Accounting and Financial Reporting by Small and Medium-sized Enterprises: Trends and Prospects

Accounting and Financial Reporting by Small and Medium-sized Enterprises: Trends and Prospects

The role of small and medium-sized enterprises (SMEs) in the economic development of countries/territories around the world cannot be overemphasized. Beyond meeting the demand for the day-to-day goods and services of the majority of the population of almost all countries/territories, SMEs make significant contributions to global trade and economic development. Moreover, SMEs provide employment to the greater share of the workforce of most countries/territories.

One of the major obstacles that SMEs face when they initially start or need to scale up operations is access to financing. Maintaining proper accounts and generating meaningful financial statements enhance their chances of obtaining financial resources. To attract foreign investment, SME reporting also needs to meet international requirements and standards such as those set by the International Accounting Standards Board (IASB). However, in response to the rapid globalization of the world economy and increasing interconnectedness of global financial markets, international accounting standards (IASs) are becoming too complex, voluminous and costly for many SMEs to apply in an effective manner.

UNCTAD’s Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) has been playing a pioneering global role in addressing the accounting and financial reporting needs of SMEs. ISAR was the first group of experts to provide SMEs with simple, user-friendly accounting and financial reporting guidelines. Most notably, ISAR has succeeded in changing an earlier widely maintained view that “one size fits all”. In tackling this issue, the ultimate objectives of ISAR – beyond the technical accounting details – have been to build a competitive SME sector, create employment opportunities, encourage entrepreneurship, increase productive capacity and trade, and achieve sustainable and inclusive economic growth.

I am very pleased to present to readers this publication that reviews recent trends and prospects in accounting and financial reporting by SMEs, including microenterprises. I am confident that policymakers, regulators, standard-setters and professional accountancy organizations will find this information useful for their policy debates and decision making in this important area.

Mukhisa Kituyi
Secretary-General of UNCTAD