FACTORS AFFECTING THE ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS BY SMALL AND MEDIUM ENTERPRISES IN NIGERIA

ABSTRACT

This study sought to identify those factors that might frustrate SMEs attempt at compliance with government’s directive on IFRS adoption. SMEs the world over are noted as the engine room of economic growth and development and the derivable benefits of compliance with IFRS for SMEs will help address the nation’s challenge of unemployment and make this crucial sector a major contributor to the country’s GDP. An explorative research design was adopted and data was gathered with the use of questionnaire which was administered on 222 SMEs in three select states of south western Nigeria, using simple random sampling on the one hand; and 5 regulatory agencies on the other hand. Data analysis involved the use of Logit probability regression and descriptive statistics.Results indicated that challenges to compliance include non-availability of skilled manpower; cost of conversion; management’s ability to manage change; management’s perception of IFRS as well as the ownership structure of the reporting entity. However, knowledge of IFRS of the reporting entity and quality of enforcement mechanism, were found not to pose significant challenge to compliance. Research findings also show that there is low awareness of IFRS and minimal preparedness among Nigerian SMEs for compliance with the standard. The study recommends that as a stop gap, SMEs should out-source their accounting function and sponsor resident accountants for IFRS certification training. Regulators on their part should increase awareness drive among SMEs and ensure the even spread of IFRS training facilities and infrastructure across the country.