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Abstract:
Small and medium sized enterprises (SMEs) have a significant place in the economy of every country. For that reason, there is a need for unique financial reporting specially adopted for the needs of SME. In the world it is for a long time recognized the need that SMEs have different reporting standards that will satisfy the external users of financial information. However, on the global scene there is still no consensus about the fact what reporting standards should SME use. Namely, the standard setters agree that International Accounting Standards (IAS)/ International Financial Reporting Standards (IFRS) are too complicated, that business transactions are very difficulty to apply in practice and for that reason they are not suitable for financial reporting of SME. Taking this into the consideration the International Accounting Standards Board (IASB) is developing a separate set of financial reporting standards that are suitable to SMEs. So, the question is what accounting standards should SMEs use that the information needs of all users would be satisfied. For that reason the aim of this paper, who are the most important users of financial information for SME, what are cost/ benefits related to financial reporting for SMEs, why do SME need differential financial reporting and provide SWOT analysis of SME standards. Also, the aim of this paper is to present current position of SME in Croatia as well as an existing experience in financial reporting for SMEs in Croatia.
Key words: accounting harmonization, international accounting standards, SME, financial reporting, Croatia
Introduction
International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) are developed in the first place to satisfy information needs of large and listed companies. Although it was believed that full IFRS are applicable for all business entities, the practice has shown that information needs of small and medium-sized companies differs. When is cost- benefit approach taken into the consideration it was clear that cost of preparing financial information for small and medium sized entities (SMEs) according to the IAS/IFRS exceeds the benefit from it. Namely, the critics on the implementation of IAS/IFRS for all entities were based on the facts that these standards are too complicated, that contain complex business transactions that are difficult to implement in practice for large and listed...