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An Investigation into the challenges faced by Small to Medium Enterprise operators when adopting and implementing IFRS for SMEs in Zimbabwe

2016

and implementing IFRS for SMEs in Zimbabwe 2016 FACULTY OF COMMERCE DEPARTMENT OF ACCOUNTING PROJECT TOPIC

FACULTY OF COMMERCE

DEPARTMENT OF ACCOUNTING

PROJECT TOPIC

An Investigation into the challenges faced by Small to Medium Enterprise operators when

adopting and implementing IFRS for SMEs in Zimbabwe

Done by:

NEMATIERE MUNYARADZI

N0126484C

Supervised by:

MR P.KORERA

Submitted in partial fulfillment of the Bachelor of Commerce Honors Degree in Accounting offered by the National university of Science &Technology (N.U.S.T)

Submitted:

03 MAY 2016

by the National university of Science &Technology (N.U.S.T) Submitted: 03 MAY 2016 Munyaradzi Nematiere N0126484C
by the National university of Science &Technology (N.U.S.T) Submitted: 03 MAY 2016 Munyaradzi Nematiere N0126484C

Munyaradzi Nematiere

N0126484C

An Investigation into the challenges faced by Small to Medium Enterprise operators when adopting and implementing IFRS for SMEs in Zimbabwe

2016

and implementing IFRS for SMEs in Zimbabwe 2016 Release Form and Declaration Name of Author :

Release Form and Declaration

Name of Author: Munyaradzi Nematiere

Title of Project: An Investigation into the challenges faced by Small to Medium Enterprise

operators when adopting and implementing IFRS for SMEs in Zimbabwe

Degree Programme: Bcom (Hons) In Accounting

Year Granted: 2016

I, Munyaradzi Nematiere do hereby declare that this submission is own work towards Bachelor

of Commerce Honors Degree in Accounting and that, to the best of my knowledge it is the result

of own investigation and research except to the extent indicated in the acknowledgements.

Permission is hereby granted to the National University of Science and Technology (NUST)

Library to produce copies of this and lend or sell for private scholarly or scientific research

purposes only.

Munyaradzi Nematiere (N0126484C)

Signature

Date

© 2016. M. Nematiere. All Rights Reserved. No part of this publication or the information contained herein may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, by photocopying, recording or otherwise, without prior permission from the author.

by photocopying, recording or otherwise, without prior permission from the author. Munyaradzi Nematiere N0126484C
by photocopying, recording or otherwise, without prior permission from the author. Munyaradzi Nematiere N0126484C

Munyaradzi Nematiere

N0126484C

An Investigation into the challenges faced by Small to Medium Enterprise operators when adopting and implementing IFRS for SMEs in Zimbabwe

2016

and implementing IFRS for SMEs in Zimbabwe 2016 FACULTY OF COMMERCE DEPARTMENT OF ACCOUNTING APPROVAL

FACULTY OF COMMERCE

DEPARTMENT OF ACCOUNTING

APPROVAL FORM

The undersigned certify that they have read and recommended to the National University of

Science and Technology (NUST) acceptance, a project entitled An Investigation into the

challenges faced by Small to Medium Enterprise operators when adopting and

implementing IFRS for SMEs in Zimbabwe submitted by NEMATIERE MUNYARADZI,

student number N0126484C in partial fulfillment of the requirements for the Bachelor of

Commerce Honors Degree in Accounting.

Supervisor

Chairperson/Programme Coordinator

.

External Examiner

in Accounting. Supervisor Chairperson/Programme Coordinator . External Examiner Munyaradzi Nematiere N0126484C
in Accounting. Supervisor Chairperson/Programme Coordinator . External Examiner Munyaradzi Nematiere N0126484C

Munyaradzi Nematiere

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An Investigation into the challenges faced by Small to Medium Enterprise operators when adopting and implementing IFRS for SMEs in Zimbabwe

2016

and implementing IFRS for SMEs in Zimbabwe 2016 DEDICATION This research is dedicated to my departed

DEDICATION

This research is dedicated to my departed father (friend, brother and mentor at the same time)

Ezekiel Nematiere for financial support and guidance that you provided up to a point when I

was in lower six. And you used to say If you want to go fast go alone but if you want to go far

then go together , these words are a vital tool in my daily life and I realised that coming

together is a beginning, keeping together is progress and working together is success.

My success story today is a result of gorgeous guidance and effective motivation that you

granted me.

May your soul rest in PEACE

guidance and effective motivation that you granted me. May your soul rest in PEACE Munyaradzi Nematiere
guidance and effective motivation that you granted me. May your soul rest in PEACE Munyaradzi Nematiere

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An Investigation into the challenges faced by Small to Medium Enterprise operators when adopting and implementing IFRS for SMEs in Zimbabwe

 

2016

Table of Contents

 

Acknowledgements

 

vi

Abstract

 

vii

List

of

tables

viii

List

of

figures

viii

List of Abbreviations

 

ix

CHAPTER 1

 

1

 

1.0

Introduction

1

1.2

Background of the problem

2

1.3

Objective of the study

3

1.4

Sub Objectives

3

1.5

Research Problem

3

1.6

Research Question

3

1.7

Sub Questions

3

1.8

1.8

Significance of the study

1.8.1Justification of the significance of the study

 

3

3

1.9

Assumptions

5

1.10

5

CHAPTER 2

 

6

Literature Review 6

Literature Review

6

 

2.0

Introduction

6

2.1 Theoretical Framework of the IFRS for SMEs

 

7

2.2 The essence of Accounting Information Systems

10

2.3 IFRS for SMEs

11

2.3.1 Comparison with full IFRS 11

2.3.1 Comparison with full IFRS

11

2.3.2 First time adoption of the IFRS for SMEs

12

2.3.3 Adoption rate of IFRS for SMEs

13

2.3.4 Considerations prior to adopting the IFRS for SMEs

13

2.3.5 Procedures taken to ensure Implementation

16

the IFRS for SMEs 13 2.3.5 Procedures taken to ensure Implementation 16 Munyaradzi Nematiere N0126484C ii
the IFRS for SMEs 13 2.3.5 Procedures taken to ensure Implementation 16 Munyaradzi Nematiere N0126484C ii

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2.3.6 How far have the SMEs implemented the standard 17 2.4 Level of awareness 17
2.3.6
How far have the SMEs implemented the standard
17
2.4
Level of awareness
17
2.4.1 Training resources
17
2.4.2 Accounting Education and Training
18
2.4.3 Amendments to existing IFRS and laws
18
2.5
Amendments to the IFRS for SMEs
19
2.5.1 Factors considered when issuing the amendments
19
2.5.2 The expected effects of amendments
19
2.5.3 The effective date for the amendments
20
2.6
Current Issues in SMEs financial reporting
20
2.7 Benefits of Adopting IFRS for SMEs
20
2.8 Reasons
for low level Implementations
21
2.9 Recommendations on the adption process
22
2.10 Conclusion
22
CHAPTER 3
23
3.0 Introduction
23
3.1 Research Philosophies
23
3.1.1
Phenomenology or Qualitative Research
23
3.2
Research Design
23
3.2.1
Explanatory Research
24
3.2.2
Descriptive Research
24
3.3
Sources of Data
25
3.3.1
Primary Source
25
3.3.2
Secondary Source
25
3.4
Population
26
3.4.1
Target Population
26
3.5
Sample
26
3.5.1
Sampling Procedures
26
3.5.2
Judgmental sampling
26
3.5.3
Convenience Sampling
27
Procedures 26 3.5.2 Judgmental sampling 26 3.5.3 Convenience Sampling 27 Munyaradzi Nematiere N0126484C iii
Procedures 26 3.5.2 Judgmental sampling 26 3.5.3 Convenience Sampling 27 Munyaradzi Nematiere N0126484C iii

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3.6 Research Intsruments 27 3.6.1 Questionnaires 27 3.6.2 Interviewing 27 3.7 Use of the Research
3.6
Research Intsruments
27
3.6.1 Questionnaires
27
3.6.2 Interviewing
27
3.7 Use of the Research Technique
28
3.8 Electronic mail
29
3.9 Data Presentation
29
3.10 Conclusion
29
CHAPTER 4
30
4.0 Introduction
30
4.1 Interviews
30
4.2 Questionnaires
31
4.2.1
Questionnaire for Private sector entities
31
4.2.2
Questionnaire for Auditors and Consulting firms
31
4.3
Questionnaire Responses
33
4.3.1
Questionnaire for SMEs
33
4.3.2
Questionnaire for Auditors and consulting firms
37
4.4
Summary of the Information gathered
42
4.4.1
Regression Analysis
43
4.5
Conclusion
44
CHAPTER 5
45
Conclusions and Recommendations
45
5.0 Introduction
45
5.1 Major Findings
45
5.1.1 Level of awareness and adoption of IFRS for SMEs
45
5.1.2 Benefits of adopting and implementing IFRS for SMEs
45
5.1.3 Challenges faced by SMEs when adopting
45
5.1.4 Effecs being made to ensure adoption and implementation of IFRS
45
5.2
Recommendations
46
5.2.1 Formalisation of business challenges
46
5.2.2 Separation of ownership and management
46
of business challenges 46 5.2.2 Separation of ownership and management 46 Munyaradzi Nematiere N0126484C iv
of business challenges 46 5.2.2 Separation of ownership and management 46 Munyaradzi Nematiere N0126484C iv

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5.2.3 Awareness campaigns 46

5.2.3 Awareness campaigns

46

 

5.2.4

Renaming the standard

46

5.2.5 Training employee

47

5.2.6 Adding it to the curricular of Universities

47

5.2.7 Professional Accounting firms

47

5.3

A standard for Micro entities

47

5.3

Suggestions for further research

47

REFERENCES

48

LIST OF APPENDICES

52

 

APPENDIX 1

52

APPENDIX 2

53

APPENDIX 3

57

Appendix 4

60

  APPENDIX 1 52 APPENDIX 2 53 APPENDIX 3 57 Appendix 4 60 Munyaradzi Nematiere N0126484C
  APPENDIX 1 52 APPENDIX 2 53 APPENDIX 3 57 Appendix 4 60 Munyaradzi Nematiere N0126484C

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ACKNOWLEDGEMENTS

I have fought the good fight, I have finished the course and I have kept the faith. 2 Timothy

4:7

Firstly I would like to give glory to the Almighty Lord for guiding me through from the time I

joined NUST up to this point. Special thanks go to Mr. Korera my Supervisor for assisting me

during the research process. Success always comes as a result of notable tip of ice-berg and

support from unsung people. Your guidance was my pillar of strength during the course of the

whole project. May you continue to receive abundant blessings from the Most High God.

Deep gratitude goes to the National University of Science and Technology, Department of

Accounting Chairperson and the lecturers that has imparted their vast knowledge and has so

much assisted me during my academic period.

My heartfelt gratitude goes to my mother, advisor and also mentor at the same time (Enesy

Nematiere) who provided the much needed motherly love and support. You placed me in the

driving seat of a vehicle that is heading to a prosperous destination, not forgetting my brothers

and sister for the love and financial support they granted me. It is because of your sacrifice that I

am at NUST and nothing could have been done without you guys. Your love is greatest

ÿ Paradzai Nematiere

ÿ Charles Nematiere

ÿ Colleen

ÿ Clementine Nematiere

Nematiere

Last but not least l would love to thank all my friends and relative for the support that you gave

me. May the good lord bless you all in your endeavors.

for the support that you gave me. May the good lord bless you all in your
for the support that you gave me. May the good lord bless you all in your

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An Investigation into the challenges faced by Small to Medium Enterprise operators when adopting and implementing IFRS for SMEs in Zimbabwe

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ABSTRACT

The main objective of this research paper is to identify the challenges faced by Small to Medium

Enterprises (SMEs) operators in the International Financial Reporting Standard (IFRS) for SMEs

adoption and implementation process and also establishing the level of the adoption in

Zimbabwe, the benefits accruing to such SMEs, maintenance of acceptable accounting records,

the relationship exists between adoption level and challenges for adoption and the promotion of

the adoption of this IFRS. The descriptive research design was used and it comprises of

interviews, questionnaires and observations which gives information directed towards

determining the nature of a situation as it existed at the time of research. The target population

consisted of manufacturing SMEs; retail SMEs, Audit firms, consulting SMEs, SEDCO and

Ministry of Small and Medium Enterprises. The composition was 36 SMEs, 12 from accounting

professional bodies, 1 from the Ministry of SMEs and 1 from SEDCO. The research instruments

used were questionnaires and interviews. Research findings showed that 60% of SMEs are aware

of the standard and of which only 29% adopted the standard with 94% facing challenges in the

adoption and implementation process. Little effort is being made to encourage the adoption of

IFRS for SMEs in the accounting profession. Benefits that could accrue to SMEs that would

have adopted the standard would be better economic decision-making leading to growth through

increased better credit rating, investor confidence, better accountability and tax compliance.

Non- adoption and implementation of IFRS for SMEs has been prompted by client reluctance,

additional cost of training, inadequate training and skills, complexity of the standard and lack of

separation of ownership from management. The study recommends the mounting of seminars or

workshops to ensure 100% awareness of the standard, need to formalise business operations for

SMEs, adding the standard to the curricular of Universities, developing a standard for micro

entities and renaming of the standard.

of Universities, developing a standard for micro entities and renaming of the standard. Munyaradzi Nematiere N0126484C
of Universities, developing a standard for micro entities and renaming of the standard. Munyaradzi Nematiere N0126484C

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List of Tables

 
 

Table 2.1 IFRS for SMEs adoption rate in different continents

13

Table 3.1 Questionnaire Circulation 1( SMEs)

28

Table 3.2Questionnaire Circulation 2 (Auditors & Consulting)

29

Table 4.1 Response Rate

31

Table 4.2 IFRS adoption and uptake level

33

Table 4.3 Challenges faced by SMEs

34

Table 4.4 Response on differences between full IFRS and IFRS for SMEs

36

Table 4.5Shows compliance rate

38

Table 4.6Responses on benefits of Adopting IFRS for SMEs

39

Table 4.7 Actions to ensure IFRS adoption

41

Table 4.8 Summary of the results

43

List of figures

 
 

Figure 2.1 Accounting Framework of the IFRS for SMEs

9

Figure 4.1 Shows the response rate by different personnel

32

Figure4.2Responses to IFRS adoption and uptake

34

Figure 4.3 Responses on challenges faced by SMEs

35

Figure 4.4 Differences between full IFRS and IFRS for SMEs

37

Figure4.5Response to IFRS compliance

38

Figure 4.6 Benefits of Adopting IFRS for SMEs

39

Figure 4.7Response onactions to ensure IFRS adoption

41

Figure 4.8Regression Analysis

44

onactions to ensure IFRS adoption 41 Figure 4.8 Regression Analysis 44 Munyaradzi Nematiere N0126484C viii
onactions to ensure IFRS adoption 41 Figure 4.8 Regression Analysis 44 Munyaradzi Nematiere N0126484C viii

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List of Abbreviations

SMEs

Small to Medium Enterprises

IFRS

International Financial Reporting Standard

IASB

International Accounting Standard Board

ZAPB

Zimbabwe Accounting Practice Board

PAAB

Public Accountants and Auditors Board

SAICA

South African Institute of Chartered Accountants

SEDCO

Small Enterprises Development Corporation

GAAP

Generally Accepted Accounting Practice

XBRL

Extensible Business Reporting Language

ICPAK

Institute of Certified Public Accountants of Kenya

OECD

Organisation for Economic Co-peration and Development

FDI

Foreign Direct Investments

ZPAB

Zimbabwean Professional Accountants in Business

Foreign Direct Investments ZPAB Zimbabwean Professional Accountants in Business Munyaradzi Nematiere N0126484C ix
Foreign Direct Investments ZPAB Zimbabwean Professional Accountants in Business Munyaradzi Nematiere N0126484C ix

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An Investigation into the challenges faced by Small to Medium Enterprise operators when adopting and implementing IFRS for SMEs in Zimbabwe

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CHAPTER 1

INTRODUCTION AND BACKGROUND

1.0 Introduction

Small and medium-sized entities (SMEs) play crucial roles in the economic growth and

sustainable development of every nation be it developing or developed. According to (Gono,

Monetary policy statement, 2013), SMEs contribute to output and employment creation and they

are also a nursery for the larger firms of the future. Also According to (Nyoni, 2012), Zimbabwe

Co-operative Development Minister, SMEs contributed above 60% of employment in the

country.

As a result of broad discussion of SMEs and common standards for SMEs worldwide,

the International Accounting Standard Board (IASB) introduced an International Financial

Reporting Standard (IFRS) designed for use by small and medium-sized entities (SMEs)

on July 9, 2009 (International Accounting Standards Board, 2010).

The Zimbabwe Accounting Practices Board (ZAPB), which is the national standard-setting

body and the Public Accountants and Auditors Board (PAAB), which is the statutory

regulatory and oversight board for the accounting profession in Zimbabwe, formally adopted

the IFRS for SMEs as the second accounting reporting framework for use in the country, by

eligible entities, with effect from 1 January 2011, (Institute Of Chartered Accountancy

Zimbabwe(ICAZ), 2011). Zimbabwe Accounting Practices Board ( ZAPB) has identified that

there is a low level uptake of IFRS for SMES reporting framework to date though it is

statutory requirement and standard practice for Entities. The PAAB has run awareness programs

including having all universities that offer accountancy degrees to have courses on the IFRS for

SMEs but still nothing has been done. The PAAB has also delivered a workshop for university

lecturers on implementing IFRS for SMEs. PAAB states that whilst the IFRS for SMEs is a

welcome development, we still feel that there are some micro entities, who still find the IFRS for

SMEs as complex, we propose that a reporting framework for very small/micro entities be

developed (Ifrs Foundation, 2012). The introduction of IFRS specifically for SMEs was driven

by many challenges faced by these entities in adopting full IFRSs in financial reporting, the main

faced by these entities in adopting full IFRSs in financial reporting, the main Munyaradzi Nematiere N0126484C
faced by these entities in adopting full IFRSs in financial reporting, the main Munyaradzi Nematiere N0126484C

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of which was the excessive disclosure requirements, based on a cost-benefit analysis for SMEs

(Nazri, 2010).

The Small and Medium-Sized Entities (SMEs) can be characterized into three categories; micro,

small and medium-size enterprises. They are small businesses employing less than 100

employees (Ministry of SMEs, 2002). The basic requirements for Small and Medium-Sized

Entities (SMEs) are companies that do not have public accountability, and prepare general

purpose financial statements for external users (International Accounting Standards Board,

2010).

1.2 Background of the Problem

Small and Medium Enterprises have low start-up costs, low risk and can exploit untapped

knowledge base of creativity in the population for new product development, but the major

challenge remains of poor financial management and reporting (Moore WC P. J., 2008).

Further studies are showing that, the major reason why small firms fail is due to the fact that they

are being underfinanced, (Gono, Monetary policy statement, 2013). Among investors,

enterprises, financial institutions, educators and financial statement users, few have spent the

time necessary to understand the differences from national GAAPs and the corresponding

impact and are not prepared to adopt, or make important business decisions with these

standards in mind. IFRS for SMEs like full IFRS, have more flexibility, less -specific rules and

more opportunities to apply professional judgment. So it is important for SMEs to follow the

current trend of financial reporting and enjoy the full benefits that are associated.

Accounting systems provide a source of information to owners and managers of SMEs operating

in any industry for use in the measurement of financial performance and make any other

economic decisions so for this information to have both the fundamental and enhancing

characteristics the financial statements will have to be prepared following IFRS. The awareness,

acceptance and implementation of the new IFRS guidelines for SMEs are challenges for many

African countries (Fortuin, 2011)

new IFRS guidelines for SMEs are challenges for many African countries (Fortuin, 2011) Munyaradzi Nematiere N0126484C
new IFRS guidelines for SMEs are challenges for many African countries (Fortuin, 2011) Munyaradzi Nematiere N0126484C

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1.3 Objective of the study

To identify the challenges faced by SMEs operators in the IFRS for SMEs adoption and

implementation process.

1.4

Sub Objectives

ÿ

To measure the extent to which IFRS for SMEs is adopted by SMEs enterprises in Bulawayo.

ÿ

To determine the relationship between IFRS adoption level and the challenges faced in the

adoption process.

ÿ

To find possible way out to eliminate or reduce the obstacles against IFRS adoption and

implementation.

1.5

Research problem

The lower level adoption of IFRS for SMEs is due to challenges faced in the adoption and

implementation process.

1.6 Research question

What are the challenges faced by SMEs operators in the IFRS for SMEs adoption and

Implementation process?

1.7

Sub questions

ÿ

What IFRS for SMEs guidelines has been adopted by SMEs?

ÿ

What is the relationship between the adoption level and the challenges faced in the adoption

process?

ÿ

What are the possible ways to eliminate or reduce the ironed obstacles to IFRS adoption?

1.8

Significance of the study

1.8.1Justification of the significance of the study

Small and medium scale enterprises are estimated to represent more than 95 per cent of all

entities, according to the (IFRS Foundation, 2010).Many businesses still don t understand what

options are available and how IFRS for SMEs interplay to their benefit(Fortuin, 2011) and also

the differences between Full IFRS and the IFRS for SMEs. By witnessing the pivotal role and

contribution which small scale businesses deliver in developed and developing countries, and

which small scale businesses deliver in developed and developing countries, and Munyaradzi Nematiere N0126484C 3
which small scale businesses deliver in developed and developing countries, and Munyaradzi Nematiere N0126484C 3

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considering the ongoing reforms by the Reserve Bank of Zimbabwe and PAAB for a sustainable

financial literacy framework for small and medium scale enterprises in the country, the

significance of this study cannot be over emphasized.

This also results in an elimination of a distinct possibility that the same type of transaction

entered into by different companies could be reported differently in the financial statements, thus

makes comparability suffer even consolidation of financial information to be difficult.

In addition to that, the importance of this research therefore lies in an attempt to iron out the

factors that are truly responsible for blocking the adoption and implementation of IFRS amongst

small scale enterprises but which have not been valued, figured or factored into the various

incentives schemes and policy measures being put up for SMEs in the state and the nation at

large.

This study is going to help me through in identifying and understanding the challenges faced by

SMES in an attempt to adopt and implement IFRS for SMEs. Other university students are also

going to enjoy the fruits of the research in the same way as me and the following stakeholders

are also going to derive economic benefits,

ÿ Potential Investors

ÿ Fellow students

ÿ Financial Institutions

ÿ Researcher

ÿ Professional Accountants in Public Practice

ÿ Shareholders

i. Potential Investors

Investors make use of accounting information when deciding whether or not to invest in a

company, so in this case decisions will be made based on relevant and faithfully represented

information in the financial statements.

based on relevant and faithfully represented information in the financial statements. Munyaradzi Nematiere N0126484C 4
based on relevant and faithfully represented information in the financial statements. Munyaradzi Nematiere N0126484C 4

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ii. Fellow students

The study will enable fellow students to understand the challenges faced by SMEs when

implementing IFRS for SMEs as well as the benefits derived from proper financial reporting to

SMEs.

iii. Financial Institutions

Financial institutions use accounting information in order to evaluate the credit worthiness of a

company when a loan is to be advanced so in this case the information will be more reliable.

iv. To the Researcher

This research is going to help me to have a deeper understanding of the obstacles faced by SMEs

when adopting and implementing IFRS for SMEs, the benefits derived from implementing IFRS

for SMEs, possible ways to minimize or eliminate the adoption gap as well as to know the

relationship between implementation and profitability levels.

v. To auditors

The external auditors will be in a position to conduct audit procedures based on the identified

criteria (IFRS for SMEs) given the challenges identified and rectified.

1.9 Assumptions

ÿ Assuming the respondents has an adequate understanding of basic financial reporting.

ÿ Assuming the respondents knows the objective of financial reporting.

ÿ Assuming the budget will be sufficient to carry out the research.

ÿ Assuming data obtained will be relevant, reliable and accurate.

ÿ Assuming the research will be completed within the stipulated period of time.

1.10 Conclusion.

This chapter is a summary of the background of the problem and the motive behind the

researcher s need to undertake the research. This research formulated the background for the

research on the challenges faced by SMEs when it comes to adoption and implementation of

IFRS for SMEs. It also looked at the research objectives, and research questions, the significance

and assumptions of the research. The following chapter will review literature related to the topic

being understudy.

The following chapter will review literature related to the topic being understudy. Munyaradzi Nematiere N0126484C 5
The following chapter will review literature related to the topic being understudy. Munyaradzi Nematiere N0126484C 5

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2.0 Introduction

CHAPTER 2

LITERATURE REVIEW

Evidence from literature reveals that there is no universally agreed definition of a SME across all

academic levels. This is so because there is no single definition that captures all the dimensions

of a small and medium-sized entity, nor can be expected to reflect the differences between

entities in different industrial sectors or countries at different levels of development.

Most definitions are however based on size and they are fundamental bases such as number of

employees, annual turnover or financial position (Ghafoor Z, 2007). However, none of these

bases are pegged at the same level across disciplines and national boundaries (Holt, 2008)

In virtually every jurisdiction, from the largest economies to the smallest, over 99% of

companies have fewer than 50 employees (Pacter, 2009) quoted in (South African Institute of

Chartered Accountants, 2010). In Zimbabwe, the Ministry of SMEs (Ministry of SMEs, 2002)

defines a small enterprise as a business that employs not more than 50 people while operating as

a registered entity and a medium enterprise as one employing up to 75 and 100 people.

The Small Enterprises Development Corporation (2010), does not differentiate between small

and medium entities but defines a SME as a firm that has not more than 100 employees with

maximum annual sales of up to $830 000 (Small Enterprise Development Corporation (SEDCO)

of Zimbabwe, 2010).

The International Accounting Standards Committee Foundation, (IASCF, February 2007)

defines a SME as an entity that does not have a public accountability and thus publishes general

purpose financial statements for external users. SMEs are entities which do not have the onerous

requirement of filing their financial statements with any regulatory body for the purpose of

issuing financial instruments. These entities do not hold assets in any fiduciary capacity for a

group of outside investors (security brokers, insurance entities, banks, funds, etc.) but only the

owners, who usually are also managers.

Accounting practices and financial reporting of SMEs in most jurisdictions, the law requires all

or many of the SMEs to prepare financial statements and, often, to have them audited. Normally,

of the SMEs to prepare financial statements and, often, to have them audited. Normally, Munyaradzi Nematiere
of the SMEs to prepare financial statements and, often, to have them audited. Normally, Munyaradzi Nematiere

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the financial statements are filed with the government, posted on a website or are made available

on request (European Commission , 2008). In Zimbabwe, all companies are required to keep

proper books of accounts in compliance with Section 140 of the Companies Act ( Chapter 24:03)

and to prepare and submit tax returns based on these financial statements to the tax authority,

Zimbabwe Revenue Authority (ZIMRA), in compliance with various pieces of tax legislation.

2.1 Theoretical framework of the IFRS for SMEs

a. Scope

Any company that publishes general purpose financial statements for external users and does

not have public accountability can use the IFRS for SMEs. Insurance entities, securities brokers,

bankers, dealers and pension funds are examples of entities that hold assets in a fiduciary

capacity for a broad group of third parties hence cannot use the IFRS for SMEs (Price

Waterhouse Coopers, 2009)

b. Historical cost

The IFRS for SMEs mainly requires items to be measured at their historical cost. However, it

requires the revaluation of investment property and biological assets to fair value, where such

information is readily available. Besides that, it also requires certain categories of financial

instrument to be measured at fair value. All items are subject to impairment other than those

carried at fair value (Price Waterhouse Coopers, 2009)

c. Concepts

Financial statements are prepared on an accruals basis and on the assumption that the entity is

going concern and will continue in operation for the foreseeable future (which is at least 12

months from the end of the reporting period). Their objective is to provide information about the

financial position, performance and cash flows of an entity that is useful to users in making

economic decisions. The principal characteristics that make information provided in financial

statements useful to users are understandability, relevance, materiality, reliability, and substance

over form, prudence, completeness, comparability, timeliness and achieving a balance between

benefit and cost (Price Waterhouse Coopers, 2009).

and achieving a balance between benefit and cost (Price Waterhouse Coopers, 2009). Munyaradzi Nematiere N0126484C 7
and achieving a balance between benefit and cost (Price Waterhouse Coopers, 2009). Munyaradzi Nematiere N0126484C 7

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In Financial reporting, a conceptual framework as shown in Fig 2.1 is a theory of accounting

prepared by a standard setting body against which practical problems can be tested objectively,

in other words, a theoretical base, a recognized criteria, a statement of principles, a philosophy

and a map, (Association of Chartered Certified Accountants, 2011). In September 2010, the

IASB issued a revised version of its conceptual framework, (Conceptual Framework for

Financial Reporting, 2010). The two fundamental objectives of financial statements which are

prepared using IFRS are stewardship and economic decision making. The main users of financial

statements are considered to be equity investors, debt holders and other creditors, while the

primary characteristics are relevance and faithful representation.

i. Relevance- Relevant information is capable of making a difference in the decisions made

by users. Information may be capable of making a difference in a decision even if some

users choose not to take advantage of it or are already aware of it from other sources.

ii. Faithful representation- To be useful, financial information must not only represent

relevant phenomena, but it must also faithfully represent the phenomena that it purports

to represent. The information to be complete, neutral and free from errors for it to be

faithful representation (Conceptual Framework for Financial Reporting, 2010).

it to be faithful representation (Conceptual Framework for Financial Reporting, 2010). Munyaradzi Nematiere N0126484C 8
it to be faithful representation (Conceptual Framework for Financial Reporting, 2010). Munyaradzi Nematiere N0126484C 8

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Figure: 2.1 Theoretical Framework of the IFRS for SMEs

Qualitative Characteristics of Financial Statements

(a)

Fundamental

ÿ

Relevance

ÿ

Faithful

Representation

(b)

Enhancing

ÿ

Completeness

ÿ

Understandability

ÿ

Timeliness

ÿ

Verifiability

Objectives

To provide useful information for sound decision making

Elements

ÿ Assets

ÿ Liabilities

ÿ Income

ÿ Expenses

ÿ Equity

Financial Statements

ÿ Statement Of Financial Position

ÿ Statement Of Profit or Loss and Other Comprehensive income

ÿ Statement Of Changes in Equity

ÿ Cash flow statement

ÿ Notes to annual Financial statements

Source: Conceptual framework 2010

RECOGNITION &

MEASUREMENT

CONCEPTS

ASSUMPTIONS

Economic entity

Going concern

Periodicity

Monetary unit

PRINCIPLES

Historic cost

Realization

Matching

Going concern Periodicity Monetary unit PRINCIPLES Historic cost Realization Matching Munyaradzi Nematiere N0126484C 9
Going concern Periodicity Monetary unit PRINCIPLES Historic cost Realization Matching Munyaradzi Nematiere N0126484C 9

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2.2 The essence of Accounting Information Systems.

ÿ Accounting is viewed as a process of analysing and recording systematically, in terms of

monetary or some other unit of measurement, operations or transactions and

summarizing, interpreting and reporting the results thereof (Kaplan, 1987).

ÿ Accounting Information System is a bracket of interrelated activities, technologies and

documents designed to collect financial and non-financial data, process it and report the

information generated to a diverse group of internal and external end users for sound

economic decision making.

ÿ The primary function of Accounting is to maintain or keep a proper and chronological

record of financial and non financial transactions and events, which grants a base for

further processing and proof for inspecting and verification purposes. It involves writing

in the original or subsidiary books, posting to the ledger, preparation of trial balance and

final accounts (Shayamapiki, 2005).

ÿ It is also a strategy for meeting legal requirements. Accounting assists to comply with the

various legal or statutory requirements. The joint stock companies have a mandatory to

prepare and present their accounts in a prescribed format.

ÿ Shim and Siegel (1999) also viewed that accounting facilitates protection and

safeguarding of business assets (Shim, 1999). Records provide a dual purpose as

evidence in the event of any dispute regarding ownership title for any assets of the

business or property hence prevent unwarranted and unjustified use.

ÿ Maintaining accounting records also triggers rational economic decision making. A

sound price policy, satisfied wage structure, competing with rivals, promotion policies

and collective bargaining decisions, all salute it to a well set accounting structure.

Accounting provides the necessary database on which a range of alternatives can be

considered to make managerial decision-making process a rational one (Shim, 1999).

After looking on the essence of Accounting Information System, we now move on to discuss

IFRS for SMEs.

the essence of Accounting Information System, we now move on to discuss IFRS for SMEs. Munyaradzi
the essence of Accounting Information System, we now move on to discuss IFRS for SMEs. Munyaradzi

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2.3 IFRS for SMEs

IFRS for SMEs are a set of accounting standards developed by IASB for its intended use in

general purpose financial statements and reporting by small and medium-sized entities, private

firms and non-publicly accountable enterprises.

According to International Accounting Standards Board (International Accounting Standards

Board, 2010), the IFRS for SMEs is self-contained standard designed to meet the needs and

capabilities of small and medium-sized entities (SMEs), which are estimated to account for over

96% of all companies around the world. The IFRS for SMEs is about good financial reporting

made simple but built on an IFRS foundation. It was designed specifically for SMEs and it is

internationally recognized. The IASB took five years to develop it (KPMG, United Kingdom,

2010). The final standard was issued by the IASB on the 9 th of July 2009. The standard is

available for any jurisdiction to adopt, whether or not it has adopted full IFRSs. Each jurisdiction

has to determine which entities should use the standard. The only restriction by the IASB is that

listed companies and financial institutions should not use it at all. The definition is therefore

based on the nature of an entity rather than on its size. Where an entry is not addressed by the

IFRS for SMEs, management is expected to use judgment to determine its accounting policy. If

such a transaction is covered in Full IFRS, management may refer to the appropriate

international standard if it wishes but is not required to do so by the IFRS for SMEs (Price

Waterhouse Coopers, 2009).

2.3.1 Comparison with full IFRSs

The IFRS for SMEs development was based on the main principles and concepts from the IASB

framework and full IFRSs, with modifications to take into account the particular financial

reporting needs of the SMEs and from a cost-benefit perspective.

In addition and given the unlikely applicability, the IFRS for SMEs does not address the

following topics:

ÿ interim financial reporting

ÿ segment information

address the following topics: ÿ interim financial reporting ÿ segment information Munyaradzi Nematiere N0126484C 11
address the following topics: ÿ interim financial reporting ÿ segment information Munyaradzi Nematiere N0126484C 11

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ÿ Classification of non-current assets (or disposal groups) as held for sale or distribution.

ÿ insurance contracts

ÿ earnings per share

The modifications gave birth to the IFRS for SMEs containing significantly less detailed

guidance and examples than full IFRSs for topics that are addressed. Therefore the similarities to

and differences from full IFRSs highlighted in this publication may require further consideration

as experience is gained in using the standard.

Since the IFRS for SMEs does not contain a specific effective date, the requirements generally

are compared to the requirements in full IFRSs on issue and that are mandatorily effective for

periods beginning on 1 January 2010 (KPMG, 2010).

2.3.2 First-time adoption of the IFRS for SMEs

A first-time adopter of the IFRS for SMEs is an entity that presents its annual financial

statements in accordance with the IFRS for SMEs for the first time; regardless of whether its

previous accounting framework was full IFRS or another set of generally accepted accounting

principles.

The IFRS for SMEs includes a separate section that sets out all transitional requirements,

mandatory exceptions and optional exemptions available on the first-time adoption of the

standard.

The transitional requirements of the IFRS for SMEs apply to a first-time adopter of the standard

regardless of its previous GAAP, even if that financial reporting framework was full IFRSs

(KPMG, United Kingdom, 2010). An entity can be a first-time adopter of the IFRS for SMEs

only once. Therefore it cannot benefit more than once from the special measurement and

recognition exceptions and exemptions available on first-time adoption of the IFRS for SMEs,

for example if an entity stops using the IFRS for SMEs for a period of time and then is required

or chooses to adopt it again at a later date, it will not be regarded as a first-time adopter at that

later date, thus we move on to look on the adoption rate of IFRS for SMEs in different

jurisdictions.

we move on to look on the adoption rate of IFRS for SMEs in different jurisdictions.
we move on to look on the adoption rate of IFRS for SMEs in different jurisdictions.

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2.3.3Adoption rate for IFRS for SMEs

South Africa was the first country to adopt IFRS for SMEs as its national SME Standard through

the South African Institute of Chartered Accountants (SAICA). Over 80 jurisdictions have either

adopted the IFRS for SMEs or stated a plan to adopt it within the next three years (IFRS

Foundation, 2014). The table below shows the adoption rate:

Table 2.1 Shows IFRS for SMEs adoption rate in different continents

Continent

Number

Countries

Africa

17

Zimbabwe, South Africa, Zambia, Botswana

etc.

Asia

11

Singapore, Hong Kong etc.

Eurasia

4

Turkey, Moldova etc.

Central America

7

Costa Rica, Honduras etc.

Caribbean

14

Jamaica, Aruba etc.

South America

8

Brazil, Chile etc.

Europe

8

Bosnia, United Kingdom etc.

North America

2

United States, Canada (limited use).

Middle East

4

Jordan, Palestine etc.

TOTAL

75

 

Source: © 2014 IFRS Foundation. London EC4M 6XH | UK. www.ifrs.org

2.3.4 Considerations prior to adopting the IFRS for SMEs

The IFRS for SMEs aims to simplify and reduce the costs of preparing financial statements. Any

entity is permitted to adopt the IFRS for SMEs, however, only those entities within the intended

scope of the standard as noted in section 2.6 can describe their financial statements as complying

with the IFRS for SMEs. The following factors to be taken into consideration when adopting the

IFRS for SMEs.

The following factors to be taken into consideration when adopting the IFRS for SMEs. Munyaradzi Nematiere
The following factors to be taken into consideration when adopting the IFRS for SMEs. Munyaradzi Nematiere

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i. Local financial reporting requirements

The adoption of the IFRS for SMEs depends, among other things, on whether the standard fits in

with local laws. Even if it fits in with local laws and a jurisdiction requires or permits the

standard as an acceptable financial reporting framework, then individual entities considering

applying the standard still need to determine whether they can claim compliance with the

standard in their particular circumstances, for instance an entity that qualifies under the criteria

specified by a jurisdiction that allows application of the IFRS for SMEs by certain entities,

would not be able to claim compliance with the standard if it has publicly- traded debt

instruments(KPMG, United Kingdom, 2010).

Another aspect to consider is whether the IFRS for SMEs is a widely accepted financial

reporting framework in the business environment in which the entities operate. One vital

question to ask is whether users such as local finance providers would accept or prefer financial

information in accordance with the IFRS for SMEs, or whether they would require additional

disclosures and statements.

On the other hand, firms involved in cross-border trade or seeking foreign investment would

benefit from adopting a standard developed by an independent international standard setter that:

ÿ Is based on similar principles as the widely accepted full IFRSs

ÿ Is simplified to be fit for purpose for SMEs than full IFRSs, but still result in the

presentation of high-quality financial information.

ÿ Is a more widely recognized framework than local GAAP?

ii. Users and comparability to other entities

Given that the requirements in the IFRS for SMEs are not as exhaustive as those in full

IFRSs, it appears inevitable that entities reporting under the IFRS for SMEs will in certain

circumstances use different accounting treatments, which may result in financial statements

of entities reporting under the IFRS for SMEs initially being less comparable than those of

entities applying full IFRSs. This may be a short- term concern for users (e.g. finance

providers) that might be interested in comparing the financial statements of different entities,

that might be interested in comparing the financial statements of different entities, Munyaradzi Nematiere N0126484C 14
that might be interested in comparing the financial statements of different entities, Munyaradzi Nematiere N0126484C 14

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but would most likely reduce over time as more entities adopt the standard and the

interpretation of the requirements of the standard becomes more standardized.

iii. Business impacts

Some of the key business aspects to consider include the effect on an entity s financial

metrics (e.g. reporting ratios, net profit), existing debt covenants and the terms and

conditions of contractual arrangements.

It also may impact on items such as:

ÿ The amount of taxes payable- if net profit changes and or tax law is based on the

accounting, and then taxable income and the amount of taxes payable could change.

ÿ The ability to pay dividends and or the amount of dividends that could be paid in

jurisdictions, in which dividends are limited to distributable reserves or are subject to

capital management requirements, the ability to pay dividends and or the amount of

dividends that could be paid could be impacted.

ÿ Management compensation- If management compensation, including incentives, is

based on net profit or other financial metrics, then the amount payable could change.

iv. Long-term goals

Entities should consider their long term goals and plans when determining whether to adopt

the IFRS for SMEs. When an entity has growth ambitions or planning an event such as a

listing in the future that would require the adoption of full IFRSs, an earlier adoption of the

IFRS for SMEs may be a useful step towards adopting full IFRSs when coming from a less

detailed and complex local GAAP.

v. Group reporting

Requirements in different jurisdictions may be particularly relevant to consider for group

reporting purposes, if, for instance, a group with subsidiaries, joint ventures or associates

(group entities) in South Africa, Germany and France is considering applying the IFRS for

SMEs for group reporting purposes, then the business case for using the standard will be

more compelling if it is an accepted financial reporting framework in most jurisdictions in

which the group entities are located as group reporting and statutory reporting will be aligned

in those cases.

are located as group reporting and statutory reporting will be aligned in those cases. Munyaradzi Nematiere
are located as group reporting and statutory reporting will be aligned in those cases. Munyaradzi Nematiere

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vi.

Cost

Adopting the IFRS for SMEs may have various cost implications to consider, depending on

entity and jurisdiction-specific circumstances (KPMG, United Kingdom, 2010). They can

include the following:

ÿ Upfront Investment- the initial adoption of the IFRS for SMEs may require some upfront

investment resulting from system changes, reformatting of the financial statements and

training costs.

ÿ Ongoing training- as the IFRS for SMEs will not be updated every year; ongoing training

costs may be less than those which would be incurred under a rapidly and constantly

changing financial reporting framework.

ÿ Financial reporting- the fact that the IFRS for SMEs may be considered a more widely

recognized financial reporting framework because of its international status may result in

entities no longer having to prepare information for regulators or finance providers to

supplement their local GAAP financial statements.

ÿ Disclosure requirements- the extent of disclosures in financial statements prepared under

the IFRS for SMEs is expected to be significantly less than in those prepared under full

IFRS, thereby resulting in lower costs to prepare financial statements under the IFRS for

SMEs. The opposite might be true if the local GAAP requirements are less onerous than the

IFRS for SMEs.

2.3.5 Procedures taken by IASB and IASC to ensure Implementation.

To assist in the implementation, the International Accounting Standards Board (2010) and

International Accounting Standards Committee have taken a number of steps which had several

implications that are worthwhile to be noted:

ÿ Implementation guidance- IFRS manual of accounting 2009 PWC S global IFRS

manual provides comprehensive practical guidance on how to prepare financial

statements in accordance with IFRS, it includes hundreds of worked examples, extracts

from company reports and model financial statements (Price Waterhouse Coopers, 2009)

ÿ Workshops- the IASC Foundation is holding regional, train the trainers workshops in

cooperation with regional professional associations and the world s development

in cooperation with regional professional associations and the world s development Munyaradzi Nematiere N0126484C 16
in cooperation with regional professional associations and the world s development Munyaradzi Nematiere N0126484C 16

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agencies, to build capacity for the implementation of the IFRS for SMEs, particularly in

developing and emerging economies.

ÿ IFRS Taxonomy- the IFRS Taxonomy is a translation of IFRSs, including the IFRS for

SMEs into XBRL (Extensible Business Reporting Language). XBRL is a digital

language used to communicate information between business and other users of

financial information.

ÿ Training material- The International Accounting Standards Committee Foundation

developed a comprehensive free to download training materials to support the

implementation of the IFRS for SMEs (International Accounting Standards Board, 2010)

2.3.6 How far have the SMEs Implemented IFRSs for SMEs?

The uptake of IFRS for SMEs in Zimbabwe is very low. Past studies revealed that 80% of SMEs

in Zimbabwe did not maintain accounting records and had not adopted IFRS for SMEs

(Grazyina, 2013). The council of the Institute of Certified Public Accountants of Kenya (ICPAK)

and the Council of the National Board of Accountants and Auditors of Tanzania approved the

use of IFRS for SMEs in 2009. Also the UK Accounting Standards Board (ASB) set the 1

January 2012 for implementing the new accounting framework (Adekoya, 2011).

2.4Level of Awareness

The implementation of IFRS for SMEs requires a vigorous preparation both at country and firm

levels to provide clarity on the authority that IFRS for SMEs will have in relation to other

existing national laws. This should include communicating the temporary impact of the transition

on financial position and business performance, raising awareness on amendments to IFRS for

SMEs and revised IFRS and identifying regulatory synergies to be derived.

More so, the transition plan to IFRS for SMEs and its effects to preparers and users of financial

statements, educators, regulators and other stakeholders have to be nicely communicated.

2.4.1 Training Resources

Professional accountants in business and public practice have personal responsibilities to ensure

successful implementation of IFRS in every jurisdiction. Along with these financial analysts, tax

implementation of IFRS in every jurisdiction. Along with these financial analysts, tax Munyaradzi Nematiere N0126484C 17
implementation of IFRS in every jurisdiction. Along with these financial analysts, tax Munyaradzi Nematiere N0126484C 17

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practitioners, government officials, accounting lecturers, preparers of financial statements, stock-

brokers and information officers are all responsible for smooth adoption process.

The training materials on IFRS are not readily available at affordable costs in Zimbabwe to train

such a large group which poses a great challenge to IFRS adoption.

2.4.2 Accounting Education and Training

Practical implementation of IFRS for SMEs needs adequate technical capacity among preparers

and users of financial statements, professional accountants in public practice and regulatory

authorities. Jurisdictions that implemented IFRS faced a variety of capacity- related issues,

depending on the chosen approach. One of the principal challenges Zimbabwe is encountering in

the practical implementation process, is the shortage of accountants and auditors who are

technically competent in implementing IFRS for SMEs since the qualified once are moving out

of country in search of green pastures.

2.4.3 Amendment to Existing IFRS and Laws

In Zimbabwe, accounting practices are governed by the Companies Act (Chapter 24:03), Public

Accountants and Auditors Act ( Chapter 27:12), Local GAAP based on the 1998 IFRS version

and other existing laws such as Zimbabwe Stock Exchange Act, Income Tax Act (Chapter

23:06), Value Added Tax 2011, Banks and other Financial Institution Act. All these provide

some guidelines on preparation of financial statements in Zimbabwe. IFRS for SMEs does not

recognize the presence of these laws and the accountants have to follow the IFRS fully with no

overriding provisions from these laws.

Zimbabwe Accounting Practice Board (ZAPB) through its technical committee assesses,

examines, evaluates and analyses the applicability and relevance of the standard in the

Zimbabwean context. In effect the ZAPB when incorporating amendments to existing and new

IFRS and IASs have to exercise extreme caution to ensure a smooth transition to IFRS.

IFRS and IASs have to exercise extreme caution to ensure a smooth transition to IFRS. Munyaradzi
IFRS and IASs have to exercise extreme caution to ensure a smooth transition to IFRS. Munyaradzi

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2.5 Amendments to the IFRS for SMEs

The International Accounting Standards Board (IASB) initially issued the IFRS for SMEs in July

2009. It stated its plan by then to undertake an initial comprehensive review of the IFRS for

SMEs after the first two years and a subsequent omnibus review after every three years.

After taking into account the feedback it received during the initial comprehensive review in

2012 and considering the fact that the IFRS for SMEs is still a new standard, the IASB has made

limited amendments to the IFRS for SMEs (Ernst & Young, 2015).

2.5.1 The factors considered by IASB in issuing the amendments:

ÿ the usefulness of financial information in decision making

ÿ the complexity of the types of events, transactions and conditions encountered by typical

SMEs

ÿ How comparability of financial information would be improved, both between reporting

periods and across different entities.

ÿ Ensuring that the IFRS for SMEs is not more onerous than full IFRSs.

ÿ Undue effort or cost in addressing the information needs for users of the financial

statements (Ernst & Young, 2015).

2.5.2 The expected effects of the amendments.

The IASB highlighted that the majority of the amendments in their basis for conclusions are

intended to clarify existing requirements or add supporting guidance, rather than to change the

underlying requirements in the IFRS for SMEs.

In addition to that, for most SMEs the amendments are expected to improve understanding of the

existing requirements, without necessarily resulting in changes in practice or changes that would

affect the financial statements (Pricewater House Coppers, 2015)

or changes that would affect the financial statements (Pricewater House Coppers, 2015) Munyaradzi Nematiere N0126484C 19
or changes that would affect the financial statements (Pricewater House Coppers, 2015) Munyaradzi Nematiere N0126484C 19

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2.5.3 The effective date for the amendments.

The amendments to IFRS for SMEs will be effective for annual periods beginning on or after 1

January 2017 and earlier applications are permitted. The amendments are to be applied

retrospectively except as highlighted in the standard.

In scenarios where it is impracticable for an entity to apply any new or revised requirements in

the amendments retrospectively, the standard allows an entity to apply those requirements in the

earliest period for which it is practicable to do so.

2.6 Current issues in small and medium-sized entities (SMEs) financial reporting

On 13 January 2016, the IASB published a new lease accounting standard which is IFRS 16 and

it will require companies to bring most leases on- balance sheet from 2019 on. This will affect

the scope of issues covered in IFRS for SMEs, the amount of implementation guidance and the

volume of disclosures. The larger the lease portfolio, the greater the impact on key reporting

metrics (KPMG, 2016).

2.7 Benefits of Adopting IFRSs for SMEs

Adekoya (2011), Pointed out that IFRS for SMEs have clear benefits for investors, lenders and

those seeking to raise finance through the transparency afforded by a consistently applied global

set of financial reporting standards (Adekoya, 2011).

ÿ It will provide a standard which is simple and well understood and this will ease transition to

full IFRS for growing firms once they become publicly accountable.

ÿ The IFRS for SMEs does not just reduce disclosure requirements, it also simplifies the

recognition and measurement requirements- for example, in connection with financial

instruments, when there is a policy choice, and the IFRS for SMEs generally adopts the

simpler option.

ÿ More so, IFRS for SMEs also provide an accounting framework for entities that are not of

the size or have the resources to adopt full IFRS (Alp, 2009)

ÿ The ability to improve comparability and understandability of financial statements will also

build investor confidence, (Adekoya, 2011).

of financial statements will also build investor confidence, (Adekoya, 2011). Munyaradzi Nematiere N0126484C 20
of financial statements will also build investor confidence, (Adekoya, 2011). Munyaradzi Nematiere N0126484C 20

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ÿ The removal of irrelevant topics to SMEs has resulted in improved access to capital,

improved comparability, improved quality of reporting as compared to existing national

GAAP, and less of a burden for entities in jurisdictions where full IFRSs or full national

GAAP are now required (Cai F. &., 2014)

2.8 Reasons for Low Level Implementation of IFRS for SMEs

The biggest challenge that exists in adopting and implementing IFRS for SMEs is in providing

adequate training to equip accountants and auditors with the crucial technical skills before

applying the standard.

Unlike the big 4 firms ( Price Waterhouse Coopers, Delloite, Ernst and Young and KPMG), the

non-big 4 usually do not posses expertise and personnel needed to assist them with transition to

international standards nor do they have global networks or counterparts to provide them with

substantial educational resources and training support. Thus, we rush to conclude that the non-

big 4 firms face more challenges than the big 4 firms when it comes to adoption of IFRS for

SMEs.

In addition to that, the IASB noted that the adoption of any new reporting framework would at

first be costly, both to the profession and the reporting entities IASB (2014). These costs are

usually a hindrance to adoption of IFRS for SMEs by emerging economies. Whilst the

accounting profession would incur costs in communicating the standards and granting training

and academic support to its members, SMEs would also incur costs and these includes costs of

upgrading and updating information systems, training staff, legal and professional fees to address

the impacts on existing contracts and meeting multiplied auditing costs, as it is likely to increase

after adoption.

More so, the success of any set of accounting standards is contingent on future professional

accountants in public and business practice having sufficient academic background (Miller,

2013). The availability of competent and trained staff will be limited until educational programs

cheap in up to the requirement. There is a great need for universities to update their curriculum

by incorporating revised, amended and new standards like IFRS for SMEs in their degree

by incorporating revised, amended and new standards like IFRS for SMEs in their degree Munyaradzi Nematiere
by incorporating revised, amended and new standards like IFRS for SMEs in their degree Munyaradzi Nematiere

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programs (Ifrs Foundation, 2012). Universities in Zimbabwe have already incorporated full IFRS

into their degree programs but with IFRS for SMEs nothing has been done yet.

2.9 Recommendation on the way forward to the Adoption of IFRS for SMEs

According to Cai and Wong (2014), governments should be ready to provide incentives to SMEs

especially those that can reduce their tax burdens, increased accessibility to capital and provide

them with an opportunity for growth. The starting point for those who have no information is

creating awareness and with the rest training needs to be reinforced (Cai, F. and H. Wong, 2014).

ZAPB should take up its roles and formulate an all encompassing IFRS with local bodies

utilizing the existing business conditions to recommend suitable financial reporting standards for

SMEs within their jurisdiction. Research in South Africa has shown that a single threshold for

differential corporate reporting may not adequately address the South African differential

corporate reporting needs and that multiple thresholds each with their own reporting

requirements may be the most comprehensive solution (Stainbank, 2012).

2.10

Conclusion

In a nutshell, the transition to IFRS for SMEs from Zimbabwe Local GAAP and full IFRS is

likely to pose a number of challenges for practitioners in Zimbabwe, including meeting training

and educational requirements, information needs of SMEs as well as justifying to SMEs the need

for a globalized reporting framework among others. This chapter is just a mere summary of the

views of the author on the issue concerned, it may not be advisable to draw conclusions on the

matter so early in the transition. The following chapter details the research methodology. It is

going to show the type of research carried out and the field work conducted by the researcher.

to show the type of research carried out and the field work conducted by the researcher.
to show the type of research carried out and the field work conducted by the researcher.

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CHAPTER 3

RESEARCH METHODOLOGY

3.0 Introduction

The chapter looks at the activities and procedures employed during the course of the research

process. More so, it points out the research instruments to be used, the primary data collection

procedures, analysis of data and presentation plans.

3.1 Research Philosophies

There are basically two philosophies to the research process that dominate literature which are

positivism (quantitative) and phenomenology (qualitative). According to New York University

(New York University, 2011), research philosophy refers to the structure of an enquiry

undertaken to ensure that the evidence collected enables the researcher to answer study questions

or test the hypotheses as unambiguously as possible. Kato (Kato, 2002), argues that no study

depends solely on one approach but in this case the researcher used the phenomenology.

3.1.1 Phenomenology or Qualitative Research

The phenomenological approach takes on a qualitative perspective to the research process. One

may argue that the world of business and management is too complex to lend itself to theorizing

by definite laws in the same way as physical sciences. According to Kato (Kato, 2002), greater

insight can often be derived when collecting data under a qualitative research framework through

such ways as interviews, observation, document and media analysis.

3.2 Research Design

Generally, the research design provides a framework that guides and specifies the type of

information gathered, its sources, how it is collected and how data is going to be analyzed

(Kothari, 2004). A research design is also considered a blueprint of research dealing with at least

four problems which are what data is relevant? What data to gather? What questions to study?

And how to analyze results (Yin, 2003).

There are a number of research designs that a researcher can make use of and these include

observation, research, case study, survey and experiment. Nevertheless, given that there was a

need to collect information from a number of SMEs in Bulawayo and from professional bodies,

to collect information from a number of SMEs in Bulawayo and from professional bodies, Munyaradzi Nematiere
to collect information from a number of SMEs in Bulawayo and from professional bodies, Munyaradzi Nematiere

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the researcher chose to do a survey. Surveys are means of collecting information that describe

the nature and the extent of a specified count of frequencies, attitudes and opinion (Henning,

2004).

Such a research design can be segregated into three types which are explanatory research design,

casual research design and descriptive research design. In this context a descriptive research

design was primarily used as the research seeks to provide a descriptive position on the subject

of the research.

3.2.1 Explanatory Research.

Explanatory research was employed, as the research had been looking for insights into the

general nature of the problem that is the challenges to the adoption and implementations of IFRS

for SMEs, the possible solutions and the relevant variables that need to be considered. The

advantages of using explanatory research are as stated below:

ÿ Research methods are unstructured thus allow a thorough pursuit of interesting ideas and

clues of the research problem.

ÿ Flexibility.

ÿ It is also vital in establishing priorities among research questions.

ÿ Research is qualitative that is the researcher begins without prior misconceptions as to the

research findings.

3.2.2 Descriptive Research

Descriptive research design comprises of interviews, questionnaires and observations which

gives information directed towards determining the nature of a situation as it existed at the time

of research. It embraces a large portion of the research problem, the main purpose being to

provide an accurate snapshot of some aspect of the problem area. The researcher will make use

of this technique for the following reasons:

ÿ Provide a detailed, highly clear picture of the problem under consideration.

ÿ Supply a report on the background or context of the research problem.

ÿ Also gives a detailed guidance by introducing more detail to the research question.

ÿ Also gives a detailed guidance by introducing more detail to the research question. Munyaradzi Nematiere
ÿ Also gives a detailed guidance by introducing more detail to the research question. Munyaradzi Nematiere

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The selection of the above research design was done so as to enhances the whole research

process since explanatory and descriptive research are different sides of the same coin meaning

they complement each other.

3.3 Sources of Data

In order to gather data on the challenges faced by SMEs in the adoption and implementation of

IFRS for SMEs basically two sources of data were taken into consideration that is primary and

secondary sources.

3.3.1 Primary Source

Primary data is that data which is first hand information collected during the study through

observation, questionnaires and interviews. The primary data is original data specifically for

solving the problem at hand and the data collected is ideal and specifically for the study. The use

of primary data enabled the research to have a complete set of information on the study.

i. Merits

ÿ It provides first hand information, which is clear and straight forward.

ÿ Primary data can be gathered in ever changing situations because the study can change the

collection techniques.

ii.

Demerits

ÿ It needs a tedious process to sort out the collected data in order to come up with reasonable

ideas or judgments.

ÿ Prone to manipulation by the researcher hence can lead to bias.

3.3.2 Secondary source

This is the source of data for some purpose other than that for which it was originally collected.

Some sources include but not limited to periodical, company journals and publications.

i. Advantages

ÿ It is less costly and time consuming since data is already available.

ÿ It grants the study a starting point in the data collection process.

available. ÿ It grants the study a starting point in the data collection process. Munyaradzi Nematiere
available. ÿ It grants the study a starting point in the data collection process. Munyaradzi Nematiere

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ii.

Disadvantages

ÿ Characterized with outdated or limited information to the study.

ÿ Ethical issues concerning confidentiality may exist.

3.4 Population

The population is the group of interest to the researcher.(Kato, 2002), say that it is upon this

group that the researcher would generalize the outcome of the study. It stretches to all the

elements under study and about which a conclusion is trying to be drawn.

The population can be in two categories, the study and target population.

3.4.1 Target Population

The target population is the actual population to which the researcher would really like to

generalize. It refers to any group of individuals that have one or more characteristics in common

that are of interest to the research. The target population of this study are manufacturing SMEs in

the central business district of Bulawayo in Zimbabwe; retail SMEs, Audit firms, consulting

SMEs, SEDCO and Ministry of Small and Medium Enterprises.

3.5 Sample

A sample is a representative part of a target population taken and tested to show what the rest of

the population is like. Levin (1994:52) defines a sample as a collection of some, but not all of the

elements of the population under study, used to describe the population. A sample can be broken

down into a sampling unit which is a single group of elements subject to selection in a sample.

3.5.1 Sampling procedures

The researcher used non probability sampling as it accommodated the calculation of the nature

and extent of any biases in the sample thus it gave more relevant and reliable, unbiased results.

3.5.2 Judgmental Sampling

Participants who had been judged or are known to be the best source of information in the field

were sought and chosen for the sample. In this context the sample comprised of participants in

the manufacturing, retail and accounting fields.

the sample comprised of participants in the manufacturing, retail and accounting fields. Munyaradzi Nematiere N0126484C 26
the sample comprised of participants in the manufacturing, retail and accounting fields. Munyaradzi Nematiere N0126484C 26

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3.5.3 Convenience Sampling

This is a sampling method in which the most readily available participants are selected since

most people in the accounting profession were usually busy, the research got information from

those who were available at that time.

3.6 Research Instruments

These are tools and techniques that were used in the collection of data for the research and the

following methods were in respect of the target population.

3.6.1 Questionnaires

A questionnaire can be referred as a document that asks the same question to all the respondents

of individuals of a sample . A questionnaire was distributed to the target respondents containing

both structured and unstructured questions. A structured questionnaire consists of a set of

questions, which leaves several blank spaces for the respondent to fill in. A non structured

questionnaire is one which is not open ended.

i.

Benefits of questionnaires

ÿ

Questionnaires can reach out a number of respondents.

ÿ

Cost per questionnaire is very low

ii.

Weaknesses of questionnaires

ÿ

Some people are ignorant, might not return them if so then unfilled.

ÿ

Normally are close ended thus crucial explanations might be lost.

3.6.2

Interviewing

This is a research method where oral questions are posed to the respondents. This can take the

form of face-to-face meeting or a telephone or Skype conversation. The research made use of the

interviews which facilitated in-depth discussion with the Matebeleland South Provincial

Development Officer for the Ministry of SMEs and Cooperative Development and the

Matebeleland Chamber of SMEs provincial secretary in regards to the challenges faced in IFRS

for SMEs adoption and implementation.

i. Advantages

to the challenges faced in IFRS for SMEs adoption and implementation. i. Advantages Munyaradzi Nematiere N0126484C
to the challenges faced in IFRS for SMEs adoption and implementation. i. Advantages Munyaradzi Nematiere N0126484C

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ÿ Feedback is provided on the spot.

ÿ Facts are presented as they are and no emphasis will be place on the researcher s

 

interpretation.

ii.

Disadvantages

ÿ Fear of victimization may lead the interviewee to grant only the theoretical aspects of the

problem rather than the practical one.

ÿ Interviewees by knowing that they can be identified and such they may be unwilling to grant

out sensitive information.

3.7 Use of the Research Technique

The questionnaires were distributed to all the subjects that were defined from the target

population. The table below shows how the questionnaires were circulated.

Table 3.1 Questionnaire 1 (SMEs)

Sectors

Number

Finance

Finance

Accountant

Accounts

Director

Manager

Clerks

Manufacturing

15

2

2

8

3

Retail

12

1

3

6

2

Consulting

5

1

1

2

1

Other

4

1

1

1

1

Total

36

5

7

17

7

1 1 2 1 Other 4 1 1 1 1 Total 36 5 7 17 7
1 1 2 1 Other 4 1 1 1 1 Total 36 5 7 17 7

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Table 3.2 Questionnaire 2 (External Auditors and Consulting Firms)

CA firm

Number

Associate

Management

Articled Clerks

Ernst & Young

2

 

1

1

Delloite

2

 

1

1

KPMG

3

1

1

1

Consulting Firms

5

 

3

2

SEDCO

1

 

1

 

Ministry

1

 

1

 

Totals

14

1

8

5

3.8 Electronic Mail (E-mail)

Some date will be gathered and collected from respondents via an e-mail, as this model is fast

and reliable. Also the confidentiality of information is safeguarded, as only the researcher made

use of the information.

3.9 Data Presentation and Analysis

Data gathered was analyzed thoroughly so as to check for completeness, timeliness and accuracy

of data responses obtained. The researcher organized and presented the data using pie charts,

tables, percentages, bar graphs and the regression analysis. These were used since they are fairly

simple to interpret, accurate, reliable and rather more meaningful to the ordinary person.

3.10 Conclusion

This chapter contains methods of data collection, research design, their merits and demerits,

methods of sampling and the manner in which the questionnaire was administered. Data

collected would be analyzed, evaluated and presented in the following chapter.

Data collected would be analyzed, evaluated and presented in the following chapter. Munyaradzi Nematiere N0126484C 29
Data collected would be analyzed, evaluated and presented in the following chapter. Munyaradzi Nematiere N0126484C 29

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CHAPTER 4

DATA PRESENTATION, INTERPRETATION AND ANLYSIS

4.0 Introduction

This chapter concentrates on the presentation, interpretation and analysis of the data gathered

from the field research. The findings and analysis were directed towards addressing research

objectives and answering research questions. The findings and data analysis sought to understand

the challenges faced by SMEs operators in the adoption and implementation of IFRS for SMEs

in Zimbabwe.

4.1 Interviews

Two Interviews were conducted with the Matebeleland South Provincial Development Officer

for the Ministry of SMEs and Cooperative Development and the Matebeleland Chamber of

SMEs provincial secretary. The following questions were asked and the responses obtained are

as follows.

Question 1

In your opinion, to what extent does IFRS for SMEs likely to benefit emerging economies?

The adoption and Implementation of IFRS for SMEs by reporting entities in emerging

economies is likely to benefit such economies in many aspects. The biggest merit would be

having an internationally recognized financial reporting framework for SMEs. In addition to that,

such a reporting framework should increase SME s access to credit facilities and equity capital,

reduce audit inefficiencies and ease the burden of financial reporting on SMEs in countries

where full IFRS is now required. This was strongly confirmed by the response of the Provincial

Development Officer as quoted below:

Zimbabwe is surely going to benefit from the adoption and implementation of IFRS for

SMEs. We will now have an updated set of internationally recognized standards for SMEs.

We are not even in a capacity to update current standards as ZAPB does not have the

necessary resources to do so.

However, emerging economies like Zimbabwe can face a bunch of difficulties given the

intention to develop its own financial reporting standards, as the process is vigorous and requires

develop its own financial reporting standards, as the process is vigorous and requires Munyaradzi Nematiere N0126484C
develop its own financial reporting standards, as the process is vigorous and requires Munyaradzi Nematiere N0126484C

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substantial amounts of funds, expertise, time and resources. Therefore it is depending on the

IASB to craft standards for it. This single set of reporting standards will help achieve a consistent

and comparable financial reporting framework hence attracts foreign direct investments (FDI)

and results in quality investment decisions. Although theoretically this seems to be sounding, it

may not be the scenario in Zimbabwe, as argued by the chamber of SMEs provincial secretary:

It is too early to comment on the benefits. The nature and operating context of small firms

in Zimbabwe is such that they have a very limited scope abroad. Truly speaking, for many

SMEs, financial reporting is basically for meeting statutory obligations for instance tax

requirements.

4.2 Questionnaires

The researcher sent a total of 50 questionnaires to respondents who had been chosen by way of

convenience and judgmental sampling to come up with a convenient proper sample. The

questionnaires were distributed in two different forms. The first form of questionnaires was sent

to private sector firms whilst the other form of questionnaires was sent to Auditing and

Consulting firms.

4.2.1 Questionnaires for Private Sector entities

The main objective of the questionnaire was to gather a thorough understanding of the challenges

faced by these private sector entities in the adoption and implementation of IFRS for SMEs when

preparing their financial statements.

4.2.2 Questionnaire for Auditors and Consulting firms

The objective of the questionnaire was to obtain a clear picture on the challenges faced by SMEs

operators when adopting and implementing the standard as witnessed by the consultants who

prepared financial statements on behalf of their clients (SMEs) and also auditors who audit their

financial statements. In total 50 questionnaires were sent to SMEs, SEDCO, Ministry of SMEs,

auditors and consulting firms. The following table shows the response rate.

Table 4.1 Response rate

firms. The following table shows the response rate. Table 4.1 Response rate Munyaradzi Nematiere N0126484C 31
firms. The following table shows the response rate. Table 4.1 Response rate Munyaradzi Nematiere N0126484C 31

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Category Of Participants

Sample Target

Response

Non Response

R Rate (%)

N R Rate(%)

SMEs

36

32

4

89%

11%

Professional Bodies

12

10

2

83%

17%

Ministry of SMEs and SEDCO

2

2

0

100%

0%

Total

50

44

6

88%

12%

Source: Primary Data Survey, April 2016

Analysis

Fig 4.1shows that, from a sample target of 50 participants, responses were obtained from 44

participants (32 participants in SMEs, 1 participant from the Ministry of SMEs, 1 participant

from SEDCO and 10 from professional bodies (Auditors and consulting firms). There was an

88% response rate, which was acceptable as it was well above 67% which is recommended by

(Saunders, 2009). This rate owes its success to the use of convenient sampling technique and

anonymity guaranteed to respondents. The twelve percent (12%) who did not submit completed

questionnaires failed to do so because of the time constraint and some were saying the

information is sensitive and were not able to respond especially the informal SMEs. Some of

them did not communicate their failure possibly because of other commitments. And for the 88%

response, the components of it are represented by the pie chart below.

Fig 4.1- Shows the response rate by different personnel

Response Rate Associate Finance Directors 2% Accounts Clerks 10% 24% Associate Finance Directors Finance Managers
Response Rate
Associate
Finance Directors
2%
Accounts Clerks
10%
24%
Associate
Finance Directors
Finance Managers
Finance Managers
30%
Accountants
Accounts Clerks
Accountants
34%

Source: Primary Data Survey, April 2016

Accountants Accounts Clerks Accountants 34% Source: Primary Data Survey, April 2016 Munyaradzi Nematiere N0126484C 32
Accountants Accounts Clerks Accountants 34% Source: Primary Data Survey, April 2016 Munyaradzi Nematiere N0126484C 32

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4.3 Questionnaire responses

The responses to the questionnaires are presented, evaluated and analyzed in two forms, first set

being responses from SMEs and the second from Auditors, consulting firms, SEDCO and

ministry of SMEs.

4.3.1 Questionnaire for SMEs

A total of 36questionnaires were distributed to 20different SMEs. Most of the firms responded

except for 4 which were not returned back.

a) Responses on Level of Awareness and Uptake of IFRS for SMEs

The researcher asked questions pertaining to the level of IFRS for SMEs awareness and uptake

in the manufacturing sector, retail sector and consulting sector in Zimbabwe. Table 4.2shows

that data, while Fig 4.2is a graphical representation of the findings.

Table 4.2- Shows IFRS adoption and uptake level

 

Responses

   
 

Very High

High

Low

Very Low

Unsure

Total

Awareness

0

0

3

2

0

5

Uptake

0

0

2

5

0

7

Compliance

0

0

1

5

0

6

Total

0

0

6

12

0

18

Source: Primary Data Survey, April 2016

Analysis

The findings in fig 4.2shows that 2 out of 7 participants ( 29%) revealed that the level of uptake

of IFRS for SMEs was low and 5 participants (71) were saying that the level of uptake is very

low in Zimbabwe. The other 3 participants (60%) showed that awareness of IFRS for SMEs was

low with 2 participants (40%) highlighted that is actually very low in Zimbabwe. More so, all 13

(100%) respondents said that compliance and uptake levels were not favorable; with 3 out of 13

(23%) saying it is very low. In addition to that, 5 out of 5 participants (100%) revealed that

saying it is very low. In addition to that, 5 out of 5 participants (100%) revealed
saying it is very low. In addition to that, 5 out of 5 participants (100%) revealed

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SMEs are not even aware of the existence of IFRS for SMEs, therefore, there might be a great

need to do intensive campaigns on awareness and educate.

Fig 4.2Responses to IFRS adoption and Uptake

IFRS for SMEs Adoption level Compliance Uptake Awareness 0% 20% 40% 60% 80% 100% Awareness
IFRS for SMEs Adoption level
Compliance
Uptake
Awareness
0%
20%
40%
60%
80%
100%
Awareness
Uptake
Compliance
Low
60%
29%
17%
Very Low
40%
71%
83%

Source: Primary Data Survey, April 2016

b) Responses on challenges faced by SMEs operators in adopting IFRS for SMEs

Table 4.3 shows the results obtained on challenges that are encountered by SMEs in the adoption

of IFRS for SMEs.

Fig Table 4.3- Challenges faced by SMEs

 

Yes

No

Participants citing Challenges

30

2

Source: Primary Data Survey, April 2016

No Participants citing Challenges 30 2 Source: Primary Data Survey, April 2016 Munyaradzi Nematiere N0126484C 34
No Participants citing Challenges 30 2 Source: Primary Data Survey, April 2016 Munyaradzi Nematiere N0126484C 34

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The research highlighted that 30 out of 32 (94%) had some challenges. The study revealed that

inadequate training and skills, additional cost of reporting, client reluctance to adopt IFRS for

SMEs, complexity and suitability of the standard, lack of separation between ownership and

management of SMEs hindered some of the organizations from adopting and implementing IFRS

for SMEs and maintaining accounting records. The Fig 4.3 shows findings on the challenges

faced.

Fig 4.3 Shows responses on challenges faced by SMEs in the adoption process.

IFRS Adoption Challenges Complexity and suitability of the standard Onwership and Management concetration Client
IFRS Adoption Challenges
Complexity and suitability of the standard
Onwership and Management concetration
Client reluctance
Additional cost of training
Inadequate training and skills
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Onwership and
Inadequate training and
skills
Additional cost of
training
Client reluctance
Management
concetration
Complexity and
suitability of the
standard
No
6%
4%
25%
33%
7%
Yes
94%
96%
75%
67%
93%

Source: Primary Data Survey, April 2016

Analysis

Another challenge faced in the adoption and implementation of IFRSs for SMEs was that of

financial resources. From the study it was reviewed that maintaining the system is costly,

especially when it comes to human resources and this is in line with assertions made by (Smith,

when it comes to human resources and this is in line with assertions made by (Smith,
when it comes to human resources and this is in line with assertions made by (Smith,

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2013)those SMEs are significantly underfinanced. It shows again that there is lack of separation

on ownership and control. Therefore, there is a high risk of accountability absence and this

seems to be in line with the opinion made by (Organisation for Economic Co-peration and

Development (OECD), 2004) that SMEs are at great risk of failure, partially because company

directors may possess less collective management experience than larger organizations.

One respondent mentioned the various challenges faced by SMEs operators when adopting and

implementing IFRS for SMEs.

ÿ The first being that there is a lack of awareness on preparers as they were trained under

full IFRS.

ÿ SMEs are subsidiaries for public companies and must comply with full IFRS for group

reporting.

ÿ Most entities do not want to be deemed as small, therefore IASB should consider giving

the standard a new name like IFRS for Non- public interest entities.

In addition to that, participants argued that there was need for awareness and education

campaigns by the PAAB indicating the benefits to SMEs in adopting the IFRS for SMEs. The

distribution of the IFRS in soft or hard copy format to target entities will results in an increase in

accessibility to users ( despite the fact that the information is freely available online still the users

are not always aware of this fact).

More so, the other challenge was the behavior issue where entities and people actually resist

change and avoid by all means learning new ideas. And some SMEs are not even keeping books

of accounts.

c) Responses on the difference between Full IFRS and IFRS for SMEs

The researcher asked this question so as trying to get an accounting appreciation from SMEs

operators and the results are as displayed in Table 4.4

Table 4.4 Response on differences between full IFRS and IFRS for SMEs

 

Response

 

Yes

No

Not sure

Difference between Full IFRS and IFRS for SMES

1

8

11

Source: Primary Data Survey, April 2016

Full IFRS and IFRS for SMES 1 8 11 Source: Primary Data Survey, April 2016 Munyaradzi
Full IFRS and IFRS for SMES 1 8 11 Source: Primary Data Survey, April 2016 Munyaradzi

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Fig 4.4- Shows the difference between full IFRS and IFRS for SMEs

Difference between Full IFRS and IFRS for SMEs 60% Not Sure 40% No 20% Yes
Difference between Full IFRS and IFRS for SMEs
60%
Not Sure
40%
No
20%
Yes
0%
Difference Between Full IFRS and IFRS
for SMEs
Yes
5%
No
40%
Not Sure
55%

Source: Primary Data Survey, April 2016

Analysis

From the results obtained as shown in Fig 4.4 five percent (5%) of the respondents are

indicating that there is a difference with forty percent (40%) saying that there is no difference

and fifty five percent (55%) not sure. This tend to create confusion to the researcher there is

no clear link with other responses but in conclusion this shows ignorance in SMEs operators

as to which standard is which and the level of awareness will then take precedence that they

were just filling without clear understanding.

4.3.2 Questionnaire for Auditors and Consulting firms

(a) Response on compliant to IFRS for SMEs when preparing financial statements

This question was asked so as to identify the reporting framework used by SMEs in the

preparation of financial statements. The following Table 4.5 will shows the results obtained

from auditors and consulting firms and Fig 4.5 will illustrate the results diagrammatically.

and consulting firms and Fig 4.5 will illustrate the results diagrammatically. Munyaradzi Nematiere N0126484C 37
and consulting firms and Fig 4.5 will illustrate the results diagrammatically. Munyaradzi Nematiere N0126484C 37

Munyaradzi Nematiere

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An Investigation into the challenges faced by Small to Medium Enterprise operators when adopting and implementing IFRS for SMEs in Zimbabwe

2016

 

Table 4.5- Shows Compliance rate

 

Yes

100 % compliance

3

Yes but less than 100 %

No

Source: Primary Data Survey, April 2016

Fig 4.5- Response to IFRS compliance

IFRS Compliance Yes Yes but Less than 100% No 72% 7% 21% 100 % Compliance
IFRS Compliance
Yes
Yes but Less than 100%
No
72%
7%
21%
100 % Compliance

Source: Primary Data Survey, April 2016

than 100% No 72% 7% 21% 100 % Compliance Source: Primary Data Survey, April 2016 Munyaradzi
than 100% No 72% 7% 21% 100 % Compliance Source: Primary Data Survey, April 2016 Munyaradzi

Munyaradzi Nematiere

N0126484C

38

An Investigation into the challenges faced by Small to Medium Enterprise operators when adopting and implementing IFRS for SMEs in Zimbabwe

2016

Analysis

From the results obtained as shown in Fig 4.5 seventy nine percent (79%) of the participants

showed that the private sector institutions does not comply 100% with the relevant

professional requirements of IFRS when preparing financial statements with 21% complying

100%. This cannot be a shock to the researcher because the level of IFRS for SMEs

awareness was very poor meaning the accounting profession regulatory body (PAAB) and

the accounting standard setting body (ZAPB) still has a lot to be done regarding adoption and

implementation of this standard.

b) Responses on the benefits of adopting IFRS for SMEs to the SMEs and accounting

profession.

The study showed that SMEs derive a number of benefits through the adoption and

implementation of IFRS for SMEs. Table 4.6 represents the data in this scenario whilst Fig

4.6illustrates the responses from professional bodies, consulting firms, ministry of SMEs and

SEDCO on the envisaged benefits.

Table 4.6Responses on Benefits of Adopting IFRS for SMEs

   

Responses

 

Benefit

Strongly Agree

Agree

Disagree

Strongly disagree

Investor Confidence