THE EFFECTS OF THE NEW DEVELOPMENT IN FINANCIAL REPORTING STANDARD ON THE DEVELOPMENT OF SMALL AND MEDIUM SCALE BUSINESS
CHAPTER ONEI
NTRODUCTION
BACKGROUND TO THE STUDY
Small and medium scale enterprises as the engine that drives the economy of Nigeria cannot be overlooked. SMEs activities both international and local have contributed immensely to the Gross Domestic Product in the economy as they participate in manufacturing, importation, exportation, employment etc. accounting to Gono (2013) SMEs contributed to output and employment creation and they are also a nursing for the larger firms of the future. The most successful developing country over the last 50 years, small and medium enterprises (SMEs) have played a significant role in economic development.
The need to harmonize accounting reporting standards for organizations operating around the world has prompted the central bank of Nigeria to set January 2014 as deadline for adoption of the international financial reporting standard (IFRS) for small and medium scale enterprises in Nigeria. This mandate has posed a lot of questions on the awareness, readiness and financial ability of SMEs operations to comply standard. This new era where globalization is fast becoming real, it is imperative to investigate the effect the IFRS adoption posses on small and medium scale enterprises as they have a key role to play in international trade in Nigeria.
The introduction of IFRS in Nigeria and the current state of globalization simply means that SMEs involved in international trade with subsidiaries and franchises in other countries to be more successful internationally it must comply with the IFRS guidelines. As a result of the harmonization of accounting reporting standards, the adoption of the IFRS has been widely accepted by various countries of the world. However, the full FRS promulgated by the IASB has been found to be irrelevant due to the disclosure requirement, which are extensive for SMEs for this reasons, the IASB promulgated a simplified version of the FRS applicable to SMEs.
As a result of broad discussion of SMEs and common standard for SMEs worldwide, the introduced an international financial reporting standard (IFRS) designed for use by small and medium sized entities (SMEs) on July 9, 2009, (international accounting standard aboard 2010), 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 requirements, based on a cost benefit analysis for SMEs.
STATEMENT OF THE PROBLEM
In Nigeria, the greatest challenges facing small and medium scale enterprises is access to finance- SMEs as the engine of the economy have the full potentials to him the economy around for the better, but their greatest challenge shill remains underfinanced. With the introduction of IFRS, SMEs in Nigeria are mandated to adopt the new reporting standard from January 2014. The awareness, acceptance and implementation of the new IFRS guidelines for SMEs are challenges for many African countries. Poor financial management and book keeping are to major barriers confronting SMEs when it comes to accessing funds from financial institution and government agencies. In Akwa Ibom State.
OBJECTIVES OF THE STUDY
The objectives of the study is to find out the following
. Examine the extent to which FRS is adopted by small and medium scale enterprises in Akwa Ibom State.
. Determine the role government used in promoting financial reporting standard in small scale businesses
. Determine the level of awareness of financial reporting standard guideline amongst small and medium scale business in Akwa Ibom State
. Find out the problems faced by small scale business
. To make useful recommendations based in research findings
RESEARCH QUESTIONS
The following research question are formulated to guide the study
. To what extent is financial reporting standard is adopted by small and medium scale enterprises in Akwa Ibom State?
. what are the roles of government in promoting accounting reporting standard in small scale businesses?
. What is the level of awareness of financial reporting standard (FRS) guidelines amongst small and medium scale business in Akwa Ibom State?
. What are the problems faced by small scale businesses in Akwa Ibom State?
RESEARCH HYPOTHESES
Hypotheses 1
Ho:Financial reporting standard do not have significance on the development of small and medium scale businesses in Akwa Ibom State
Hi: Financial reporting standard have significance on the development of small and medium scale businesses in Akwa Ibom State
HYPOTHESES II
Ho:There is no relationship between government promotion of financial reporting standard in small and medium scale business
Hi:There is relationship between government promotion of financial reporting standard in small and medium scale business.