Assessment of Compliance with IFRS in Small and Medium Enterprises (SMEs) in Nigeria

Assessment of Compliance with IFRS in Small and Medium Enterprises (SMEs) in Nigeria

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Background of the Study

The adoption of International Financial Reporting Standards (IFRS) has been mandatory for large and publicly listed companies in Nigeria. However, small and medium-sized enterprises (SMEs), which form a significant part of Nigeria's economy, have been allowed to adopt IFRS at their discretion. This has led to varied levels of compliance across SMEs. While some SMEs have fully embraced IFRS, others continue to rely on simplified accounting frameworks. This study seeks to assess the level of compliance with IFRS among SMEs in Nigeria and identify factors influencing compliance.

Statement of the Problem

Although the Nigerian government has mandated IFRS adoption for large firms, SMEs face challenges in complying with these standards due to limited resources, knowledge, and access to training. The level of compliance with IFRS among SMEs remains uncertain, and the barriers to full adoption need to be understood. This study will assess the compliance levels of SMEs with IFRS in Nigeria and explore the factors affecting this compliance.

Aim and Objectives of the Study

The main aim of this study is to assess the level of IFRS compliance among SMEs in Nigeria.

The specific objectives are:

1. To evaluate the level of compliance with IFRS among SMEs in Nigeria.
2. To identify factors that influence the adoption of IFRS in SMEs, such as knowledge, resources, and regulatory support.
3. To explore the challenges SMEs face in adopting IFRS and the potential solutions to overcome these challenges.
4. To assess the role of regulatory bodies in ensuring IFRS compliance among SMEs.

Research Questions

1. What is the level of IFRS compliance among SMEs in Nigeria?
2. What factors influence the adoption of IFRS by SMEs in Nigeria?
3. What challenges do SMEs face in implementing IFRS?
4. How can regulatory bodies support SMEs in ensuring full IFRS compliance?

Research Hypotheses

1. There is a significant relationship between the size and resources of SMEs and their level of IFRS compliance.
2. SMEs with access to IFRS training and resources are more likely to comply with IFRS.
3. The regulatory framework in Nigeria significantly influences the level of IFRS compliance in SMEs.

Significance of the Study

This study will provide an understanding of the level of IFRS compliance in Nigerian SMEs, helping policymakers, regulatory bodies, and SME owners identify areas where support and training are needed. The findings will inform strategies to improve IFRS adoption among SMEs, thereby contributing to the overall improvement of financial reporting standards in Nigeria.

Scope and Limitation of the Study

The study will focus on SMEs in Nigeria that have either partially or fully adopted IFRS. Limitations may include the reluctance of SMEs to disclose full details about their compliance practices and challenges.

Definition of Terms

• IFRS: International Financial Reporting Standards, a set of global accounting standards designed to ensure consistency and transparency in financial reporting.
• SMEs: Small and medium-sized enterprises, businesses with a limited size, revenue, and number of employees, which are vital to the economy.
• Compliance: The extent to which an entity adheres to the established regulations and standards, in this case, IFRS.

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