The Effects of International Financial Reporting Standards Adoption on SMES Performance: A Case Study Mombasa – Central Business District (CBD)

Abstract

The world over, SMEs contribute 90% of the sector production and they are prime source of new jobs in developing countries and play a crucial role in income generation especially for the poor. For their progress, SMEs are required to keep books of accounts and several companies irrespective of their size are bound by statutory rules of a particular country in which they operate to prepare financial reports that conform to specialized set of accounting principles. In July 2009, the IASB published the IFRS for SMEs. The IFRS for SMEs is intended to be applied to the general purpose financial statements that do not have public accountability. The essence of this study is to identify the effects of IFRS adoption by SMEs on their performance. The sampling procedure used was stratified sampling technique. Primary data was collected by use of self-administered questionnaire and it was purely quantitative. Data collected was analyzed with the aid of Statistical Package for Social Scientist (SPSS) and Regression analysis.

Finally the findings of the study are presented in bar graphs, diagrams and figures. Tables are used to summarize responses for further analysis and facilitate comparison hence see if the objectives are achieved from conducting the study. The research study sought to evaluate the effects of international financial reporting standard on SMEs performance in Mombasa CBD, Specifically the study explored the objectives provided in chapter one. The study employed descriptive data analysis. The sample under study comprises 39 respondents. The study used primary and secondary data that was collected using questionnaires that was served on the respondents and findings presented using tables. The first part of the objective was to investigate the effect of accessibility of capital on SMEs performance. Majority of the respondents agreed that accessibility of capital had a high effect on performance since in improved on service delivery and production. The second part of analysis was to evaluate the effect of comparability of financial statements on SMEs performance in Mombasa CBD. Majority of the respondents agreed that it has great effect that they were able to their SWOT analysis with accuracy. The third part of the analysis was to investigate the effect of governance on performance. There was high level of acceptance that it reduced levels of fraud and management of resources. The last part of the analysis was to examine the effect of information asymmetry on SME performance. Majority of the respondents agreed that it helped stakeholders in making informed decisions. In investigating the effect of accessibility of capital on SMEs performance, it can be concluded that it had great effect in improving SMEs service delivery and production of goods. The issue of governance has helped in proper utilization of resources and to a great extends reduced levels of fraud. Comparability of financial statements has helped the SMEs in having easy access to financial institutions and being to do accurate SWOT analysis thus giving them a competitive edge. Information asymmetry improved the levels of investment and enabling stakeholder’s make informed economic decisions. In conclusion is apparent that international financial reporting standards are an important component in the performance of SMEs.