IFRS for SMEs in developing and developed economies: Early evidence from Albania and the UK

This thesis was submitted for the award of Doctor of Philosophy and was awarded by Brunel University LondonThis thesis examines the motives upon the adaption of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) applicable to non-publicly accountable entities in Albania, as an example of a developing country, and in the UK, as an example of a developed one. It also examines and investigates the impact of such decision for eligible entities, preparers and users of financial information in both countries. Semi-structured interviews with key stakeholders were conducted in Albania consisting of representatives of the national standard setter and the Ministry of Finance, accountants, auditors and lenders. The interview data consisted of 30 interviews which were analysed thematically. In the UK, a thematic analysis of the minutes of the national standard setter’s meetings, comment letters on the public consultation on the future of UK GAAP, and the tax authority’s blog, together with an interview with a representative of the tax authority. In addition, maximum likelihood statistical analysis was performed on the data collected from an online survey of 509 UK members of the ACCA using the adapted IFRS for SMEs. The results in both countries reveal coercive, normative and mimetic pressures affecting the decision of adapting the IFRS for SMEs for non-public accountable entities in Albania and the UK. Larger entities in both countries find the application of the standard simpler and less costly than the smaller ones. There are differences in the way the profession perceives the costs and benefits in Albania and the UK. However, even at this early stage, benefits for eligible entities have been identified in both countries. Finally, the results provide evidence of increased agency costs for the users of financial reporting in both countries. To the author’s knowledge, this is the first study investigating the impact of using international financial reporting for non-publicly accountable entities after the implementation of the adapted IFRS for SMEs in the context of developing and developed countries. The study contributes to the emerging literature by extending our knowledge of reasons and motivations that influence the decision to use the standard as the basis for financial reporting in both developing and developed economies and the impact of this decision on the reporting entities, preparers and users. The results should be of interest to national regulators in both countries and in other developing and developed economies planning to use the IFRS for SMEs. They will also be of interest to the IASB