The Adoption of International Accounting Standards for Small

231 Pages·2015·0.85 MB·English

Walden University
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Walden Dissertations and Doctoral Studies
Walden Dissertations and Doctoral Studies
Collection
1-1-2011
The Adoption of International Accounting
Standards for Small- and Medium-Sized Entities
Doris K. Feltham
Walden University
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Walden University

COLLEGE OF MANAGEMENT AND TECHNOLOGY

This is to certify that the doctoral dissertation by

Doris Feltham

has been found to be complete and satisfactory in all respects,
and that any and all revisions required by
the review committee have been made.

Review Committee
Dr. Jeffrey Prinster, Committee Chairperson,
Applied Management and Decision Sciences Faculty

Dr. Robert Aubey, Committee Member,
Applied Management and Decision Sciences Faculty

Dr. William Brent, University Reviewer
Applied Management and Decision Sciences Faculty

Chief Academic Officer

Eric Riedel, Ph.D.

Walden University
2013
Abstract
The Adoption of International Accounting Standards for Small- and Medium-Sized
Entities
by
Doris K. Feltham

MBA, Dallas Baptist University, 1993
BS, Oral Roberts University, 1981

Dissertation Submitted in Partial Fulfillment
of the Requirements for the Degree of
Doctor of Philosophy
Applied Management and Decision Science

Walden University
January 2013
Abstract
U.S. private entities considering adoption of International Standards for Small- and
Medium-sized Entities (IFRS for SMEs) need to understand how the new standards will
modify financial reporting. However, there has been no determination of the significance
of the financial statement impact of changing from United States Generally Accepted
Accounting Principles (U.S. GAAP) to IFRS for SMEs. Without this knowledge, private
entities in the United States will not be able to make an informed decision as to the
benefits or consequences of adopting IFRS for SMEs. Based on stakeholder theory, this
study sought to determine how adoption of IFRS for SMEs would affect the financial
reporting of U.S. private entities. Using identified reporting differences between the 2
sets of standards, hypothetical 2010 IFRS for SMEs’ financial statements were prepared
for 3 participating entities. Analysis of variation between the hypothetical IFRS for
SMEs’ financial statements and the original U.S. GAAP financial statements provided a
means to determine the financial reporting impact of IFRS for SMEs’ adoption. In each
of the 3 case studies, adoption of IFRS for SMEs did not significantly influence the
financial reporting of U.S private entities, indicating that the communication of financial
information would be fundamentally the same using the simplified IFRS for SMEs or the
more complex U.S. GAAP. The results of this study suggest that IFRS for SMEs should
be considered an acceptable set of standards for the preparation of quality financial
statements by U.S. private entities. This study positively contributes to social change by
providing new knowledge to assist private companies in the evaluation of the adoption of
IFRS for SMEs; such knowledge could, in turn, reduce financial reporting costs and
improve the SMEs’ economic conditions.

The Adoption of International Accounting Standards for Small- and Medium-Sized
Entities
by
Doris K. Feltham

MBA, Dallas Baptist University, 1993
BS, Oral Roberts University, 1981

Dissertation Submitted in Partial Fulfillment
of the Requirements for the Degree of
Doctor of Philosophy
Applied Management and Decision Science

Walden University
January 2013
UMI Number: 3550655
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Dedication
I would like to dedicate this paper to my husband Don and my children, Chris,
Abigail, Sarah and my son-in-law Jeff, who have been a source of emotional support and
encouragement throughout the process of completing this project. Thank you for being
patient, sacrificial, and flexible not only through the writing of this dissertation but also
through the five years of the doctoral program. You are the best!
I would also to dedicate this paper to the memory of my daughter, Kelly, whose
short but important life helped me truly understand Philippians 4:13 (NKJV) “I can do all
things through Christ for strengthens me.”
Acknowledgments
I wish to acknowledge the contribution of Dr. Jeffrey Prinster who served not
only as my faculty mentor during the completion of my doctoral program, but also as my
dissertation committee chair. His guidance and words of encouragement were an
important factor in my completion of my doctoral studies. I also wish to acknowledge
Dr. Robert Aubey for his recommendations and assistance in the research design and
completion of this study.
Table of Contents
List of Tables .................................................................................................................... vii
Chapter 1: Introduction to the Study ....................................................................................1
Background ....................................................................................................................1
The Necessity of IFRS for SMEs...................................................................................2
IFRS for SMEs in the United States ..............................................................................3
IFRS for SMEs Research ...............................................................................................4
Assessment of Adoption Impact ....................................................................................6
Problem Statement .........................................................................................................6
Purpose of the Study ......................................................................................................7
Research Question .........................................................................................................8
Theoretical Base.............................................................................................................9
SME Users’ Accounting Needs: An Application of Stakeholder’s Theory ................10
Definition of Terms......................................................................................................12
Significance of the Study .............................................................................................13
Summary and Overview ..............................................................................................14
Chapter 2: Literature Review .............................................................................................16
Introduction ..................................................................................................................16
Development of IAS ....................................................................................................16
Discussion Paper: Preliminary Views on Accounting Standards for SMEs ................19
Exposure Draft IFRS for SMEs ...................................................................................26
Necessity for SME Reporting Standard .......................................................................28
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