Assessment of Compliance with IFRS in Small and Medium Enterprises (SMEs) in Nigeria
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Background of the Study
Small and Medium Enterprises (SMEs) are the backbone of many economies, including Nigeria. They contribute significantly to employment, innovation, and economic growth. However, one of the major challenges faced by SMEs in Nigeria is ensuring financial transparency and maintaining quality financial reporting. The adoption of International Financial Reporting Standards (IFRS) has become crucial in ensuring that businesses, including SMEs, align with global accounting practices. While larger companies have been mandated to comply with IFRS, SMEs have faced challenges in fully adopting these standards due to resource constraints, lack of awareness, and inadequate technical support. This study explores the level of compliance with IFRS among SMEs in Nigeria and the factors influencing their ability to meet these international standards.
Statement of the Problem
Although IFRS adoption is mandatory for listed companies and public-interest entities, SMEs in Nigeria face significant barriers to compliance. These include a lack of technical expertise, insufficient resources, and the complexity of IFRS standards. As a result, many SMEs either partially comply or fail to adopt IFRS, which affects the transparency and reliability of their financial reporting. This study aims to assess the level of compliance with IFRS among SMEs and identify the factors that contribute to or hinder full compliance.
Aim and Objectives of the Study
Aim:
To assess the level of compliance with IFRS among SMEs in Nigeria.
Objectives:
To evaluate the extent to which SMEs in Nigeria comply with IFRS.
To identify the factors that hinder or promote IFRS compliance among SMEs.
To assess the impact of IFRS compliance on the financial reporting quality of SMEs in Nigeria.
Research Questions
To what extent do SMEs in Nigeria comply with IFRS?
What factors affect the compliance of SMEs with IFRS in Nigeria?
How does IFRS compliance impact the financial reporting quality of SMEs in Nigeria?
Research Hypotheses
SMEs in Nigeria exhibit low levels of compliance with IFRS due to resource constraints and lack of technical expertise.
Factors such as cost, complexity, and lack of training significantly hinder SMEs' compliance with IFRS.
Compliance with IFRS improves the financial reporting quality of SMEs in Nigeria.
Significance of the Study
This study will provide critical insights into the challenges SMEs face in adopting IFRS and the impact of these challenges on their financial reporting practices. The findings can help policymakers, regulatory bodies, and SME owners understand the importance of IFRS compliance and identify strategies to enhance adoption within the SME sector.
Scope and Limitation of the Study
The study will focus on SMEs in Nigeria, particularly those operating in urban areas. Limitations may include difficulties in accessing financial data from SMEs and varying levels of awareness of IFRS among business owners.
Definition of Terms
Small and Medium Enterprises (SMEs): Businesses with fewer employees and lower revenue than large corporations, playing a significant role in the economy by driving innovation, job creation, and economic growth.
Compliance with IFRS: Adhering to the principles and guidelines set out in the International Financial Reporting Standards for preparing financial statements.
Financial Reporting Quality: The clarity, reliability, and transparency of the financial information provided by a business in its financial statements.
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