Does the International Financial Reporting Standard for small and medium-sized entities suit private firms? Fieldwork case-study vignettes for Taiwan

This paper challenges policy makers' claims that the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) is 'fit for purpose' in private firms, using the mixed method and fieldwork evidence from Taiwanese companies. We exploit a unique research window during 2012-2016, when the Taiwanese accounting regulators considered adopting IFRS for SMEs, but finally chose a new hybrid standard: the Enterprise Accounting Standards (EAS), involving elements of IFRS and IFRS for SMEs. We find that companies' attitudes towards IFRS for SMEs were strongly influenced by their plans and strategies (e.g., being acquired), and the accounting standard used by their parent companies. Hence, while introducing IFRS for SMEs or EAS seems a sound policy, accounting regulators should beware of their challenges to private firms (e.g., no ambitions to go public). Compliance costs could be attenuated by providing firms with clear accounting choices, whilst ensuring adequate financial reporting comparability.