The Suitability of International Financial Reporting Standards for Small and Medium-sized Entities

South Africa adopted the International Accounting Standards Board’s (IASB) draft International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) in 2007 as Statement of Generally Accepted Accounting Practice for Small and Medium-sized Entities (Statement of GAAP for SMEs). In 2009, the final IFRS for SMEs was approved for use in South Africa and the Statement of GAAP for SMEs was withdrawn. This study provides evidence, using exploratory research in KwaZulu-Natal, as to the perceptions of users and accounting practitioners regarding the preferred form and content of IFRS for SMEs. The results indicate that financial statements based on a simplified version of IFRSs are the preferred form for financial reporting for SMEs. With regards to the content of differential reporting, the study found that the while certain standards were considered essential for SMEs (IAS 7, IAS 8, IAS 19 and IAS 20) and others were considered not essential for SMEs (IAS 27, IFRS 3 and IFRS 5), overall there was support for recognition and measurement concessions. This research thus provides some support for the IASB’s IFRS for SMEs.