The Impact of IFRS for SMEs on UK companies - Essay Example

All of these entities have the option to adopt corresponding accounting tiered reporting framework under a certain purpose (Baker and Wallage, 2000). For instance in the United Kingdom (UK), publicly accountable entities are required to adopt full international financial reporting standard (IFRS) while those non-publicly accountable entities are required to use IFRS for SMEs. On the other hand, small companies are required to adopt financial reporting standard for smaller entities (FRSSE). However, these different entities have the option to adopt whatever reporting framework they need or most suited to their individual system (Jermakowicz et al., 2006). For instance, in the UK, small companies may have the opportunity to either apply full IFRS or IFRS for SMEs.

Small company is defined as having less 250 employees and there are 571 listed of them in the UK in 2010 (Andrews, 2010). Financial reporting standards such as IFRS are designed especially in advanced economies (Tyrrall et al., 2007). In line with this, there is a strong link between economic system and financial reporting standards. In the UK, it is without question that organisations may eventually adopt it due to complexity of their business operations. However, in the midst of this assurance, it is still important to individually understand how each organisation responds to existing financial reporting standards considering the system they have with them.

In line with this, the European Union for instance is trying to call the attention of stakeholders in order to participate in the implementation process (Larson and Herz, 2011). However, in the midst of this strong effort, there is still a need to consider how exactly this will create an impact on the individual stakeholders with specific systems they are adopting. Furthermore, there is certainly an ongoing issue about the effectiveness of using regular IFRS and IFRS for SMEs. Thus, organizations are faced with various considerations on what reporting framework to use in the first place to effectively contribute maximum benefits into their business.

For instance, one of the important issues is concerning about cost and successful efforts in adapting to international accounting reporting standards (Cortese and Irvine, 2010). In accounting, an organisation is always faced with issue concerning cost and success of implementing activities. The entire activity does not only employ the idea, but the corresponding compatibility. Companies have ideas on the good thing about creating their own standard about financial and tax accounting reporting and their strong link so as to ensure flexibility in the application process (Street and Larson, 2004).

On the other hand, in adopting specific financial reporting framework companies especially in Europe are not only concerned with the costs it may incur. They are also looking forward to the other benefits it may contribute to their organisation (Jermakowicz and Tomaszewski, 2006). The benefits however may vary on what financial reporting standard they employ. Little is known about the impact of IFRS for SMEs on the UK companies. Mostly, the regular or full IFRS have been used and widely evaluated in its performance though.

Objective of the study The proponent will assess top ten best small companies in 2010 in the UK