ABSTRACT

Previous studies have paid little attention to the state of International Financial Reporting Standard (IFRS) awareness and adoption in North-Central geo-political zone of Nigeria. This study investigated level of awareness, challenges and adoption of IFRS for Small and Medium Enterprises (SMEs) in North-Central Nigeria with the view of highlighting the implication for financial reporting quality. The outcome variable in the study is financial reporting quality measured by qualitative reporting attributes namely, reliability, comparability and understandability. The explanatory and control variables are IFRS awareness, challenges and adoption, taxation, entity size and ownership structure. From the population of 556 registered SMEs in three randomly selected States in the zone, a sample of 307 SMEs was selected for the study. Data was collected through a self-administered questionnaire. Multiple regression analysis was applied to test the study hypotheses. Results show that the financial reporting practice of SMEs in North-Central Nigeria is not only poor, but also majority of the business entities do not prepare financial reports in line with the guidelines of the IFRS for SMEs.

Result further show that IFRS awareness significantly influences understandability, for instance, a unit increase in the level of IFRS awareness will result in the decline of understandability by a unit of 0.0779 (β1=0.0779, p<0.05) indicating decline in the quality of financial reporting; IFRS challenges significantly influences comparability, for instance, a unit increase in IFRS challenges that is an additional challenges facing the adoption of IFRS will result in the decline of comparability indicating decline in the quality of financial reporting by a unit of 0.1679 (β1=0.1679, p<0.05); and willingness to adopt IFRS significantly influences reliability, that is high quality financial reporting, for instance, increases in the level of willingness to adopt IFRS will lead to higher quality of financial reporting among the SMEs indicating that entities that show willingness to adopt IFRS are willing to prepare their financial statements based on the guidelines of IFRS for SMEs (β 1=1.3327, p<0.001). The study concluded that awareness, challenges and willingness to adopt IFRS are major influence on financial reporting quality among the SMEs.

Keywords: IFRS, SMEs, financial, quality, reporting