135
0.105
145
2 0.152
0.069
143
0.090
0.280
146
Forex sale/
purch
2 0.017
0.836
147
0.256
0.002 *
146
0.101
0.226
144
(continued)

IFRS for SMES

213

Table AIII.
Factors influencing the
suitability and challenges
of the IFRS for SMEs

Table AIII.

0.051
0.547
144
Forex lend/
borrow
0.137
0.100
146
0.287
0.000 *
145
0.168
0.045 *
143
0.262
0.001 *
146
SS choice cash/
shares
0.073
0.382
145
0.029
0.727
144
0.189
0.024 *
142
0.069
0.407
145

Note: *Correlation is significant

rs
p
n
LegForm rs
p
n
NoOwners rs
p
n
Size
rs
p
n

BusSector

rs
p
n
LegForm rs
p
n
NoOwners rs
p
n
Size
rs
p
n

BusSector

rs
p
n
Gvmnt. Grnts
2 0.057
0.495
147
0.176
0.034 *
146
0.071
0.397
144
0.165
0.045 *
147
Trmnt emply
appntmt pmt
0.127
0.127
146
0.118
0.158
145
0.107
0.205
143
0.245
0.003 *
146

0.156
0.068
138

0.144
0.082
147
Forex fin
stmts
2 0.006
0.945
148
0.097
0.242
147
0.039
0.639
145
0.010
0.907
148
Vlntry
rdndncy pmt
0.114
0.171
145
0.101
0.227
144
0.108
0.201
142
0.168
0.043 *
145

0.202
0.015 *
145
Profits/bonus to
employee
20.033
0.692
148
0.249
0.002 *
147
0.250
0.002 *
145
0.128
0.120
148
Defer emply bnft
0.068
0.418
145
0.326
0.000 *
144
0.304
0.000 *
142
0.215
0.009 *
145

0.150
0.075
143
Purch with own
shares
0.189
0.022 *
147
0.202
0.014 *
146
0.432
0.000 *
144
0.029
0.724
147
Frmr emply bnft
0.161
0.052
146
0.241
0.003 *
145
0.298
0.000 *
143
0.166
0.046 *
146

Offst intrst
0.140
0.095
143
0.285
0.001 *
142
0.310
0.000 *
140
0.262
0.002 *
143

0.111
0.179
147
Px based on value
of shares
0.094
0.261
146
0.247
0.003 *
145
0.311
0.000 *
143
0.142
0.087
146
Offst
forex
0.135
0.109
143
0.281
0.001 *
142
0.247
0.003 *
140
0.248
0.003 *
143

0.271
0.001 *
146

Offst
Cdty Px
2 0.055
0.515
144
0.011
0.900
143
0.199
0.018 *
141
2 0.018
0.835
144

0.075
0.369
147

0.070
0.405
145

214

Size

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0.166
0.045 *
147

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