The Experiences in the Adoption of PFRS for Small Entities

of SEs in Tuguegarao City

By Badajos, Valerie Faye
Cabaguan, Marjun
Dela Cruz, Kristine Faye
Ilarde, Christian King
Pagulayan, Juris

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 1
INTRODUCTION

The small and medium enterprises (SME) has been and is known to be the
growth driver of economies and is the most flourishing business sector particularly in the
developing countries. SMEs have benefited the macro – economy through creating
employment, motivate people in entrepreneurship, generating income, and provide
encouragement to social and political stability. The contributions made by SMEs in the
economic development are measured by observing the rise or fall in the gross domestic
product (GDP) and employment rate. This ultimately shows the economic performance
of any nation. Micro, small and medium enterprises are sometimes not appreciated for
their invaluable contribution to the Philippine economy (Angara, 2011).

In a global economy, a key issue is the financial reporting practices by

companies around the world, globalization of the capital markets has increased the need
for high-quality, comparable financial information across entities. Consequently,
pressure has been increasing for adoption of a single set of accounting standards
worldwide, this is the challenge for the International Accounting Standard Board (IASB).
On the other hand, there have been warnings that for many countries, convergence with
IAS will be a monumental task (Street, 2008). Harmonization of accounting standards is
now at the forefront of consideration for financial reporting. However, entities experience
difficulty in following either of these standards because they are different in some
aspects and there are some issues that those standards have not taken into
consideration such as the complexities and application to the transactions faced by
Small and Medium Enterprises.

IFRS Standards address this challenge by providing a high quality, internationally

recognized set of accounting standards that bring transparency, accountability and
efficiency to financial markets around the world. IFRS Standards bring transparency by
enhancing the international comparability and quality of financial information, enabling
investors and other market participants to make informed economic decisions. IFRS
Standards strengthen accountability by reducing the information gap between the
providers of capital and the people to whom they have entrusted their money. These
standards provide information that is needed to hold management to account. For
businesses, the use of a single, trusted accounting language lowers the cost of capital
and reduces international reporting costs.

Challenges and willingness to adopt IFRS are major influential factors on

financial reporting quality. There is the need for a special public education programme to
target raising the level of awareness of the IFRS for SMEs. Until awareness is made
universal, the prospect of adopting the IFRS and implementing it to ensure quality
financial reporting by small and medium entities, is doubtful (Solanke A, 2016). In the
study conducted by Asaduzzaman (2016), the results reveal that SMEs do not maintain
proper books of accounts because owners find it difficult to maintain the system and do
not appreciate the need to keep accounting records, lack the necessary accounting
knowledge and blame the records would make their firm pay more tax. Conclusions
made by the study of Chand P and Perera D (2015) reveals that, as far as the cost
implications in adopting IFRS for SMEs are concerned, the preparation of financial
statements under the new standard is said to be cost-effective, with the IFRS for SMEs
having significantly reduced disclosure requirements compared to the full IFRS. This
might be true if a transition is made from the full IFRS to the IFRS for SMEs. At present,

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 2
SMEs in many countries prepare their financial statements based on local GAAP
requirements, so the transition from local GAAP to the IFRS for SMEs may therefore
increase the cost of preparation of financial statements. Costs associated with training,
changes to the existing systems/packages, the re-establishment of financial statements,
extra consultation, and so on would also be onerous for SMEs adopting the IFRS for
SMEs. Thus, the precise effect on the cost–benefit considerations of such simplifications
in the recognition and measurement requirements of the IFRS for SMEs is uncertain.

The Securities and Exchange Commission has issued SEC Memorandum

Circular No. 05 (2018) adopting, as part of its financial reporting rules and regulations,
the Philippine Financial Reporting Standards (PFRS) For Small Entities in line with the
corporate regulator’s Ease of Doing Business initiatives. A small entity shall adopt this
PFRS for annual periods beginning on or after January 1, 2019. The PFRS for Small
Entities was developed in response to feedback of small entities that PFRS for Small
and Medium-sized Entities (PFRS for SMEs) is too complex to apply. By reducing
choices for accounting treatment, eliminating topics that are not generally relevant to
small entities, simplifying methods for recognition and measurement, and reducing
disclosure requirements, the PFRS for Small Entities allows small entities to comply with
the financial reporting requirements without undue
cost or burden.

This study, attempt to identify and take a closer look on the experiences faced by
SMEs in the process of adopting and implementing PFRS for Small entities given that
there must be a mandatory compliance and its corresponding benefits, if applied.

Research Objectives

The general aim of this study is to determine the experiences in the adoption of
PFRS for small entities by small entities within Tuguegarao City.

Specifically, it tends to explore the following:

i. To assess the level of awareness/knowledge of small entities of the PFRS for
small entities as mandated by SEC
ii. To identify the challenges and benefits in the adoption of the standard by
small entities
iii. To determine the coping mechanisms used by small entities towards the
adoption of the standard

Significance of the Study

The purpose of the study is to determine the experiences that small entities face
in the adoption of the amended SEC memorandum PFRS for small entities. This study
will be greatly beneficial to small entities to produce a more comprehensive picture of the
current status of the entity in terms of the adoption of the standard and to weigh the
probable challenges and benefits that would lead to the establishment of a better
understanding and perception of the standard by small entities. This study is also of
great significance to future researchers to fill the existing gap in knowledge and act as a
baseline for them in conducting studies of similar topic.

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 3
Literature Review

Small Enitites
Countries around the world have developed their own definitions of small entity
for a broad range of purposes including prescribing financial reporting obligations. Often
those national or regional definitions include quantified criteria based on revenue,
assets, employees or other factors (IASB, 2015).

In the Philippines, an entity is considered a small entity if, and only if, it satisfies all of
the following criteria:
1. It has total assets or total liabilities between Php3,000,000 to Php100,000,000. If
the entity is a parent company, the said figures shall be based on the
consolidated amount; and,
2. It does not have public accountability.
Not having public accountability simply means that the shares of the business is not
traded in any stock exchange and it is not in the process of offering its hares to the
public through an initial public offering. It must also not have any secondary licenses
from SEC.

Given the following criteria, it would apply mostly on closely held family corporations,
partnerships, and sole proprietor businesses provided they are within the range of the
total assets or liabilities as provided above. (SEC Memorandum Circular 5-2018)

IFRS for SMEs

Walton (2011), defines IFRS for SMEs as ground breaking standard issued in
2009 and sits apart from the body of IFRS. He continues to argue that it provides a stand
-alone comprehensive basis of accounting for small and medium businesses and has
been adopted in many countries for companies in a size tier below that in which IFRS
are used.

IFRS for SMEs is a self-contained set of accounting principles, based on full

IFRS, but simplified so that they are suitable for SMEs. The standard has been
organised by topic with the intention that the standard is user-friendlier for preparers and
users of SME financial statements. IFRS for SMEs and full IFRS are separate and
distinct frameworks.

Therefore, the standard for SMEs is by nature not an independently developed

set of standards. It is based on recognized concepts and pervasive principles and it
allows easier transition to full IFRS if the SME later becomes a public listed entity.

Experiences of SMEs towards IFRS for SMEs

Most of the accounting professionals as concluded by Kılıç and Başarı, are

aware of IFRS for SMEs adoption process; have a moderate information level of IFRS
for SMEs; are optimistic regarding the adoption process; and attended trainings about
IFRS for SMEs. Although the majority of the accounting professionals made some
preparation for the IFRS for SMEs, there still is a considerable number of participants
who did not.

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 4
 SMEs support the adoption of the new standard, they want it to be elective,
rather than compulsory, and even if it is elective, most of the respondents are eager to
apply it. (Atik, 2010). Some SMEs sees IFRS for SMEs as an advantage to their part.
Mandaza argued that IFRS for SMEs enhance confidence on the SMEs report. Also, the
adoption will lead to improved financial reporting, improved national comparability of
business result and improve compliance (Kilic, Uyar & Basac, 2013). According to
Madhuri, 2016 the compliance to IFRS for SMEs reduces the burden of complying with
full IFRS by the SMEs. The costs of complying with full IFRS are larger for SMEs than
the benefit obtained from its compliance. The IFRS for SMEs is more user-friendly for
both prepares and users of the SMEs financial information. Additionally, different
studies on adoption of IFRS for SMEs including (Samujh & Devi, 2015, Rudzani &
Charles, 2016, Odia & Ogiedu, 2013, Namatiere, 2016, Mazhindu & Mafuba, 2013,)
have argued the same on the benefit connected to compliance with IFRS for SMEs.

Despite the benefits coming from the adoption of IFRS for SMEs, entities still
face some disadvantages. Chege & Muturi, 2016, argued that, SMEs are forced to
incur additional cost of hiring financial consultants to help them prepare the financial
information following the standard, for the information which is apparently being only
used by the few stakeholders’ such as tax consultants.

Though some already adopted, there are still number of SMEs which not yet
adopted the standard. This delay, according to Barya, 2017, is attributed to several
factors which ranges from challenge of amending the existing tax laws to effect the
changes in line with the new standards, the level of education and experience, level of
awareness, weak enforcement and compliance mechanism, inadequate technical
capacity, improper planning on the part of management as well as inadequate private
sector participation.

METHODS

Research Design
A qualitative method will be utilized in the study.

Locale of the Study

The study will be conducted among small entities within Tuguegarao City.

Respondents
Small entities operating in Tuguegarao City, coming from the different economic
sectors including manufacturing, service providers, merchandising and retail business,
etc. will be considered.

Data Gathering Instrument

The interview method will be utilized in the study. The questions from the
interview will focus in the experiences focusing on the awareness, challenges and
benefits, and coping mechanisms in the adoption of the PFRS for small entities.

Procedures
1. Request a letter from the Academic Dean of SABH and VP for Academics
2. Request from BIR a list of small entities within Tuguegarao City and identify
possible respondents of the study.

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 5
 3. Issue letter of consent to the respondents asking for their participation in the
study.
4. Conduct guided interview with the identified respondents if they consented
and clarify that all information and results that will be reflected will remain in
utmost confidentiality.

Data Analysis
The data gathered will be analyzed using Thematic Analysis.

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Journal of Finance & Accountancy, 13(1).

Abedin, N. et al (2013), The validity of ASSIST as a measurement of learning approach

among MDAB Students, Procedia - Social and Behavioral Sciences, 90(549)

Adetula, D. T.&Owolabi, F.&Onyinye, O.I(2014) International Financial Reporting

Standards (IFRS) for SMES Adoption Process in Nigeria, European Journal of
Accounting Auditing and Finance Research, 2 (4)

Atik, A. (2010), SME’s Views on the Adoption and Application of “IFRS for SMEs” in
Turkey, European Research Studies,13(4)

Baba,B.U (2013), Assessing Nigeria’s Journey towards IFRS Adoption

Barya, H. (2017), The Implementation of IFRS for SMEs in Developing Countries

Chege, C. N. & Muturi, W. (2016), Factors Affecting the Implementation of International

Financial Reporting Standards for Small and Medium Enterprises in Kenya: A Case
Study of Small and Medium Enterprises in Thika Town International Journal of
Management and Commerce Innovations, 3(2)

Ebogbue, C.C. (2016),Issues and Challenges in the adoption of IFRS for SMEs in
Nigeria Matric no.: 129021114

Garuba, A. (2011),The Challenges of Adopting International Financial Reporting System

in Nigeria JORIND (9)1

Hussain, F.F , Chand, P.V & Rani, P. (2012), The Impact of IFRS for SMEs on the
Accounting Profession: Evidence from Fiji Accounting & Taxation,4 (2)

Joshi, M., Yapa, P. & Kraal, D. (2016) IFRS adoption in ASEAN countries: Perceptions
of professional accountants from Singapore, Malaysia and Indonesia International
Journal of Managerial Finance, 12(2)

Kaya, D. & Koch, M. (2014), Countries’ adoption of the International Financial Reporting
Standard for Small and Medium-sized Entities (IFRS for SMEs) – early empirical
evidence

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Kilic, M. & Uyar, A. (2009), Adoption Process of IFRS for SMEs in Turkey: Insights from
academics and accountants International Istanbul Finance Congress 2013

Kilic, M., Uyar, A. & Basac, A. (2013), Perception of the SMEs on the IFRS for SMEs:
the Case of Turkey International Istanbul Finance Congress 2013

Madawaki, A. (2012), Adoption of International Financial Reporting Standards in

Developing Countries: The Case of Nigeria International Journal of Business and
Management, 7(3)

Madhuri ,S. (2016), An Effect of International Financial Reporting Standards (IFRS) in

Small and Medium Enterprises (SMEs) and Comparison with Indian GAAPs ELK
Asia Pacific Journals –Special Issue

Mandaza, T. (2016), Effect of IFRS adoption on financial reporting quality of SMEs: a

case of Harare CBD

Mazhindu, K. & Mafuba, G. (2013) The Adoption of International Financial Reporting

Standards for Small to Medium Enterprises in Zimbabwe International Journal of
Asian Social Science,3(11)

Mpoma,G. E. (2017), The Compliance And Challenges Of Implementing International

Financial Reporting Standard For Small And Medium- Sized Enterprises in
Tanzania

Muwanika, P., Anok, P., Mugaga, J., Kirungi, N.B., Muraa, C., Omach, D.O et al. (2015),
Assessing the Challenges of SMEs in Adopting IFRS in Uganda

Nematiere, M. (2016), An Investigation into the challenges faced by Small to Medium

Enterprise operators when adopting and implementing IFRS for SMEs in Zimbabwe

Odia,.J.O. & Ogiedu, K.O. (2013), IFRS Adoption : Issues, Challenges and Lessons for
Nigeria and other Adopters Mediterranean Journal of Social Sciences MCSER
Publishing, Rome-Italy 4(3)

Otchere, F.A. & Agbeibor, J. (2012), The International Financial Reporting Standard for
Small and Medium‐sized Entities (IFRS for SMES): Suitability for small businesses
in Ghana Journal of Financial Reporting and Accounting,10(2)

Perera, D.(2015), Adoption of international financial reporting standards (IFRS) for small
and medium-sized enterprises (SMEs): problems and challenges

Perera, D. & Chand, P. (2015), Issues in the adoption of international financial reporting
standards (IFRS) for small and medium-sized enterprises (SMES) Advances in
Accounting,31(1)

Rudzani, S. & Charles, M.D. (2016), An assessment of the Challenges of Adopting and
Implementing IFRS for SMEs in South Africa Problems and Perspectives in
Management 14 (2-1)

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 7
Samujh,H. &Devi, S.S (2015), Implementing IFRS for SMEs: Challenges for Developing
Economies International Journal of Management and Sustainability, 4(3)

Solanke, A.A, Adinnu, P. & Alhassan, K. A. (2016), Adoption of International Financial

Reporting Standard for Small and Medium Enterprises in North Central Nigeria:
Implications for Financial Reporting Quality International Journal of Sciences: Basic
and Applied Research, 30(3)

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 8
 LITERATURE MATRIX

Major Method,
Delineated
Objective/s Data Gathering
Bibliography Factors/
Central Tool, Major Findings Recommendation
(APA format) Variables/Theme
Question/ Subject/Partici
s
Main Problem pant

Adetula, D. This paper  Adoption Descriptive Findings show that a This study recommends
T.&Owolabi, studies the Process survey design major factor why IFRSs that the curriculum of both
F.&Onyinye, readiness of  Internatio would be adopted by secondary schools and
O.I(2014) small and nal Nigeria is because other tertiary institutions should
International medium scale Financial countries have adopted be restructured in order to
Financial enterprises Reporting them. Again results be IFRS compliant and
Reporting (SME) in Lagos Standard show that the IFRS for the cost of acquiring !FRS
Standards State, Nigeria s SMEs adoption process education should also be
(IFRS) for for the adoption  Small is currently confronted subsidized especially for
SMES of International and with diverse challenges small firms by major
Adoption Financial Medium that may prevent the accounting regulatory
Process in Reporting Scale effective adoption and bodies in Nigeria.
Nigeria Standards enterpris implementation of I FRS
European (!FRS) and the es for SMEs in Nigeria in
Journal of likely challenges 2014 if they are not
Accounting that may be addressed with
Auditing and encountered in promptness.
Finance the adoption
Research, 2 process.
(4)

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 9
Atik, A.
The objectives  SMEs Descriptive The results of the The study recommends
(2010), of this study are  IFRS for survey design research show that tax that the authorities
SME’s Views to determine the SMEs based accounting are promote the adoption of
on the
current structure  Financial more common among IFRS for SMEs, provide
Adoption and of SME Reporting SMEs and most of the trainings and assistance
Application of
accounting and in Turkey respondents are
“IFRS for
financial satisfied with the current
SMEs” in
reporting, the accounting practices.
Turkey views of SMEs Another interesting
European on the adoption finding of the research
Research and application is that most of the
Studies,13(4)of the standard participants are
and the possible unaware of “IFRS for
variables that SMEs” established by
might be IASB.
affecting SMEs’
thoughts
Baba,B.U The objective of  IFRS Based on Finding from the study This paper suggest that
(2013), this study is to  Adoption review of reveals that policy makers need to
Assessing assess the  Assessin various most publicly quoted organize workshops and
Nigeria’s achievements g journals,resear companies listed on the create awareness on
Journey recorded so far,  Nigeria ch Nigerian stock implementation of IFRS
towards IFRS challenges papers,newspa exchange (NSE) for SMEs
Adoption being per were still
encountered, articles,periodi far behind in their
and measure cals and other implementation drive.
taken in documentary Specifically,
order to ensure materials of challenges were
a smooth and professional encountered by listed
successful accounting entities in meeting their
implementation bodies as regulatory
of the three well as periodic filing
phases of conferences, obligations with the Ex
IFRS seminars and change for fiscal 2012
implementation workshop Audited Accounts and
in Nigeria. papers. 2013 Interim Accounts(

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 10
 Nnorom,
2013).
This delay is attributed
to several factors which
ranges from c
hallenge of amending
the existing tax laws to
effect the changes in
line with the new
standards, the level of
edu
cation and experience,
level of awareness,
Weak enforcement and
compliance mechanism,
inadequate technical
capacity, improper
planning on the part of
management as well as
inadequate private
sector participation

Barya, H. The objectives  IASB Descriptive The results of analysis Considering the
(2017), The of this study are  IFRS Survey Method indicate that developing advantages of IFRS for
Implementatio to explore and  SMEs countries despite some SMEs, it is recommended
n of IFRS for evaluate the  Afghanist challenging issues for Afghanistan to
SMEs in implementation an intend to move towards implement the IFRS for
Developing of IFRS for IFRS for SMEs and SME
Countries SMEs in actively implement it.
developing The complex nature and
countries and to excessivecosts of
analyze the implementation of IFRS
implementation for SMEs, hence limited
of IFRS for resources, lack of well-
SMEs in the qualified professional
context of staff and professional

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 11
 Afghanistan. education are the major
listed challenges for the
implementation of IFRS
for SMEs in developing
countries.

Chege, C. N. The general  Impleme Descriptive From the findings the The study recommends
& Muturi, W. objective of this ntation of Survey Method study concludes that that training policies
(2016), study was to IFRS for education and training should be introduced to
Factors identify the SMEs affected the the SMEs finance
Affecting the factors that  Educatio implementation of IFRS managers. It also
Implementatio affect the n of for SME. This was recommends that the
n of implementation finance specifically in terms of stakeholders should
International of IFRS for manager management skills provide funds to enable
Financial SMEs in Kenya. s inadequacy. Practical the implementation of
Reporting  Availabilit implementation of IFRS IFRS for SMEs. Lastly,
Standards for y of for SMEs requires that the policy makers in
Small and finance adequate technical Kenya need to organize
Medium  Awarene capacity among workshops and create
Enterprises in ss of preparers and users of awareness on
Kenya: A IFRS for financial Statements. implementation of IFRS
Case Study of SMEs. The finance managers for SMEs
Small and who had received
Medium training and were well
Enterprises in educated had
Thika Town implemented better than
International their colleagues who
Journal of were not well educated.
Management However, this was not
and uniform across board as
Commerce implementation of IFRS
Innovations, for SMEs was a function
3(2) of many factors some of
which were beyond the
scope of this study.

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 12
Ebogbue, The general  IFRS Descriptive The results show the The study encourages the
C.C. (2016), objective of this  IFRS for Survey Method various relationships government to ensure a
Issues and research work is SMEs existing between the level playing ground by
Challenges in to investigate  SMEs factors that affect the drawing out a timetable,
the adoption the likely  Financial adoption of IFRS for which the SMEs are to
of challenges that Reporting SMES and the standard abide to while adopting
IFRS for SMEs will , the itself. The finding also the standard and to also
SMEs inencounter in Standard reveals that despite the provide the necessary
Nigeria adopting IFRs challenges bedeviling funding where the need
Matric no.: for SMEs within the SMEs, SMEs are arises considering the
129021114 the Nigerian willing and ready to cost involvement in
environment adopt the standard adoption
and those however, training and
factors that re-training has to be
could hamper enhanced.
the adoption of
the standard by
SMEs.
Garuba, A. The intention of  Investors Descriptive In this paper we have The study recommends
(2011), this paper to  internatio Survey Design been able to explore the that training, workshops
The critically nal informational value of should be given to the
Challenges of examine the standard financial statements SMEs.
Adopting Inte adoption of s under the IFRS.
rnational IFRS, its  Globaliza Globalization and
Financial challenges and tion Information
Reporting to proffer  Financial and Communication
System in solutions that statemen Technology(ICT) has
Nigeria would ensure ts. made it possible to
JORIND (9) seamless share financial
1 transition in information
Nigeria globally hence investors
can
invest in any part
of the globe.

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 13
Hussain, F.F , This study  IFRS for In depth The reporting This study recommends
Chand, P.V & therefore, SMEs interviews requirements under that regulatory bodies in
Rani, P. examines the  Professio IFRS for SMEs are such emerging economies
(2012), preparedness, n that most of them may should give considerable
The Impact of capacity and  Emerging still not be applicable to thought to the adoption of
IFRS for challenges Economi SMEs in emerging IFRS for SMEs and
SMEs on the faced by big 4 es economies like Fiji. engage in wider
Accounting and non-big 4 consultations before
Profession: accounting firms deciding on the matter.
Evidence in dealing with
from Fiji IFRS for SMEs
Accounting & in Fiji through in
Taxation,4 (2) depth interviews
Joshi, M., The purpose of  Harmoniz Survey The analysis of the data This study recommends
Yapa, P. & this paper is to ation approach shows that accounting strengthening education
Kraal, D. examine the  IFRS professionals in and training,
(2016) perceptions of adoption Singapore, Malaysia establishment of an
IFRS professional  ASEAN and Indonesia strongly independent body to
adoption in accountants countries supported IFRS monitor and enforce
ASEAN from three adoption; their opinions accounting and auditing
countries: countries from did not differ standards.
Perceptions the Association significantly by place of
of of South East training, experience or
professional Asian Nations professional
accountants (ASEAN) in qualifications.
from order to
Singapore, evaluate their
Malaysia and perceived
Indonesia benefits
International associated with
Journal of the adoption of
Managerial International
Finance, Financial
12(2) Reporting
Standards
(IFRS) in their

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 14
 respective
nations as well
as the
implications of
these standards
for the
accounting and
auditing
professions in
their country of
practice.
Kaya, D. &  Accounti Survey Method Standard setters and
Koch, M. ng regulators might consider
(2014), regulatio our study in the future
Countries’ n development of
adoption of  Accounti accounting harmonization
the ng of non-publicly
International harmonis accountable entities.
Financial ation
Reporting  IASB
Standard for  IFRS for
Small and SMEs
Medium-sized  Non-
Entities (IFRS publicly
for SMEs) – accounta
early ble
empirical entities
evidence  Standard
setting

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 15
Kilic, M. & The main  IFRS for In-depth The findings of the This study suggests a
Uyar, A. purpose of this SMEs interview research confirmed the comprehensive
(2009), research is to  SME methodology need for a stand-alone assessment of expected
Adoption investigate the  Interview standard set for SMEs. costs as well as the
Process of perceptions of s The interviewees benefits of adoption of
IFRS for Turkish  Qualitativ asserted that more IFRS for SMEs for Turkish
SMEs in accountants, e Study simplification on IFRS SMEs. In addition,
Turkey: acadamecians,  turkey for SMEs may hinder universities should update
Insights from and auditors comparability of their accounting
academics regarding the financial stataments. curriculums by addressing
and adoption financial reporting
accountants process of IFRS standards.
International for SMEs via in-
Istanbul depth interview
Finance methodology
Congress
2013
Kilic, M., the aim of this  IFRS for Questionnaire this study has showed This study suggests that
Uyar, A. & study is to SMEs Survey that most of the the authorities should
Basac, A. measure the  IFRS respondents agree with promote the application of
(2013), perception of  SMEs that the financial financial reporting
Perception of the small and  Perceptio statements will be standard sets in entities.
the SMEs on medium n reliable,
the IFRS for enterprises  Turkey understandable,
SMEs: the (SMEs) on the transparent, and
Case of advantages, comparable as a result
Turkey disadvantages, of the use of
International and the IFRS for SMEs. The
Istanbul obstacles of the respondents agree also
Finance IFRS for SMEs with some
Congress in Turkey. disadvantages of this
2013 set but not at
same level.

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 16
Madawaki, A. The study  Financial Pre-dominantly In implementing IFRS, Recommendations were
(2012), focused on the reporting review Nigeria faces made to forestall such
Adoption of adoption  Adoption approach. challenges including the challenges which include
International process of  Accounti development of a legal strengthening education
Financial International ng and regulatory and training,
Reporting Financial standard framework, awareness establishment of an
Standards in Reporting  Developi campaign, and training independent body to
Developing Standards ng of personnel. monitor and enforce
Countries: (IFRS) on countries accounting and auditing
The Case of adeveloping standards.
Nigeria economy, with
International particular
Journal of reference to
Busine Nigeria.
ss and
Management,
7(3)
Madhuri ,S. The aim of the  IFRS Descriptive In Indian, one major This study suggests the
(2016), study is to  Small Survey Method criticism against the full consideration for adoption
An Effect of investigate and implementation of IFRS of the standard by the
International features of Medium was that it would concerned entities
Financial adoption of Enterpris impose an unnecessary
Reporting IFRS and to es (SME) burden and hardship on
Standards address issue  General SMEs. In general to
(IFRS) in and challenges Acceptin state financial
Small and while adopting g statements comply with
Medium IFRS for small Accounti IFRS for SMEs is not
Enterprises and medium ng difficult. Most of the
(SMEs) and scale Principles requirements are
Comparison enterprises in (GAAPs) already being complied
with Indian India and the with while preparing
GAAPs context of IFRS financial statements for
ELK Asia in Indian “income tax purposes”
Pacific Scenario. are other general
Journals – Identify benefits purpose.
Special Issue for small and

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 17
 medium scale
enterprises
through
adoption of
IFRS and to
make
comparison
between India
GAAP
framework with
IFRS for small
and medium
enterprises.
Mandaza, T. The aim of the  IFRS Suvery From the research the The recommendation was
(2016) research is to  IFRS for research findings also that the government
Effect of IFRS analyse the SMEs show that adopting should assist in
adoption on effects of  SMEs IFRS significantly minimizing the cost of
financial adopting IFRS  Financial affects the quality of adopting IFRS and
reporting for SMEs on Reporting accounting reports of business stakeholders to
quality of quality of , the SMEs. The findings also help with the relevant
SMEs: a case accounting Standard indicated that the legal resources required to
of Harare reports of SMEs framework of the implement IFRS for
CBD in Harare CBD. country was a major SMEs.
determinant of
accounting reporting for
SMEs. The researcher
discovered that SMEs
need assistance from all
stakeholders in order to
improve awareness of
adopting the IFRS.

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 18
Mazhindu, K. The objectives  Small to Survey The study revealed that The study recommends:
& Mafuba, G. of this research medium research 80% of SMEs did not
(2013) paper are to enterpris Design maintain accounting 1.Formalization of
The Adoption establish the es records and had not Business Operations
of level of the (SMEs) adopted IFRS for SMEs. 2. Training of Employees
International adoption of the  Internatio Lack of awareness was 3. Separation of
Financial International nalFinanc the main challenge. Ownership and Control
Reporting Financial ial Other challenges were 4. Awareness Campaigns
Standards for Reporting Reporting lack of capacity and 5. Professional
Small to Standards(IFRS Standard absence of separation accounting firms
Medium ) for the Small to s (IFRS) between ownership and 6. Renaming of the
Enterprises in Medium management of standard
Zimbabwe Enterprises(SM businesses hindered 7. Adding it to the
International Es) in most SMEs from curricular of universities
Journal of Zimbabwe, the maintaining accounting
Asian Social benefits records. Ignorance
Science,3(11) accruing to such about the existence of
SMEs, the IFRS for SMEs and
promotion of the utility of accounting
adoption of records were the key
these IFRS, challenges.
maintenance of The study showed that
acceptable SMEs would derive a
accounting number of benefits if
records and they adopt IFRS for
related SMEs. These included
challenges for ensuring comparability
the adoption of of financial statements,
IFRS for SMEs. building investor
confidence, allowing for
growth through
accountability, and tax
compliance.

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 19
Mpoma,G. E. The research Descriptive The study findings The study recommends to
(2017), work deals with survey reveal that there is low the Tanzanian National
The assessing the compliance to IFRS for Board of Accountants and
Compliance level of SMEs, the poor Auditors (NBAA) a further
And compliance and implementation is review of the standard to
Challenges challenges mainly due to quite high be applied for micro
Of faced by SMEs costs of implementation entities. In general, the
Implementing in adopting and and indeed, even research suggests to
International implementing ignorance about the policy makers and
Financial IFRS for SMEs existence of IFRS for standard setter to put a
Reporting in Tanzania. SMEs. Moreover, lack stronger effort on
Standard For of infrastructure and an encouraging the adoption
Small And absence of separation of IFRS for SMEs through
Medium- between ownership and the organization of
Sized management of seminars or workshops in
Enterprises in business hinder most which micro and small
Tanzania SMEs from maintaining enterprises have to be
accounting records. In actively involved
addition, most of the
SMEs employees lack
basic accounting
records knowledge.
Also, it was observed
that, at present, the
IFRS for SMEs’
requirements are still
too complex, preventing
micro entities from
adopting the standard.

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 20
Muwanika, P., The essence of  SMEs Qualitative Based on the qualitative The government needs to
Anok, P., this study is to  IFRS for research results, the findings empower the local
Mugaga, J., identify the SMEs employing exhibit that SME’s in association (ICPAU)
Kirungi, N.B., challenges  Problems semi- Uganda are not inclined through funding to
Muraa, C., faced by SME’s  Adoption structured towards IFRS for SME’s increase awareness and
Omach, D.O in Uganda that interviews and and are a long way in encourage adoption of
et al. (2015), are using or interview adopting these IFRS through trainings
Assessing the wish to use guides standards. In addition, a
Challenges of IFRS for. large number have even
SMEs in Furthermore, never heard about the
Adopting this study will IFRS at all let alone
IFRS in identify the using them
Uganda problems that
are faced by
SME’s in
Uganda, in the
process of
adopting IFRS
for SME’s.
Lastly, this
study will be
conducted to
check whether
SME’s in
Uganda prefer
to use IFRS
forSME’s or the
other GAAP.
The IFRS for
SME’s is
intendedto be
applied to the
general purpose
financial
statements of
entities that do

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 21
 nothave public
accountability.

Nematiere, M. The main  IFRS for Descriptive Research findings The study recommends
(2016), objective of this SMEs research showed that 60% of the mounting of seminars
An research paper  SMEs design SMEs are aware of the or workshops to ensure
Investigation is to identify the  Challeng standard and of which 100% awareness of the
into the challenges es only 29% adopted the standard, need to
challenges faced by Small  Adoption standard with 94% formalize business
faced by to Medium  Impleme facing challenges in the operations for SMEs,
Small to Enterprises ntation adoption and adding the standard to the
Medium (SMEs)  Benefits implementation process. curricular of Universities,
Enterprise operators in the Little effort is being developing a standard for
operators International made to encourage the micro entities and
when Financial adoption of IFRS for renaming of the standard
adopting and Reporting SMEs in the accounting
implementing Standard (IFRS) profession. Benefits that
IFRS for for SMEs could accrue to SMEs
SMEs in adoption and that would have
Zimbabwe implementation adopted the standard
process and would be better
also economic decision-
establishing the making leading to
level of the growth through
adoption increased better credit
inZimbabwe, the rating, investor
benefits confidence, better
accruing to such accountability and tax
SMEs, compliance. Non-
maintenance of adoption and

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 22
 acceptable implementation of IFRS
accounting for SMEs has been
records, the prompted by client
relationship reluctance, additional
exists between cost of training,
adoption level inadequate training and
and challenges skills, complexity of the
for adoption and standard and lack of
the promotion of separation of ownership
the adoption of from management
this IFRS
Odia,.J.O. & The objective of  Internatio Predominantly Lessons from already However for effective
Ogiedu, K.O. this paper is to nal review adopters of IFRS adoption, the
(2013), review the Financial approach IFRS reveal that for following are suggested:
IFRS literatures on Reporting effective IFRS adoption, (i) Effective
Adoption : the adoption of Standard there must enabling implementation of IFRS
Issues, IFRS by s institutional framework, requires careful planning
Challenges countries.  Adoption accounting education and extensive public
and Lessons Specifically, the  Challeng and training,efficient education, the allocation
for Nigeria paperdeals with es capacity building of
and other some of the programme to prepare resources, a legal and
Adopters issues and the various stakeholders regulatory support system
Mediterranea challenges for the imminent and institutional support
n Journal of associated IFRS transition and with strong management
Social adoption. challenges. systems.
Sciences (ii) The communications
MCSER system for informing
Publishing, users of the changes in
Rome-Italy reporting requirements
4(3) must be effective
and responsive.
(iii) Adequate resources
must be put in place to
support the sustainable
implementation of IFRS.
This includes

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 23
 having consultative
groups available to
respond promptly to
concerns by users and to
provide for their ongoing
training.
(iv) Suitable standards
must be developed to
facilitate recognition of the
small and medium scale
enterprises
(SMEs) because most of
the standards include
complex and detailed
disclosure issues
applicable to larger
companies which are
listed in the stock
exchange.
Otchere, F.A. The purpose of  Ghana Survey Method It was found that small This study suggests that
&Agbeibor, J. this paper is to  Small businesses in Ghana regulatory agencies on
(2012), assess the enterpris have limited their activities should see
The suitability of the es international structures the adoption of IFRS for
International International  Internatio and activities which do SMEs as a top priority in
Financial Financial nal not result in a need for view of the many benefits
Reporting Reporting standard internationally that are attached to the
Standard for Standard for s comparable financial adoption
Small and Small and  Financial reporting information.
Medium‐sized Medium‐sized reporting Small businesses also
Entities (IFRS Entities (IFRS do not receive requests
for SMES): for SMES) for to provide such
Suitability for small information. In total, 19
small businesses of the 27 issues
businesses in (micro entities addressed by the
GhanaJournal and SMEs) in Standard and assessed
of Financial Ghana by in the study were found

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 24
Reporting and assessing their to be irrelevant to small
Accounting, need for the businesses in Ghana.
10(2) IFRS for SMEs Size, legal form and
and the number of owners
appropriateness influence the suitability
of the IFRS for of the Standard for
SMEs as the small businesses in
accounting Ghana.
standard of
choice for small
businesses in
Ghana. The
paper also aims
to investigate
the firm
characteristics
likely to
influence small
businesses'
need for the
Standard and
the
appropriateness
of the Standard
for small
businesses.

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 25
Perera, The aim of this  IFRS for exploratory The findings of this The analyses and insights
D.(2015), thesis is to SMEs and empirical thesis provide evidence provided by this study will
Adoption of undertake a  Accounti research that IFRS for SMEs have implications for
international comprehensive ng methods have been a challenge revising the IFRS for
financial examination of converge for non-publicly SMEs and will assist in
reporting the conceptual nce accountable entities to addressing future
standards and practical  Non- adopt and there are complications in the SME
(IFRS) for issues in the publicly several conceptual and convergence process
small and convergence of accounta practical issues with
medium-sized IFRS for SMEs ble IFRS for SMEs. In
enterprises and suggest entities particular, the thesis
(SMEs): possible ways to  SMEs provides evidence that
problems and address these  Financialr accountants are unable
challenges issues eporting to choose accounting
transform treatments that best
ation reflect the economic
substance of a
transaction when the
recognition and
measurement
requirements are
different across full
IFRS and IFRS for
SMEs and when
guidance is significantly
reduced from IFRS for
SMEs.

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 26
Perera, D. This study  IFRS for The findings of this The analyses and insights
&Chand, P. provides SMEs thesis provide evidence provided by this study will
(2015), evidence that  Accounti that IFRS for SMEs have implications for
Issues in the IFRS for SMEs ng have been a challenge revising the IFRS for
adoption of have been a converge for non-publicly SMEs and will assist in
international challenge for nce accountable entities to addressing future
financial non-publicly  Non- adopt and there are complications in the SME
reporting accountable publicly several conceptual and convergence process.
standards entities to adopt accounta practical issues with
(IFRS) for and there are ble IFRS for SMEs. In
small and several entities particular, the thesis
medium-sized conceptual and  SMEs provides evidence that
enterprises practical issues  Financial accountants are unable
(SMES) with IFRS for reporting to choose accounting
Advances in SMEs. transform treatments that best
Accounting,3 ation reflect the economic
1(1) substance of a
transaction when the
recognition and
measurement
requirements are
different across full
IFRS and IFRS for
SMEs and when
guidance is significantly
reduced from IFRS for
SMEs.
Rudzani, S. & The purpose of  IFRS Both desk Empirical evidence The study recommends:
Charles, M.D. this study is to  SMEs search and suggests ‘man 1. review of the IFRS
(2016), assess the  Challeng questionnaire y, if not most’ SMEs in for SMEs to
An challenges es interviews Vhembe district have reduce the level of
assessment faced by  Adoption were used not adopted and complexity;
of the small and  Impleme implemented the new 2. accounting
Challenges of medium sized ntation standards has not been professional
Adopting and enterprises  Expertise confirmed. For those bodies should
Im (SMEs) in that did not adopt, they conduct

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 27
plementing adopting and cited low level of 3. more affordable
IFRS for implementing awareness, lack of awareness
SMEs in International accounting education, workshops on
South Africa Financial training and inability to theuse of IFRS for
Problems and Reporting acquire relevant SMEs
Perspectives Standards resources as some of 4. more resources
in (IFRS the main obstacles. should be made
Management ) for SMEs in According to the available on the
, South Africa. findings, those SMEs internet to provide
14 (2-1) that have adopted the guidance on how
standards cited few to implement the
indirect standards
benefits experienced 5. secondary
when implementing the education must
standard, such as easy offer curriculum
access to finance (loans that includes IFRS
and for SMEs in
grants) from the banks accounting
and government, doing subjects.
business with
government (tenders)
and proper
compliance with tax
regulations

Samujh,H. This paper  Internatio Survey The results show that This study suggest that
&Devi, S.S critically nal research adoption without investment in the
(2015), examines the Financial design modifications or business infrastructure is
Implementing forces driving Reporting exemptions would a priority.
IFRS for adoption, Standard provide few benefits for
SMEs: participation of  SMEs SMEs in emerging
Challenges stakeholders in  Challeng economies; rather it
for the processes of es would be burdensome
Developing development of  Impleme to entrepreneurs and
Economies the IFRS for ntation inappropriate for
International SMEs, achieving national

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 28
Journal of implementation economic growth
Management issues and targets.
and possible
Sustainability, dysfunctional
4(3) consequences
for
entrepreneurs in
developing
countries

Solanke, A.A, This study  IFRS for Qualitative Results show that the It is hereby recommended
Adinnu, P. & investigates SMEs research financial reporting that SMEs in the North-
Alhassan, K. level of  Small to method practice of SMEs in central Nigeria and the
A. (2016), awareness, medium North-Central Nigeria is relevant regulatory
Adoption of challenges and enterpris not only poor, but also agencies on their
International willingness for es majority of the business activities should see the
Financial the adoption of (SMEs) entities do not prepare adoption of IFRS for
Reporting IFRS for Small  Level of financial reports in line SMEs as a top priority in
Standard for and Medium awarenes with the guidelines of view of the many benefits
Small and Enterprises s the IFRS for SMEs. that are attached to the
Medium (SMEs) in  Challeng adoption (especially the
Enterprises in North-Central es World Bank credit
North Central Nigeria, with a availability to SMEs that
Nigeria: view to comply with the provisions
Implications highlighting the of the Standard as they
for Financial implications of prepare their financial
Reporting the adoption for statements).
Quality financial
International reporting quality
Journal of among the
Sciences: SMEs
Basic and
Applied
Research,
30(3)

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 29
The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 30
 VARIABLE MATRIX

VARIABLE LEXICAL DEFINITION OPERATIONAL DEFINITION

Adoption Defined as the action or fact of
choosing to take up, follow, or
use something.
It is the implementation, application
and use of the Accounting Standards
to manage accounting records for
legal and business purposes as
mandated by the Securities and
Exchange Comission (SEC).

Experiences Defined as the direct It is used to explore the awareness,

observation of or participation knowledge, positive and negative
in events as a basis of orientation, and perception.
knowledge
Small Entities Small entities are those entities These are the firms that dominate
that has Total Assets of most of the population of business
between PhP 3 million to PhP and enforces most of the workforce of
100 million or total liabilities of the country.
between PhP 3 million to PhP
100 million. These are the firms
that dominate most of the
population of business and
enforces most of the workforce
of the country.

Philippine The Philippine Financial Standard used and a guide towards

Financial Reporting Standards the reporting of financial statements
Reporting (PFRS)/Philippine Accounting of different entities.
Standards (PFRS) Standards (PAS) are. the new
set of Generally Accepted
Accounting Principles (GAAP)
issued by the Accounting
Standards. Council (ASC) to
govern the preparation of
financial statements.

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 31
 Interview Guide

Name of the business entity: ______________________________

QUESTIONS
1. Are you aware of the newly amended SEC memorandum PFRS for Small Entities?

( ) Yes ( ) No
2. If yes in number (1) above, have you adopted the PFRS for Small Entities?

( ) Yes ( ) No
3. What are the experiences of your organization in the adoption of PFRS for Small
entities?

4. What are the coping mechanisms used by your organization towards the challenges in
the adoption of the standard, if any?

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 32
 School of Accountancy, Business and Hospitality
RESEARCH PROPOSAL Defense Evaluation

Title: The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City
FORM
Completeness of various parts of the paper (5 pts.) = _________
Correctness of format (5 pts.) = _________
Readability and writing style (5 pts.) = _________
Orderliness of presentation of data (5 pts.) = _________

CONTENT
Significance of the study to the field (5 pts.) = _________
Completeness of literature review (5 pts.) = _________
Appropriateness of research design (5 pts.) = _________
Validity and reliability of tools and instruments (5 pts.) = _________
Overall quality of content (5 pts.) = _________
Legibility of characters, figures & diagram (5 pts.) = _________

ORAL PRESENTATION
Graded INDIVIDUALLY at 50%, this includes:
Mastery of the content
Ability to answer queries correctly
Use of clear and understandable language
Show of professionalism thru manners and appearance
Logical arrangement of slides

RESEARCHERS RATING

1. Badajos, Valerie Faye

2. Cabaguan, Marjun

3. Dela Cruz, Kristine Faye

4.Ilarde, Christian King

5.Pagulayan, Juris

Evaluated by:

_______________________________

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 33
 School of Accountancy, Business and Hospitality
RESEARCH PROPOSAL – Minutes of Defense

Title: : The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City
Date, Time and Venue of Defense: _______________________________

Proponents: Panel of Evaluators:

1. Badajos, Valerie Faye A.
2. Cabaguan, Marjun T.
3. Dela Cruz, Kristine Faye A.
4. Ilarde, Christian King S.
5. Pagulayan, Jose Juris P.
1. Mrs. Rovelle Concepcion Siazon, CPA, DBA
2. Mr. Jervie T. Gumatay, CPA
3. Mr. Patrick Louie E. Reyes, CPA
4. Mrs. Karen Joy Catacutan, MBA

Comments and Suggestions

Title
Change the focus of the study from Challenges to Experiences
Introduction or
Background of Expand the information regarding the experiences of small entities in the
the Study adoption of PFRS for Small Entities
Statement of
the Problem Since it is a qualitative research, concentrate on the research objectives
and Research rarher than research questions. The objectives must encompass the
Questions awareness/knowledge, positive and negative perception (i.e. challenges and
benefits), and the coping mechanisms of small entities towards the adoption
of PFRS for small entities

Hypothesis There is no hypothesis

Significance of Change the focus of the study and dwell in the experiences of small entities
the Study in the adoption of PFRS for small entities

Theoretical or
Conceptual There is no conceptual framework
Framework

Literature Enhance and revise the literature review. Focus on the small entities in the
Review Philippines, IFRS and PFRS, and the experiences of small entities in the
adoption and application of PFRS for small entities

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 34
Research There is no research paradigm
Paradigm

Methods No comment

Research No comment
Design

Locale of the Assess if where in particular

Study

Subjects or Focus on the owners of Small Entities only

Participants

Instrument No comment

Procedures No comment

Data Analysis No comment

References APA style

Appendices No comment

Literature
Matrix No comment

Variable No comment
Definition

Research No comment
Instrument

The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 35
The Experiences in the Adoption of PFRS for Small Entities of SEs in Tuguegarao City | 36