THE EFFECTS OF THE NEW DEVELOPMENT IN FINANCIAL REPORTING STANDARD ON THE DEVELOPMENT OF SMALL AND MEDIUM SCALE ENTERPRISE

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Chapter one/Introduction

It is impossible to ignore the significance of small and medium-sized businesses as the engine that propels Nigeria’s economy forward. The operations of small and medium-sized enterprises (SMEs), both internationally and locally, have made a significant contribution to the Gross Domestic Product (GDP) of the economy. These contributions include participation in manufacturing, importation, exportation, employment, and other areas. According to Gono (2013), small and medium-sized enterprises (SMEs) contributed to the creation of both output and employment, and they also serve as a nursing for the larger corporations of the future. Small and medium enterprises (SMEs) have played a vital part in the country’s overall economic development, helping to make it the most successful developing country over the past half century.
The need to harmonize accounting reporting standards for organizations that operate in different parts of the world prompted the central bank of Nigeria to set January 2014 as the deadline for the adoption of the international financial reporting standard (IFRS) for small and medium scale enterprises in Nigeria. This was done in order to facilitate the harmonization of accounting reporting standards for organizations that operate in different parts of the world. This mandate has raised a lot of doubts about the level of awareness among SMEs operations, as well as their preparation and financial ability to comply with the norm. In this new era, in which globalization is rapidly becoming a reality, it is necessary to analyze the effect that the adoption of IFRS poses on small and medium scale organizations because these businesses have a significant role to play in Nigeria’s participation in international trade.
Because of the current state of globalization and the implementation of IFRS in Nigeria, small and medium-sized enterprises (SMEs) engaged in international trade and possessing subsidiaries or franchises in other countries are required to comply with the guidelines established by IFRS in order to achieve greater levels of success on an international scale. The implementation of the International Financial Reporting Standards (IFRS) has gained widespread support across the globe as a direct consequence of the harmonization of accounting reporting standards. However, the full FRS that was promulgated by the IASB has been found to be irrelevant due to the disclosure requirements, which are extensive for SMEs. As a result, the IASB has promulgated a simplified version of the FRS that is applicable to SMEs. This version of the FRS is applicable to public companies.

On July 9, 2009, (international accounting standard aboard 2010), the introduced an international financial reporting standard (IFRS) designed for use by small and medium sized entities (SMEs). The introduction of IFRS specifically for SMEs was necessitated by many challenges faced by these entities in adopting full IFRS in financial reporting, the main of which was the excessive disclosure. Broad discussion of SMEs and a common standard for SMEs worldwide led to the development of the IFRS.

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