International financial reporting standards for small and medium enterprises adoption and the quality of their financial reports/ statements Kawempe division- Kampala district- Uganda

Abstract

The intent of this study was to examine the effect of IFRS for SMEs adoption and the quality of financial reports / statements of SMEs in Kawempe division. The objectives of the study were to; investigate the effect of IFRS for SMEs adoption benefits on the quality of financial reports / statements of SMEs, investigate the effect of IFRS for SMEs adoption cost on the quality of financial reports / statements of SMEs and examine the moderating effect of entity size on the relationship between IFRs for SME adoption and the quality of financial reports / statements in Kawempe division-Kampala District. The study adopted a case study design. Data were collected from primary sources using questionnaire, interview guide and documentary checklist from a sample of 103 and a total of 85 respondents from Kawempe division were able to participate giving a response rate of 79.54%. The findings revealed that 41.8% of the SMEs that participated in this study revealed that adoption benefits leads to improved quality of reports in SMEs, 60.8% of the SMEs that participated in the study revealed that adoption cost affect the adoption of IFRS for SMEs and the quality their financial reports / statements and 48.2% of the SMEs that participated in this study revealed that size of SME affects the adopt IFRS for SMEs and the quality of their reports. To note is 50.49% of the SMEs that participated do not comply with IFRS for SMEs. The study findings on adoption benefits and quality of financial reports / statements indicate that 41.8% of the SMEs that participated can state that adoption benefits leads to improved quality of reports in SMEs, it’s below average and need to be improved. This study recommends that the government should put in place policies that enforce all SMEs to use and adopt IFRS for SMEs to improve the quality of their financial reports. 60.8% of the SMEs that participated revealed that adoption costs affects the quality of financial reports / statements of SMEs and this study recommends that the government should put in place certified public accountants to offer probono audit services to SMEs so that they can reduce on the cost of adopting IFRS for SMEs and for objective three, the government should further categories SMEs into different sizes and re-direct the application of IFRS for SMEs so that at least each category can have asset of financial reporting standards to adopt.