The Impact of performance of the level of compliance with the Philippine financial reporting standards for small and medium-sized entities under the semi-conductor industry within Luzon

This study identifies and assesses the issues resulting from Small and Medium-sized Entities (SMEs) complying with the new set of standards laid out specifically for SMEs, the Philippine Financial Reporting Standards for SMEs (PFRS for SMEs) and the effects it has on their financial performance. The focus of the study is mainly to evaluate the level of compliance of SMEs with the PFRS for SMEs and to ascertain as to whether there exists a relationship between the compliance to PFRS for SMEs and its overall financial performance. The study will concentrate on SMEs around Luzon and under the semi-conductor industry. These SME companies must be considered SME-based on the definition of the PFRS for SME standards and must have released financial statements, which also states in its disclosure on whether the company is compliant or not with the said PFRS for SMEs. This research paper is exploratory in nature. In measuring the effects of the standards on the SMEs financial performance, understanding of key financial ratios is used. Also, to shed light on the discussion, a quantitative analysis is used for measuring the degree of compliance of the firms under the area of study through the disclosure index and the financial performance through the key financial ratios. The results of this paper are that the semi-conductor SMEs in Luzon are complaint with the PFRS for SMEs, since the main purpose of having this new set of standards is to simplify the financial reporting of SMEs, but their level of compliance has no significant effect on the overall performance of the SME. Also, because of the simplified form of financial reports, understanding the company\u27s current situation and potential improvements easing of understanding makes it easier for internal and external stakeholders to get a better picture of the SME which in turn improves the financial performance of the SMEs