Countries’ Adoption of the International Financial Reporting Standard for Small and Medium-Sized Entities (IFRS for SMEs) – Early Empirical Evidence

Accounting and Business Research, Volume 45, Issue 1, 2015, pp. 93-120

Posted: 3 Dec 2014 Last revised: 25 Dec 2014

See all articles by Devrimi Kaya

Devrimi Kaya

Ruhr University of Bochum

Maximilian Koch

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg

Date Written: December 2, 2014

Abstract

The International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) is increasingly being adopted in a number of jurisdictions. Despite the economic importance of non-publicly accountable entities, little is known about what factors influence countries' decisions to adopt IFRS for SMEs. In a unique sample of 128 countries, we find that countries that are not capable of developing their own local generally accepted accounting principles are more likely to adopt IFRS for SMEs. We also provide evidence that in jurisdictions where full IFRS have been applied to private firms, the likelihood of adoption of IFRS for SMEs increases, suggesting that jurisdictions reduce the financial reporting burden on SMEs. Moreover, in line with prior literature, there is evidence that countries with a relatively low quality of governance institutions are more likely to adopt this new set of accounting standards. The results also hold under alternative measures and different estimation approaches. Overall, our results are helpful in understanding the worldwide diffusion of IFRS for SMEs. Standard setters and regulators might consider our study in the future development of accounting harmonisation of non-publicly accountable entities.

Keywords: accounting regulation; accounting harmonisation; IASB; IFRS for SMEs; non-publicly accountable entities; standard setting

JEL Classification: G15, G30, K22, M41, M42

Suggested Citation

Kaya, Devrimi and Koch, Maximilian, Countries’ Adoption of the International Financial Reporting Standard for Small and Medium-Sized Entities (IFRS for SMEs) – Early Empirical Evidence (December 2, 2014). Accounting and Business Research, Volume 45, Issue 1, 2015, pp. 93-120 , Available at SSRN: https://ssrn.com/abstract=2432645

Devrimi Kaya (Contact Author)

Ruhr University of Bochum ( email )

Faculty of Management and Economics
Bochum, 44801
Germany

Maximilian Koch

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg ( email )

Schloßplatz 4
Erlangen, DE Bavaria 91054
Germany

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