The required information and financial statements disclosure in SMEs

Anas Abdel Karim Al Bakri · Abdul Naser

12 citations0/0 files storedQatar University QSpace (Qatar University)

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Accounting Theory and Financial Reporting Auditing, Earnings Management, Governance Accounting and Financial Management

Abstract

This study aimed to determine the nature, the requirements of financial disclosure in small and medium enterprises (SMEs) in comparison with large corporations in Jordan. It also aimed to investigate the need for a special International Accounting Standard for small and medium enterprises (SMEs in Jordan). To achieve the objectives of the study, a fifty - item questionnaire has been designed based on the disclosure literature. This questionnaire contained information that must be disclosed in published financial statements which are prepared according to International Financial Reporting Standards. This study points out that there is a significant difference between SMEs and large corporations in terms of the materiality of the required disclosure in the income statement. The percentage of the important items that should be disclosed in SMEs was 40%, and it was 90%, in the large corporations. For the financial position statement they were 31%, & 82%, respectively, and for the statement of changes in owners’ equity they were 14%, & 43% respectively. Finally for the cash flow statement the two percentages were same and it was100%. Moreover, the majority of the study sample (76%) supports the need for special standard which organize the disclosure in SMEs. The nature and the extent of the disclosure in SMEs financial statements have been given more importance. This study is the first of its kind that explored the requirements of financial disclosure in SMEs in comparison with large corporations in Jordan. Also to encourage SMEs to improve the efficiency of their accounting and control systems, which increase the efficiency of their financial and administrative reports. This will provide more transparency and disclosure in their financial data.

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References

2004Earnings quality in UK private firms: comparative loss recognition timeliness 2007Small and Medium Enterprises Across the Globe 2005Disclosure Incentives and Effects on Cost of Capital around the World 2011International Accounting Standards Board (IASB)1984Market Failure and the Economic Case for a Mandatory Disclosure System 2006Mandated Disclosure, Stock Returns, and the 1964 Securities Acts Amendments 2003Mandatory Versus Voluntary Disclosure in Markets with Informed and Uninformed Customers 2006Financial Reporting of Small Business Entities in Canada

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