BENEFIT AND CHALLENGE ADOPTION OF IFRS FOR SMALL AND MEDIUM BUSINESS (IN CASE OF ADISS ABEBA)

Abstract

This study examines the benefits and challenges of adopting International Financial Reporting Standards (IFRS) for Small and Medium Enterprises (SMEs) in Addis Ababa, Ethiopia, using a mixed-methods approach combining surveys and semi-structured interviews with key stakeholders. Focusing on SMEs in manufacturing, services, and trade sectors, the research aimed to assess current financial reporting practices, to evaluate awareness and readiness for IFRS for SMEs, to identify implementation barriers and benefits, and to propose actionable recommendations. Findings revealed that 64.3% of SMEs lacked awareness of IFRS for SMEs, while 75.7% cited high implementation costs and 58.3% reported being unprepared to address financial constraints. Despite recognizing benefits like improved transparency (73.9% agreement) and access to finance (61.7%), SMEs face systemic challenges rooted in resource gaps, skills shortages, and weak regulatory support. The study concludes that successful adoption requires phased strategies, including subsidized training, tax incentives, simplified local-language guidelines, and stronger institutional collaboration. Recommendations emphasize capacity-building programs, regulatory mandates, and public-private partnerships to align Ethiopian SMEs with global financial reporting standards.