IMPACT OF FINANCIAL REPORTING OF SMES OF SMEs

The impact of financial reporting of SMEs of Small and Medium Sized Enterprises in Economic Development of Balkan Countries

The impact of financial reporting of Small and Medium Sized Enterprises in Economic Development of Balkan Countries

Background

The importance of internal and external accounting as a source of information for owners and managers of small enterprises and their different stakeholders is steadily growing. It is of crucial importance that the accounting systems applied by small enterprises meet their actual needs, providing necessary information yet avoiding unjustified administrative burden. It is recognised that appropriate accounting information is important for a successful management of a business whether it is large or small.

At EU level, accounting legislation is in place for listed companies, i.e. the International Accounting Standards/International Financial Reporting Standards and for non-listed limited liability companies, the Fourth and the Seventh Company Law Directives i.e. the Accounting Directives. However, at EU level there is no accounting legislation applicable to those enterprises which are not listed or are not limited liability companies; in most cases we would be referring to small enterprises.

Because of the importance of appropriate accounting information for owners and managers of small enterprises and their different stakeholders, it is considered important to analyse the various accounting systems applied in Member States in the case of non-regulation at EU level.

Introduction

The importance of accounting as a source of information for owners and managers of small enterprises and their different stakeholders is obvious. In the European Union (EU), there is accounting legislation in place for different kinds of companies. As regards listed companies in the EU, we have the International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) as adopted by the EU ( IAS Regulation (EC) N° 1606/ 2002 ) .

Concerning limited liability companies, there are at EU level the Fourth Directive (78/660/EEC) and the Seventh Directive (83/349/EEC) , together named the Accounting Directives, which are transposed by Member States into their national accounting legislation to become local GAAP (General Accepted Accounting Principles). However, there is no accounting legislation in force at EU level for those enterprises which are not covered by the IAS Regulation and the Fourth and Seventh Directives.

In 2007 the European Commission set out a vision for simplifying EU rules on company law, accounting and auditing in a Communication . In 2009 some elements of the Communication were taken forward by the Commission in a Directive amending the Accounting Directives as regards certain disclosure requirements for medium-sized companies and the obligation to draw up consolidated accounts. In 2009 the European Commission announced that micro entities would be exempted from the Accounting Directives and that in addition a modernisation and simplification of the Accounting Directives would be carried out in the near future.

In 2008 the Directorate General for Enterprise and Industry in the European Commission published an expert group report on "Accounting systems for small enterprises - recommendations and good practices" . This report describes e.g. the accounting systems and accounting framework in place for small ...