The Adoption of Financial Accounting Standards for Small Medium Enterprises by Muslim Entrepreneurs
Abstract
This study aims to discuss the adoption of financial reporting and accounting standards for small-medium enterprises (SMEs) by Muslim entrepreneurs. A structured questionnaire was used to collect quantitative data from the SME owners. 214 Muslim owners of SME businesses participated in the survey. The results show that only a few Muslim entrepreneurs prepared financial reports regularly. The main reason for preparing the statement is for calculating tax, borrowing money, and decision making. An unexpected finding from this study is that most of the Muslim owners are unaware of Standard for SMEs. Users of SME financial reports include tax authority, banks, and owners, or shareholders. This study enriches the financial reporting studies by examining the accounting standards for SMEs in a Muslim dominated country. The findings of this study also have implications for the Institute of Indonesia chartered accountants (IICA) as standard setter. IICA must routinely disseminate these standards to SMEs and also assist them in preparing financial reports
Downloads
Download data is not yet available.
References
Aboagye-Otchere, F., & Agbeibor, J. (2012, October). The international financial reporting standard for small and medium-sized entities (IFRS for SMEs) suitability for small businesses in Ghana. Journal of Financial Reporting & Accounting, 10(2), 190-214.
Adetula, D. T., & Owolabi, F. (2014). International financial reporting standards (IFRS) for SMEs adoption process in Nigeria. European Journal of Accounting Auditing & Finance Research, 2(4), 33-38.
Akhtar, S., & Liu, Y. (2018, March/April). SMEs' use of financial statements for decision making: Evidence from Pakistan.
The Journal of Applied Business Research, 34(2), 381- 392 Akman, N. H. (2011, July). The effect of IFRS adoption on financial disclosure: Does culture still play a role? American International Journal of Contemporary Research, 1(1), 6-17.
Alamad, S. (2019, May 13). Financial and accounting principles in Islamic finance (1st ed.). Switzerland AG: Springer International Publishing.
Apak, S., Erol, M., & Atmaca, M. (2012). Accounting measures to be taken for the enterprises in difficulty during times of economic crisis: A study on small and medium-sized enterprises (SMEs). African Journal of Business Management, 6(23), 6832-6844.
Atik, A. (2010). SME’s views on the adoption and application of “IFRS for SMEs” in Turkey. European Research Studies, 13(4), 19-31.
Baydoun, N., & Willett, R. J. (2000). Islamic corporate reports. Abacus: A Journal of Accounting, Finance & Business Studies, 26(1), 71-90.
Berry, A. J., Faulkner, S., Hughes, M., & Jarvis, R. (1993, June). Financial information: Banker and the small business. The British Accounting Review, 25(2), 131-150.
Berry, A., Citron, D. & Jarvis, R. (1987). The information needs of bankers dealing with large and small companies (Research Report 7). London: ACCA.
Bunea-Bontus, C. A., & Petre, M. C. (2010). The international financial reporting standard for small and medium-sized entities: Pros, cons and challenges. Revista Economica, 6(53), 96-105.
Carraher, S. M., & Van Auken, H. (2013, May). The use of financial statements for decision making by small firms. Journal of Small Business & Entrepreneurship, 26(3), 323-336.
Chittenden, F., McConnel, J., & Risner, C. (1990). The role of the accounting profession in the growth and development of small businesses (ACCA Research Report No. 18). London: CEAT.
Collis, J., & Jarvis, R. (2000, November 15-17). Financial information: The vital spark in the small enterprise management. Paper presented at the 23rd ISBA National Small Firms Policy and Research Conference, Small Firms: Adding the Spark, The Robert Gordon University, Aberdeen.
Cusmano, L. (2015, October 28). New approaches to SME and entrepreneurship financing: Broadening the range of instruments. Pariz: OECD Centre for Entrepreneurship, SMEs & Local Development.
Dang-Duc, S. (2011, September). Compliance with accounting standards by SMEs in transitional economies: Evidence from Vietnam. Journal of Applied Accounting Research, 12(2), 96-107
Dowa, A., Elgammi, A. M., Elhatab, A., & Mutat, H. A. (2017, February). Main worldwide cultural obstacles on adopting international financial reporting standards (IFRS). International Journal of Economics & Finance, 9(2), 172-179.
Faizal, P. R. M., Ridhwan, A. A. M., & Kalsom, A. W. (2013). The entrepreneurs characteristic from al-Quran and al-Hadis. International Journal of Trade, Economics & Finance, 4(4), 191-196.
Gursoy, D., Altinay, L., & Kenebayeva, A. (2017, October). Religiosity and entrepreneurship behaviours. International Journal of Hospitality Management, 67, 8794.
Hameed, S. (2000). The need for Islamic Accounting: Perception of its objectives and characteristics by Malaysia accountants and academics. Unpublished Ph. D. thesis. United Kingdom: University of Dundee.
Haniffa, R., & Hudaib, M. (2007). Exploring the ethical identity of Islamic banks via communication in annual reports. Journal of Business Ethics, 76(1), 97-116.
Hendrian & Hadiwidjaja, R. D (2016). Implementation of accounting standard on small and medium-sized entities (SMEs). Global J. Bus. Soc. Sci. Review 4(4), 68-78.
Herath, S. K., & Alsulmi, F. H. (2017, February). International financial reporting standards (IFRS): The benefits, obstacles, and opportunities for implementation in Saudi Arabia. International Journal of Social Science & Business, 2(1), 1-18.
Kanagaretnam, K., Lobo, G. , & Wang, C. (2015, December). Religiosity and earnings management: International evidence from the banking industry. Journal of Business Ethics, 132(2), 277-296.
Keasey, K., & Short, H. (1990). The accounting burdens facing small firms: An empirical research note. Accounting & Business Research, 20(80), 307-313.
Lind, P. (2012). Small business management in cross-cultural environments (pp. 27). New York: Routledge.
Mahmood, Z., Khan, A. B., Ur Rehman, A., & Atta, S. (2018, June). Preliminary insights on the adoption of international financial reporting standard (IFRS) for small and medium enterprises (SMEs) in Pakistan. Journal of Accounting & Finance in Emerging Economies, 4(1), 95-110.
Maseko, N., & Manyani, O. (2011). Accounting practices of SMEs in Zimbabwe: An investigative study of record keeping for performance measurement (a case study of Bindura). Journal of Accounting & Taxation, 3(8), 171-181.
Mawutor, J. K. M., Williams, S., & Oduwaa, M. A. (2019). Assessment of the adoption and implementation of IFRS for small and medium scale entities (SMEs). “A study of selected SMEs GA East of Ghana". Asian Journal of Finance & Accounting, 11(1), 24-258
Murtuza, A., (2003). Islamic antecedents for financial accountability. International Journal of Islam Financial Services 4(1), 73-86.
Oukil, M. S. (2013). Entrepreneurship and entrepreneurs in an Islamic context. Journal of Islamic & Human Advanced Research, 3(3), 115-130.
Page, M. J. (1984). Corporate financial reporting and the small independent company. Accounting & Business Research, 14(55), 271-282.
Perera, D., & Chand, P. (2015, April). Issues in the adoption of international financial reporting standards (IFRS) for small and medium-sized enterprises (SMEs). Advances in Accounting, 31(1), 165-178.
Reddy, M. (2007, March & June). Small business in small economies: Constraints and opportunities for growth. Social & Economic Studies, 56(1 & 2), 304-321.
Sava, R., Mârza, B., & Eşanu, N. (2013). Financial reporting for SMEs–past, and perspectives. Procedia Economics & Finance, 6, 713-718.
Sian, S., & Roberts, C. (2009, May). UK small owner-managed businesses: Accounting and financial reporting needs. Journal of Small Business & Enterprise Development, 16(2), 289-305.
Son, D. D., Marriott, N., & Marriott, P. (2006, September). Users' perceptions and uses of financial reports of small and medium companies (SMCs) in transitional economies: Qualitative evidence from Vietnam. Qualitative Research in Accounting & Management, 3(3), 218-235.
Uddin, S. J. (2003, January). Understanding the framework of business in Islam in an era of globalization: A review. Business Ethics: A European Review, 12(1), 23-32.
Van Auken, H. E., Ascigil, S., & Carraher, S. (2017). Turkish SMEs’ use of financial statements for decision making. The Journal of Entrepreneurial Finance, 19(1), 1-30.
Van Praag, M. (2003). Business survival and success of young small business owners. Small Business Economics, 21(1), 1-17.
Violet, W. J. (1983). The development of international accounting standards: An anthropological perspective. The International Journal of Accounting, 18(2), 1-12.
Visser, T., & Chiloane-Tsoka, G. E. (2014, January). An exploration into a family business and SMEs in South Africa. Problems & Perspectives in Management, 12(4), 427-432
Adetula, D. T., & Owolabi, F. (2014). International financial reporting standards (IFRS) for SMEs adoption process in Nigeria. European Journal of Accounting Auditing & Finance Research, 2(4), 33-38.
Akhtar, S., & Liu, Y. (2018, March/April). SMEs' use of financial statements for decision making: Evidence from Pakistan.
The Journal of Applied Business Research, 34(2), 381- 392 Akman, N. H. (2011, July). The effect of IFRS adoption on financial disclosure: Does culture still play a role? American International Journal of Contemporary Research, 1(1), 6-17.
Alamad, S. (2019, May 13). Financial and accounting principles in Islamic finance (1st ed.). Switzerland AG: Springer International Publishing.
Apak, S., Erol, M., & Atmaca, M. (2012). Accounting measures to be taken for the enterprises in difficulty during times of economic crisis: A study on small and medium-sized enterprises (SMEs). African Journal of Business Management, 6(23), 6832-6844.
Atik, A. (2010). SME’s views on the adoption and application of “IFRS for SMEs” in Turkey. European Research Studies, 13(4), 19-31.
Baydoun, N., & Willett, R. J. (2000). Islamic corporate reports. Abacus: A Journal of Accounting, Finance & Business Studies, 26(1), 71-90.
Berry, A. J., Faulkner, S., Hughes, M., & Jarvis, R. (1993, June). Financial information: Banker and the small business. The British Accounting Review, 25(2), 131-150.
Berry, A., Citron, D. & Jarvis, R. (1987). The information needs of bankers dealing with large and small companies (Research Report 7). London: ACCA.
Bunea-Bontus, C. A., & Petre, M. C. (2010). The international financial reporting standard for small and medium-sized entities: Pros, cons and challenges. Revista Economica, 6(53), 96-105.
Carraher, S. M., & Van Auken, H. (2013, May). The use of financial statements for decision making by small firms. Journal of Small Business & Entrepreneurship, 26(3), 323-336.
Chittenden, F., McConnel, J., & Risner, C. (1990). The role of the accounting profession in the growth and development of small businesses (ACCA Research Report No. 18). London: CEAT.
Collis, J., & Jarvis, R. (2000, November 15-17). Financial information: The vital spark in the small enterprise management. Paper presented at the 23rd ISBA National Small Firms Policy and Research Conference, Small Firms: Adding the Spark, The Robert Gordon University, Aberdeen.
Cusmano, L. (2015, October 28). New approaches to SME and entrepreneurship financing: Broadening the range of instruments. Pariz: OECD Centre for Entrepreneurship, SMEs & Local Development.
Dang-Duc, S. (2011, September). Compliance with accounting standards by SMEs in transitional economies: Evidence from Vietnam. Journal of Applied Accounting Research, 12(2), 96-107
Dowa, A., Elgammi, A. M., Elhatab, A., & Mutat, H. A. (2017, February). Main worldwide cultural obstacles on adopting international financial reporting standards (IFRS). International Journal of Economics & Finance, 9(2), 172-179.
Faizal, P. R. M., Ridhwan, A. A. M., & Kalsom, A. W. (2013). The entrepreneurs characteristic from al-Quran and al-Hadis. International Journal of Trade, Economics & Finance, 4(4), 191-196.
Gursoy, D., Altinay, L., & Kenebayeva, A. (2017, October). Religiosity and entrepreneurship behaviours. International Journal of Hospitality Management, 67, 8794.
Hameed, S. (2000). The need for Islamic Accounting: Perception of its objectives and characteristics by Malaysia accountants and academics. Unpublished Ph. D. thesis. United Kingdom: University of Dundee.
Haniffa, R., & Hudaib, M. (2007). Exploring the ethical identity of Islamic banks via communication in annual reports. Journal of Business Ethics, 76(1), 97-116.
Hendrian & Hadiwidjaja, R. D (2016). Implementation of accounting standard on small and medium-sized entities (SMEs). Global J. Bus. Soc. Sci. Review 4(4), 68-78.
Herath, S. K., & Alsulmi, F. H. (2017, February). International financial reporting standards (IFRS): The benefits, obstacles, and opportunities for implementation in Saudi Arabia. International Journal of Social Science & Business, 2(1), 1-18.
Kanagaretnam, K., Lobo, G. , & Wang, C. (2015, December). Religiosity and earnings management: International evidence from the banking industry. Journal of Business Ethics, 132(2), 277-296.
Keasey, K., & Short, H. (1990). The accounting burdens facing small firms: An empirical research note. Accounting & Business Research, 20(80), 307-313.
Lind, P. (2012). Small business management in cross-cultural environments (pp. 27). New York: Routledge.
Mahmood, Z., Khan, A. B., Ur Rehman, A., & Atta, S. (2018, June). Preliminary insights on the adoption of international financial reporting standard (IFRS) for small and medium enterprises (SMEs) in Pakistan. Journal of Accounting & Finance in Emerging Economies, 4(1), 95-110.
Maseko, N., & Manyani, O. (2011). Accounting practices of SMEs in Zimbabwe: An investigative study of record keeping for performance measurement (a case study of Bindura). Journal of Accounting & Taxation, 3(8), 171-181.
Mawutor, J. K. M., Williams, S., & Oduwaa, M. A. (2019). Assessment of the adoption and implementation of IFRS for small and medium scale entities (SMEs). “A study of selected SMEs GA East of Ghana". Asian Journal of Finance & Accounting, 11(1), 24-258
Murtuza, A., (2003). Islamic antecedents for financial accountability. International Journal of Islam Financial Services 4(1), 73-86.
Oukil, M. S. (2013). Entrepreneurship and entrepreneurs in an Islamic context. Journal of Islamic & Human Advanced Research, 3(3), 115-130.
Page, M. J. (1984). Corporate financial reporting and the small independent company. Accounting & Business Research, 14(55), 271-282.
Perera, D., & Chand, P. (2015, April). Issues in the adoption of international financial reporting standards (IFRS) for small and medium-sized enterprises (SMEs). Advances in Accounting, 31(1), 165-178.
Reddy, M. (2007, March & June). Small business in small economies: Constraints and opportunities for growth. Social & Economic Studies, 56(1 & 2), 304-321.
Sava, R., Mârza, B., & Eşanu, N. (2013). Financial reporting for SMEs–past, and perspectives. Procedia Economics & Finance, 6, 713-718.
Sian, S., & Roberts, C. (2009, May). UK small owner-managed businesses: Accounting and financial reporting needs. Journal of Small Business & Enterprise Development, 16(2), 289-305.
Son, D. D., Marriott, N., & Marriott, P. (2006, September). Users' perceptions and uses of financial reports of small and medium companies (SMCs) in transitional economies: Qualitative evidence from Vietnam. Qualitative Research in Accounting & Management, 3(3), 218-235.
Uddin, S. J. (2003, January). Understanding the framework of business in Islam in an era of globalization: A review. Business Ethics: A European Review, 12(1), 23-32.
Van Auken, H. E., Ascigil, S., & Carraher, S. (2017). Turkish SMEs’ use of financial statements for decision making. The Journal of Entrepreneurial Finance, 19(1), 1-30.
Van Praag, M. (2003). Business survival and success of young small business owners. Small Business Economics, 21(1), 1-17.
Violet, W. J. (1983). The development of international accounting standards: An anthropological perspective. The International Journal of Accounting, 18(2), 1-12.
Visser, T., & Chiloane-Tsoka, G. E. (2014, January). An exploration into a family business and SMEs in South Africa. Problems & Perspectives in Management, 12(4), 427-432
Published
2020-05-01
How to Cite
MUSLICHAH, Muslichah et al.
The Adoption of Financial Accounting Standards for Small Medium Enterprises by Muslim Entrepreneurs.
Journal of Accounting, Business and Management (JABM), [S.l.], v. 27, n. 1, p. 54-65, may 2020.
ISSN 2622-2167.
Available at: <https://journal.stie-mce.ac.id/index.php/jabminternational/article/view/563>. Date accessed: 26 apr. 2024.
doi: https://doi.org/10.31966/jabminternational.v27i1.563.
Section
Articles
