Hallenges and potential advantages in adopting the International Research Paper

Hallenges and potential advantages in adopting the International Financial Reporting Standard for - Research Paper Example Besides that, the users of the financial statement of the SMEs are also benefitted from this, since the information provided can be compared with the international standards as the SMEs are also seen to deal with the venture capital firms, credit rating agencies, customers, suppliers, financial institutions and investors who are operating outside the home countries of the SMEs. However, the extant IFRSs cannot be used to meet the need of SME financial statement comparable to the international standard as they are designed especially to meet the financial reporting needs of the large businesses, that are operating in the globalised financial market and very little in regards to the economic compliance burden on the smaller businesses (Devi, 2003; IASB, 2009; Thompson, Sian & Roberts, 2006). Moreover, the SMEs cannot be considered as the smaller version of large businesses, which suggests the way that users will utilize the financial statement and accounting expertise along with their ability to bear the cost of financial reporting, which also differs from those of the large publicly traded companies (IASB, 2009). There are enough literatures that provide evidences regarding the appropriateness of IFRS for the SMEs (Chand, Patel & Cummings, 2006; Eierle, Haller & Beiersdorf, 2007; MAZARS, 2008; Sian & Roberts, 2008; Fu? lbier & Gassen, 2010; Neag, Masca & Pa?scan, 2009; Van Wyk & Rossouw, 2009) but there is need of additional research, since most of the researches were restricted only to some specific context. Therefore, this research focuses on the advantages and challenges that the SMEs of UAE will face on adopting the IFRS. Research Question The research question that this study will try to answer is the benefits that the small and medium sized enterprises, along with the suppliers of fund, will enjoy due to closure of the information gap. This information gap is produced as most of the SMEs are following non-standardized financial reporting techniques in UAE, which makes the evaluation of the performance of the enterprises more difficult. Literature Review Factors that lead the SMEs to adapt to the IFRS While developing the IFRS for the SMEs, the IASB has taken into consideration the important firm-level aspects. IASB has argued that there is a requirement for the global SMEs to prepare their financial reporting as per the international standards because of the users of their financial statement and the international structure and activities, in which the SMEs are engaged (IASB, 2009). In this context, the board has argued that the extant IFRS fails to meet the need of the financial reporting of the SMEs compared to the international standards, since they are complex in nature and poses significant amount of economic burden and compliance on the SMEs. Therefore, the following sections look at the prior literatures and highlight the characteristics of the firm, which will attempt to find the necessity of IFRS for the SMEs and its appropr iateness for financial report