Interview: Felix Nana Sackey
Should financial reporting standards be tailored to small and medium-sized enterprises (SMEs)?
FELIX NANA SACKEY: The International Financial Reporting Standards (IFRS) for SMEs are a self-contained standard, incorporating accounting principles based on full IFRS that have been simplified to suit SMEs. IFRS for SMEs provides an alternative framework that can be applied by eligible entities in place of the full IFRS.
Any company adopting IFRS for SMEs for the first time is required to publish three balance sheets in its initial financial statements, including the balance sheet at the time of the transition date (i.e., the beginning of the earliest comparative period).
The adoption of IFRS for SMEs in Ghana is a long overdue step in the right direction given the array of other countries that are already using or have permitted these standards. We have been longing for this reform and are happy that our aspiration is being realised. IFRS for SMEs will go a long way towards improving financial reporting in Ghana by enhancing transparency and greatly benefitting investors and other users of financial statements.
Although the authorities have extended the compliance date to 2015, companies must already start making the necessary preparations in order to achieve a successful transition to the framework.
How will this impact financial reporting in Ghana?
SACKEY: As previously mentioned, IFRS for SMEs will go a long way towards improving financial reporting in Ghana. For example, the new disclosure requirements mean that a lot of information about these companies will be released to the market, which will assist various users of financial statements in making informed decisions. Foreign investors will be able to easily read and understand locally produced financial statements provided they are prepared using a financial reporting language that is globally understood. IFRS for SMEs will bring about more transparency and a higher degree of comparability, both of which will help investors to realise the goal of a single global capital market. Furthermore, the benefits of compliance far outweigh the costs as most of the information in the full IFRS has already been tailored to suit the needs of SMEs.
There are implications for accountants as well. Ghanaian accountants are currently being schooled according to local accounting standards. Many accountants would have to undergo training on IFRS for SMEs in order to remain relevant and ensure good performance when the framework is adopted in 2015. To respond to this, the Institute of Chartered Accountants Ghana (ICAG) should update its syllabus with a view to making sure that current ICAG students are properly prepared for the standards. Continuing professional education material should also be expanded to incorporate IFRS for SME-related topics. This will go a long way towards ensuring that qualified accountants update their knowledge.
What challenges do you foresee arising during the transition to IFRS for SMEs in the country?
SACKEY: All of the other countries that adopted IFRS for SMEs in the past have faced challenges, so Ghana will not be an exception to this rule. The most important thing we can do is to clearly identify the relevant challenges ahead of time and to then find ways to appropriately deal with them as they arise.
Relevant laws need to be amended as quickly as possible in order to pave the way for the adoption of IFRS for SMEs. It is equally crucial to revise training accordingly, as many accountants may be relatively unfamiliar with the new standards.
Regulators also need to be up to date on IFRS for SMEs so they will be better able to enforce compliance. Ideally, regulators should know more than those who are being regulated. More importantly still, regulators would also need to individually or collectively commission a project assessing the level of readiness of entities transitioning to IFRS for SMEs.
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