How suitable is IFRS for SMEs for smaller firms? Evidence from Taiwan

Accounting authorities recently introduce IFRS for SMEs with the aim to achieve the convergence of financial reporting when taking into account the inherent difference between large and small firms. This paper investigates whether IFRS for SMEs is really suitable for smaller firms as what policy makers claim. It uses the interview data obtained from Taiwanese companies. This method helps to gain business insights and to enhance our understanding of how firms view this new accounting standard.
In this research, five cases of private firms are discussed in detail. Two of them are individual firms and the other three are members of corporate groups. The results show that companies’ attitudes towards IFRS for SMEs can be influenced by their future plans (e.g., whether to go public or not). A sampled private firm which anticipates making IPO perceives large benefits of applying IFRS for SMEs while another private firm which hopes to stay private finds this adoption costly. Furthermore, a firm which belongs to a business group often considers the consistency within the group and its accounting decisions are affected by group policies. Therefore, if its parent company is required to adopt IFRS, it is more likely to see benefit in complying with IFRS for SMEs. The findings suggest that IFRS for SMEs may not fit all private firms and there is room for improvement in designing accounting regulations for small and medium sized firms. This work provides new evidence with respect to IFRS for SMEs, contributes to academic literature and offers crucial policy insights.