Does the IASB know the needs of SMEs? A comparative analysis between the IFRS for SMEs and full IFRS due processes. Introduction: Small and medium-sized enterprises are of great importance at the level of the global economy, as they constitute more than 99% of the entities in the world, so it was necessary to have a universally accepted international standard in order to produce financial information with high-quality for comparison among these enterprises. Therefore, the International Accounting Standards Board issued a special standard for small and medium entities that do not have public accountability, which consists of adopting the same conceptual framework for the full IFRS, but with a simplification especially in matters related to disclosure, recognition and measurement principles. However, this standard is not clear in terms of the extent to which it meets the financial information needs of users and preparers in small and medium-sized companies. This makes this standard a worthwhile issue to research. Among the researches that dealt with the research with this standard is ( Bautista-Mesa, Muñoz-Tomás, & Horno-Bueno, 2019).

1. 1
Does the IASB know the needs of SMEs? A comparative
analysis between the IFRS for SMEs and full IFRS due
processes.
Introduction:
Small and medium-sized enterprises are of great importance at
the level of the global economy, as they constitute more than 99% of
the entities in the world, so it was necessary to have a universally
accepted international standard in order to produce financial
information with high-quality for comparison among these enterprises.
Therefore, the International Accounting Standards Board issued a
special standard for small and medium entities that do not have public
accountability, which consists of adopting the same conceptual
framework for the full IFRS, but with a simplification especially in
matters related to disclosure, recognition and measurement principles.
However, this standard is not clear in terms of the extent to which it
meets the financial information needs of users and preparers in small
and medium-sized companies. This makes this standard a worthwhile
issue to research. Among the researches that dealt with the research
with this standard is ( Bautista-Mesa, Muñoz-Tomás, & Horno-Bueno,
2019).
Research problem:
The research problem has been identified by raising the
following questions:
1- In the IFRS for SMEs due process, is there a pattern of
responses depending on the constituent’s role in the financial
information chain?
2. Is the proportional participation of preparers lower in the due
process for the IFRS for SMEs than for full IFRS?
3. Is the proportional participation of auditors higher in the due
process for the IFRS for SMEs than for full IFRS?

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4. Is participation from Latin American and African countries
proportionally higher in the due process for the IFRS for SMEs
than for full IFRS?
5. Is participation of developing countries proportionally higher
in the due process for the IFRS for SMEs than for full IFRS?
Research objective:
The aim of the research was to ensure that the IFRS for Small
and Medium-Sized Entities due process included the appropriate
representation of these entities' preferences. Especially in developing
economies where access to capital markets is limited.
Summary of research design:
This research is based on the descriptive and analytical
approach. In the beginning, in order to obtain dichotomous
independent variables, the research relied on questions that include
mechanisms that coordinate between the IFRS for SMEs due
processes and the full IFRS due processes in the discussion paper for
the year 2004.
First variable: DP2004.Q4: ‘Do you agree that if the IASB
regulations for SMEs do not address a particular issue regarding
recognition, measurement or revelation, the entity must follow the
pertinent IFRS to resolve that particular issue? ’ (The value 1 is taken
if the answer is yes, and 0 if the answer is no).
Second variable: DP2004.Q5: ’Should it be permitted to revert
to the IFRS if treatment in the version for SMEs differs from treatment
in IFRS, or instead, should SMEs choose between the complete set of
IFRS and the complete set of standards for SMEs without optional
reversion to the IFRS? ’ (The value is taken 1 if the answer is yes, and
0 if the answer is no).
After the responses are recorded in the variables above, the
research performs a cluster analysis in order to compare in terms of

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the suitability of the constituents groups specified in the research. Then
the research uses a hierarchical block model to compare each group
in this analysis. In addition, a comparison is made on the Cluster
analysis by comparing the classification of constituents based on their
role in the chain of financial reports, which are the dependent variables,
and responses to the dichotomous independent variables that are
considered variables Independent.
the research explore the differences between the constituents
of the IFRS for Small and Medium-Sized Entities and the full IFRS
processes by discovering the contrasted classification of the
constituents. In order to achieve this, a comparison is made between
the comment letters (which are the constituents) received from each
group, and the geographic location to other full IFRS projects and IFRS
for Small and Medium-Sized Entities. The Z-statistic is used to perform
bilateral comparison tests.
The comparison group consists of all the 97 International
Accounting Standards Board consulting documents issued for the full
IFRS from 2004 to 2012. The selected period from includes the period
in which all the consultancy documents for the IFRS for SMEs were
issued.
Result and discussion:
Concerning the answer to the first question, the results showed
that the stakeholders are divided into four groups, these through the
compilation of the constituents of the IFRS for Small and Medium-
Sized Entities due process. These groups are the auditors who had
dominance, then followed by the standard setters, then the users, and
the lowest were preparers of financial information.
From here, we infer the answer to the second question, as the
participation of the preparers in the IFRS for Small and Medium-Sized
Entities was not among the majority. This is in addition to the fact that
their participation was relatively less in the IFRS for Small and Medium-
Sized Entities in comparison with their participation full IFRS projects.
this means suffers is that the council will face greater difficulties in
order to be able to know the preferences of the IFRS for Small and
Medium-Sized Entities .moreover , The awareness of these companies

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will be less regarding the regulatory role of the International Accounting
Standards Board.
As for the third question, the results showed that the auditors
participated in of the IFRS for Small and Medium-Sized Entities
relatively higher than with full IFRS projects. This indicates that SMEs
tends to make the auditor represent it in the due process, and the
reason for this is due to issues related to costs and benefits in relation
to this participation, and it should be noted that the auditors' goal of this
representation is matters related to risks and stability not for interest of
their client’s. In addition to this, the results revealed that the
participation of local standard setters was greater. As for the banks and
insurance companies, it has been found that their participation is
significantly less, which indicates the failure of these standards to fill
specific needs of the creditors of small and medium companies.
As for the geographical aspect of the results related to the fourth
question, it was found that Europe has percentage (43%) which has
the largest number of comment letters on the IFRS for SMEs. But, the
Europe's percentage of these letters is less in the case of preparing
financial reports for small and medium enterprises compared to The
full IFRS project. The second region has the largest number of
comment letters was Asia with percentage (15%). The research
concluded that Ireland, the United Kingdom and Anglo-Saxon
countries have presence by (13%), and the reason for this may be that
the tax and regulatory requirements and accounting data requirements
are little related. As for the lowest participation rate, it was for North
America (4%). While the participation of "G4 + 1" in the full IFRS is
related, due to its impact on the reform of the International Accounting
Standards Board in 2001, while their participation status of the IFRS
for SMEs was less clear, which means that the constituents From the
previous "G4 + 1" it represented only 17% of the IFRS for SMEs as
against 34% in full IFRS projects.
Concerning Latin America and African jurisdictions, which are
the least developed and knowledgeable of the English language, and
historically far from the IASB tradition.

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Finally, the results concluded regarding the fifth question that
developing countries have a greater interest in IFRSs for SMEs and,
in contrast, had less participation in full IFRS projects.
Conclusion:
The research initially refers to the democratic theory of the
economy for listed companies, which is also applied to the accounting
organization of small and medium-sized companies, which means that
stakeholders position themselves according to their own interests in
the regulating.
The research results also reveal that the process of unifying
international accounting standards for small and medium-sized
companies includes less participation from preparers compared to the
standards of listed companies. And that the participation of low
numbers of preparers resulted in higher participation of reviewers. This
research also has shown the low participation of small and medium-
sized companies in the regulatory process supports the idea that there
are a large number of small entities whose international link is non-
existent that should have moved for the potential benefits of reaching
a unified accounting through a standard for small and medium
companies that is worldwide.
The research also indicated that UNCTAD developed
alternative guides for small and medium-sized enterprises (ISARs) that
better meet the simplification needs of preparers which have few
resources, as they were developed with a bottom-up approach, based
on the real preferences of users and preparers. While the IFRS for
SMEs has postponed priority in producing information useful for
management small and medium-sized enterprises, the ISAR has given
priority in producing information useful for management small and
medium-sized enterprises.
As for the geographical aspect, developed countries, especially
Europe, are still concentrated in terms of participating in the
procedures required for the IFRS for Small and Medium Enterprises
due process, but the research results show that there is a greater
impact is by the less developed and developing countries. The theory
of economic democracy shows that these countries will have greater

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incentives to adopt a unified standard of accounting at the global level
for small and medium-sized companies to enhance their capabilities in
capital markets and international trade, and thus their benefits will
exceed their costs. Examples of this for developing economies are the
countries of Africa, Latin America.
In short, the International Accounting Standards Board appears
to be failing to gain legitimacy for inputs into the IFRS for SMEs by
applying the same full IFRSs due process.
Reference:
Bautista-Mesa, R., Muñoz-Tomás, J. M., & Horno-Bueno, M. P. (2019,
July 1). Does the IASB know the needs of SMEs? A comparative
analysis between the IFRS for SMEs and full IFRS due
processes. Revista de Contabilidad-Spanish Accounting
Review, pp. 203-217.