EFFECT OF IFRS ADOPTION ON SMALL AND MEDIUM SCALE ENTERPRISE IN NIGERIA ( A STUDY OF FRIESLAND CAMPINA WAMCO NIG PLC, SANA)
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- NGN 3000
BACKGROUND OF THE STUDY
The globalization of economic activities has resulted in an increased demand for high quality, internationally comparable financial information that will guide companies and investors operating beyond borders. The International Accounting Standards Board (IASB) was prompted to develop a single set of global accounting standards that require comparable information in financial statements in order to assist participants in various capital markets around the world and other users of accounting with timely information, access to reliable income and statements of affairs that will aid economic decisions, as a result, International Financial Reporting Standards (IFRS) were created by the board (IASB, 2007). According to Anacoreta, and Silva (2015), the International Financial Reporting Standards (IFRS) are a set of prescriptive rules and guidelines with global reach and appeal that provide direction and guidance on how businesses in a globalized world can achieve the goals of proper record keeping, transparency, uniformity, comparability, and public confidence in financial reporting. All of these characteristics speak to complete transparency and/or fair portrayal. Thus, full disclosure was dedicated to guaranteeing data accuracy in financial reports which was presented to Nigerian regulatory bodies, such as the Central Bank of Nigeria and the Securities and Exchange Commission (SEC) to execute this different sector of their economy (Public and Private sectors) in other measure up with what is obtainable at the international market.
Historically, the International Accounting Standard Committee (IASC) was formed in 1973 by 16 professional bodies from various countries, including the United States of America, the United Kingdom, France, Canada, Germany, Australia, Japan, the Netherlands, and Mexico, with the goal of establishing an acceptable global high quality financial reporting standards. Howbeit, in order to harmonize with international practices, the Federal Executive Council (FEC) approved the convergence of Nigerian SAS with the International Financial Reporting Standards (IFRS) on January 1, 2012. Furthermore, FEC also established an IFRS adoption committee, where it was decided that Public Listed Entities(PLE) and Public Interest Entities (PIE) should adopt the International Financial Reporting Standards (IFRS) in the preparation of their financial statements by January 2012. Specifically, all other Public Interest Entities are required to implement the International Financial Reporting Standards (IFRS) for statutory purposes by January 2013, while SMEs were required to adopt the IFRS by January 2014 (Fowokan, 2011).
In emerging economies, Small and Medium-sized companies (SMEs) are often recognized as the engine of economic growth and equitable development. Small and Medium Enterprises, are widely regarded as the backbone of every economy on the planet hence the rising need to ensure credibility and transparency in the financial reporting standard of SMEs. They are labor-intensive, capital-efficient, and capable of assisting the government in the creation of a wide range of new employment. They are also seen as crucial to emerging nations' economic progress, poverty reduction, and job creation (Abdul 2018). However, SMEs in Nigeria must have a similar financial reporting framework and accounting standards convergence to IFRS in order to deal with capital market globalization efforts to improve financial communication, support them in obtaining financial resources from foreign capital markets, and meet their need for a common international accounting language. According to Yoshino and Taghizadeh-Hesary, (2019), Small and Medium-sized Entities (SMEs) are entities that are not subject to public accountability and do not have debt or equity instruments that are traded on a public exchange but due to transformation brought by globalization, the International Accounting Standard Board (IASB) developed IFRS for SMEs in July 2012, allowing SMEs to present their financial statements in a single, cross-border reporting standard.
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