The applicability of the IASB's proposed accounting standards for SMEs in the local scenario

Abstract

Maltese companies are required, by the Companies Act of 1995, to prepare annual accounts in accordance with full IFRSs. Such standards became applicable for SMEs as well and as a consequence, Malta is one of the countries now feeling the burden of utilising full IFRSs. The IASB's decision to initiate a project to develop a set of standards for SMEs was thus very well received locally. The objective of this study is to determine the desirability of such a set of standards for SMEs and to identify what this standard should contain for it to be applicable in the local scenario. Research data was collected by means of a questionnaire, which was submitted to sole practitioners, as the majority of SMEs are audited by them and also to warrant holders occupying the post of financial controllers within SMEs in order to garner their point of view on the subject. The study carried out has shown that the complexity of IFRSs is a major issue to warrant holders. Although a small majority has acknowledged that the IASB's standards for SMEs are the way forward to solving this problem, knowledge on the project itself is limited amongst respondents. Simplifications to recognition and measurement principles are considered fundamental for the IASB project to be applicahle locally. Respondents thoroughly agreed with the simplifications put forward by the IASB, however further areas for simplification were identified. The Malta institute of Accountants should give priority to the subject given its importance and it should also provide a means by which knowledge on the IASB project can be increased.