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Abstract:
The aim of this article is to analyse the form and extent of IFRS adoption in the Czech accounting and the main reasons of the lack of interest in IFRS reporting with a special attention to the segment of SMEs. This research is based on the qualitative analysis of present accounting regulation and on results of questionnaire survey of 260 Czech SMEs. As the main causes of the lack of interest in IFRS usage are the specific features of economic conditions, resulting in imbalances between the costs and benefits of practical implementation of IFRS and the lack of interest to report in accordance with IFRS on the side of business partners.
Key words: IFRS, Effect of IFRS Adoption, Accounting Harmonization, Small and Medium Enterprises
JEL Classification: M41, P20
1. Introduction
Since 2005 the firms listed on the regulated capital markets in the EU are required to prepare their financial statements in accordance with the IFRS. The main intent of IFRS adoption were (1) to ensure greater comparability and transparency of financial reporting, (2) to reduce information asymmetry and (3) to improve the quality of information for users of accounting information. On the macroeconomic level there were expectations of increase of the volume of trading on capital markets, boost of foreign direct investments and intensification of the international exchange of goods and services. Mandatory IFRS adoption resulted in changes affecting broader pool of companies, not only those that have a direct obligation to use IFRS, but it influenced the entire accounting system in many countries around the world (Heil et al., 2009; Daske et al., 2008; Leuz, & Wysocki, 2008).
The Czech economy is an open economy, dependent, to a large extent, on exports of goods and services. It belongs to a group of transitioning economies that transformed from a centrally planned to a market economy and it has created new accounting regulations fitting the new conditions. The transformation of the accounting system was performed at the same time as the transformation of the whole economy which was an important part of this process.
Generally, the process of accounting harmonization resulted in the mandatory adoption of IFRS for preparation of Financial Statements on EU capital markets. IFRS became a tool, which supported the...