Research in Bahrain, by Joshi & Ramadhan (2002) showed evidence that SMEs who chose to report under IFRS (IFRS-SME was not available at the time) found it easier to get loans from banks. They also found it helpful for audit purposes. The study also revealed that IFRS reporting was aiding Bahrain SMEs that reported under full IFRS to better control financial management. The introduction of IFRS-SME to these companies may reduce their compliance costs, but at the same time maintain the relative ease of obtaining bank finance, due to international recognition of the IFRS-SME standard and the standard’s perceived value.
Other countries have not been so quick to adopt the standard, including New Zealand and Australia. These countries’ standard setters are treading more cautiously in their consideration of the appropriateness of the new standard and its adoption. The ASRB states in its discussion document that “the differing measurement and extensive disclosure requirements of IFRS-SME means that its suitability for use as a differential version of IFRS is still being assessed in Australia and NZ” (ASRB, 2009). This study hopes to inform standard setters in NZ as to the potential effects on financial reporting that IFRS-SME may have for NZ SMEs.
The Evans et al (2005) review of SME literature found evidence that there is no need for international comparability of SME financial reports. And that the standard has no relevance to reporting for tax purposes. In countries whose current reporting standards are aligned with tax reporting requirements, this would create a need for additional tax purpose reporting. The additional requirement would increase the cost of financial reporting for SMEs in adopting countries where accounting standards are aligned with tax reporting.
In contrast to this, when the Australian DIFFREP ED was released, Holmes et al., (1991) found that accountants were using the tax basis for preparing financial reports. But that they did not agree with accounting standards being developed based on tax rules or